The crypto industry's regulatory backup plan is shakier than it looks. After the Senate blocked the CLARITY Act on September 15, falling short by one vote, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) announced they would write digital asset rules on their own authority. However, major financial institutions are now questioning whether agency-written rules can provide the durable legal framework the industry needs.

What Happens When Congress Fails to Act?

The CLARITY Act was designed to settle a fundamental question: which regulator oversees which digital assets, and under what rules? When the Senate failed to pass it, SEC Chair Paul Atkins and CFTC Chair Michael Selig each announced within hours that their agencies would move forward with rulemaking using existing legal authority. The CFTC is directing staff to draft rules for a new exchange registration category tailored to crypto trading, while the SEC is developing an offering framework that would let crypto projects raise capital under clearer disclosure requirements.

For Bitcoin and XRP specifically, these moves could provide meaningful clarity. The CFTC's proposed exchange category would give Bitcoin spot markets a formal regulatory path instead of operating under state money-transmitter licenses, and it could explicitly include XRP as an eligible asset for the first time. The SEC's offering rule, open for public comment until October 20, would give projects like Ripple a defined process for future token sales rather than case-by-case litigation risk.

Why Is JPMorgan Skeptical About Agency Rules?

JPMorgan warned clients that agency rules carry a critical weakness: they can be changed or reversed more easily than legislation. A statute written into federal law creates a durable framework that survives leadership changes. Agency rules, by contrast, depend on the priorities and philosophy of whoever leads the SEC or CFTC at any given moment.

The bank's concern reflects a real historical pattern. In 2025, the SEC dismissed its enforcement case against Coinbase and shifted away from the previous administration's "regulation-by-enforcement" approach, demonstrating how dramatically agency policy can pivot with new leadership. If a future SEC chair takes a different view of crypto, the clearer rules Atkins is building could be dismantled without Congress needing to pass a new law.

"Agency rules are less durable than legislation as they can be changed or challenged in court," JPMorgan told clients, while acknowledging that clearer agency rules could still support crypto prices in the near term.

JPMorgan, analysis for clients

How Does Ripple's Case Show the Limits of Regulatory Action?

Ripple's years-long battle with the SEC illustrates both the value and the fragility of relying on regulatory action outside legislation. In 2023, Judge Analisa Torres ruled that Ripple's institutional sales of XRP were securities transactions, while its programmatic sales on exchanges were not. When the SEC and Ripple dropped their appeals in 2025, that district court judgment became the law for XRP, but only after years of litigation and only through a court ruling rather than an industry-wide rule.

Agency rulemaking can provide broader guidance without waiting for a case to reach court, but it carries the same durability risk. The SEC can change its regulatory approach when its leadership changes, as the Coinbase case demonstrated in 2025. SEC Chairman Paul Atkins has acknowledged that legislation would provide rules durable enough to withstand future leadership changes, but the CLARITY Act is now stalled with only a handful of Senate working days remaining in the current Congress.

What Are the Practical Implications for Different Cryptocurrencies?

The durability question affects different digital assets differently. Bitcoin has fewer unresolved regulatory questions because its status as a digital commodity is more firmly established, meaning a future change in SEC policy would have fewer fundamental questions to reopen. XRP, Ethereum, and Solana remain more exposed to changes in how the SEC interprets specific activities like token sales and staking.

Michael Saylor, executive chairman of MicroStrategy, a company holding hundreds of thousands of Bitcoin, expressed confidence that regulators can advance digital asset rules under existing statutes without waiting for Congress. He pointed to recent regulatory progress, including SEC guidance issued on December 17, 2025, clarifying how broker-dealers should handle custody obligations for crypto asset securities, and the Office of the Comptroller of the Currency endorsing the ability of nationally chartered banks to custody digital assets.

How Can the Crypto Industry Navigate Regulatory Uncertainty?

The path forward for crypto regulation now splits into two tracks, each with different implications for investors and companies:

• Agency Rulemaking Track: The SEC, CFTC, and Treasury Department can provide faster clarity using existing legal authority, but rules remain subject to change if leadership shifts or if courts challenge them.
• Legislative Track: Congress could still revive the CLARITY Act, though Senator Thom Tillis kept the bill alive procedurally rather than closing it out entirely, leaving a narrow path for reconsideration before the current Congress ends.
• Litigation Track: Court rulings like the Ripple case can establish important legal distinctions, but they apply narrowly and take years to resolve.

Saylor also highlighted the GENIUS Act as a potential catalyst for stablecoin adoption, noting that a clearer stablecoin framework would expand on-ramps between traditional finance and digital assets, creating more reasons for banks to build out their crypto infrastructure. Multiple banks have announced or expanded digital asset custody and lending services throughout 2026, coinciding with the regulatory shifts Saylor described.

For investors looking beyond the next few months, the critical question is not whether the SEC can make the rules clearer, but how much of that clarity would survive the next change in Washington. Agency rulemaking can provide a head start on legislation, but legislation would put that framework on a different legal footing entirely. Until either the CFTC's exchange registration rule reaches the finish line or Congress revives the CLARITY Act, the crypto industry's regulatory case remains a work in progress rather than settled law.