Just last week, federal authorities announced the takedown of a $37 million international crypto scam that defrauded Americans nationwide. Five men pleaded guilty to running a sophisticated “pig butchering” scheme that lured victims through social media and dating apps, promised safe returns on digital asset investments, then funneled their life savings overseas.
This is not an isolated incident: the FBI reports that crypto scams cost Americans over $6.5 billion last year alone. Congressional inaction exposes more families to the regulatory void, while legitimate innovators avoid U.S. markets.
Congress finally has a chance to change that. On June 10, the House Financial Services Committee advanced the Digital Asset Market CLARITY Act (H.R. 3633) with bipartisan support, setting the stage for the most significant digital asset reform in U.S. history. The bill, introduced just three weeks ago, is now poised for a full House vote. The stakes could not be higher: the longer Congress waits, the more Americans get crypto scams instead of useful tokens.
Why has American crypto regulation failed for so long? Because our laws are aimed at the wrong target: risk. The optimal amount of risk is not zero, and it’s a mistake to think that we regulate securities because they’re risky. After all, buying Beanie Babies is risky. Buying Kansas farmland is risky. Even getting a law school education is risky (just ask the students worried about AI taking their future jobs). Risk, by itself, isn’t the reason for federal oversight.
What makes securities unique is truth. Securities regulation exists to make truth enforceable in capital markets. In finance, risk is something we know how to price if, and only if, we have reliable information. Disclosures, audited statements, and anti-fraud rules create a legal infrastructure where investors can trust that what they’re told is based on truth. If issuers can lie or hide material facts, risk becomes uncertainty. Markets break down. The entire securities law regime exists not to ban risk, but to ensure that investors can price it.
Some digital assets like Bitcoin defy the logic of securities. Bitcoin has no issuer, no cash flows, no promise to do anything. Speculation drives its price. Such assets are, by design, “truth-agnostic.” Their value isn’t grounded in enterprise facts or future claims. These sorts of tokens function like digital money. We should regulate digital money like money, not like securities.
Up until now, however, whether the law regulates cryptocurrency like securities depends not on what the token does but on how it’s marketed or how investors (or speculators) treat it. Whether a token is a security depends on the Howey test, established in 1946 and designed to evaluate profit schemes on orange groves, not computer code. The test produces absurd results, like the same token (Ripple’s XRP) being both a security and not a security depending on who sells it.
The result is a systemic category failure. Classification swings with marketing language, judicial mood, or the profile of the buyer. Honest entrepreneurs face uncertainty; bad actors exploit the chaos.
This isn’t just an academic debate. Real-world crypto-preneurs are avoiding the U.S. regulatory minefield. DeFi startups are blocking American users. Innovation is moving overseas. Investors are left to fend for themselves. Scams slip through the cracks. It’s like George Akerlof’s market for lemons, where the only crypto left in the American marketplace will be duds and scams.
We’ve been here before. In the 19th century, Americans used wildcat banknotes: money was privately issued, unreliable, and often worthless. Congress, wisely, didn’t try to regulate those notes as securities; instead, it created a national currency through a new legal infrastructure for a new kind of value. Crypto’s “wildcat” era calls for the same level of bold clarity.
Here’s what makes the CLARITY Act work: Instead of regulating tokens by how they’re sold or what they’re called, the Act classifies them by what they do. Investment contracts remain under SEC guardrails. Payment tokens and stablecoins are regulated under banking law. Digital collectibles and NFTs are excluded from both regimes. The Act sets real, auditable thresholds for insider control, and deadlines for registration and joint rulemaking. It aligns U.S. law with international standards (like Europe’s Market in Crypto-Asset Regulation and Singapore’s Payment Services Act), ensuring American comparability if not leadership in global innovation.
Some critics worry that regulation stifles innovation. In reality, CLARITY’s safe harbors for payments, collectibles, and decentralized protocols support responsible growth. It delivers the clear rulebook honest builders crave, while closing loopholes for fraud and manipulation.
The ask is simple: Bring H.R. 3633 to the House floor before the July recess. Every day of delay risks another FTX-style collapse and another wave of American talent heading offshore. Congress has the chance, right now, to restore truth and trust to digital asset markets, and to keep the U.S. at the forefront of financial innovation.
Not every token is digital gold. Treating every blockchain asset the same is like equating the Magna Carta and a Keno ticket just because they both use ink. The CLARITY Act finally brings order to the chaos by making sure our laws fit the facts.
Seth C. Oranburg is a professor of law at the University of New Hampshire Franklin Pierce School of Law where he specializes in digital asset regulation. His detailed analysis of the CLARITY Act is available on SSRN.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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