Key points

  • The Senate draft defines a non-decentralized finance trading protocol by control, changeable rules or an ability to restrict users.
  • It directs the SEC, CFTC and Treasury to develop tailored registration, conduct, disclosure, recordkeeping and AML rules.
  • The proposal protects software activity and limited security councils, but still faces an uncertain Senate vote on September 15.

A revised version of the Digital Asset Market Clarity Act would create a federal test for deciding when people controlling a decentralized-finance trading system may face securities, commodities and anti-money-laundering obligations. Senate Republicans circulated the 630-page substitute text on September 10, ahead of a procedural vote expected on September 15.

The draft focuses on control, not the DeFi label

The official draft defines a DeFi trading protocol as a distributed-ledger system where multiple participants execute financial transactions under predetermined, non-discretionary rules without relying on another person to hold their assets. It then creates a separate category for a “non-decentralized finance trading protocol” that meets at least one control-related condition.

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A protocol could fall into that category if a person or coordinated group can materially alter its functionality, operations or consensus rules. The test also covers systems that do not operate solely through transparent, pre-established code, or where controllers can restrict, censor or prohibit user activity.

Three agencies would write the detailed rules

The draft does not automatically impose one uniform registration regime on every protocol. Instead, it directs the Securities and Exchange Commission, Commodity Futures Trading Commission and Treasury Department to determine through notice-and-comment rulemaking how existing legal requirements apply to people or groups that exercise qualifying control.

For systems subject to securities law, the SEC would address registration, conduct, disclosure, recordkeeping and supervision while consulting Treasury. Parallel language directs the CFTC, working with the SEC and Treasury, to develop comparable rules under the Commodity Exchange Act. Treasury would define applicable Bank Secrecy Act and counter-terrorist-financing obligations.

Software and emergency security roles receive limits

The proposal attempts to separate control of a financial service from merely publishing or using software. Its rulemaking instructions require regulators to protect developers, publishers and users who create or use code, while avoiding a presumption that every covered person or activity already falls under federal financial law.

Participation in an incident-response or security council would not by itself establish control. Temporary emergency powers could remain outside the control test when they are predefined, publicly documented, limited to a specific cybersecurity incident and not used for unrelated protocol upgrades, governance choices or economic changes.

The draft also tells regulators to treat a decentralized governance system and its participants as separate persons unless they are under common control or acting together by agreement. It preserves the agencies’ existing investigative and enforcement powers, but says the new section should not create a presumption that a person or activity is already subject to the Commodity Exchange Act or Bank Secrecy Act before regulators complete the required rulemaking.

A key Senate hurdle remains

CoinDesk, Cointelegraph, The Block and CryptoSlate all reported that the revised language arrives before the Senate’s planned September 15 procedural vote. Advancing the measure is expected to require 60 votes, and reporting from the outlets indicates that disputes remain over ethics restrictions, stablecoin rewards and other provisions.

The text is a legislative proposal, not current law, and its agency rules would still need to be written if Congress ultimately enacts it. The vote would open the Senate’s debate rather than make the draft law. For DeFi developers and users, the immediate significance is the direction of the debate: lawmakers are trying to distinguish autonomous software from systems where identifiable people retain practical power over transactions or access.

Sources

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