Democrats reportedly seek greater SEC control over crypto after CLARITY Act collapse

House Democrats are reportedly discussing a broader crypto market structure bill built partly on Rep. Maxine Waters' earlier investor-rights proposals.

According to a Nov. 4 post by journalist Eleanor Terrett, the proposals include a larger SEC role, a smaller CFTC role, and more government ethics restrictions.

Industry sources who spoke with Democratic staff form the basis of that account, and the bill text remains unpublished. Waters' 2025 amendment shows what customer rules a Democratic framework could carry, and the September CLARITY compromise shows how much of that ground the Senate text already covered before cloture failed 49-50 on Sept. 15.

Amendment #31, a nine-page text from July 2025, would have imposed duties on exchanges, brokers, custodians, and other retail-facing digital asset firms. Withdrawals and transfers would be due within 24 hours, except in cases of documented good-faith fraud.

Firms would join SIPC if eligible or fund an equivalent customer-asset protection arrangement, hold customer assets in segregated, bankruptcy-remote accounts, and obtain affirmative, revocable consent before rehypothecating, lending, or staking them.

Cryptographically verifiable proof of reserves would include a licensed accountant's monthly attestation.

Crypto customer orders would take priority over proprietary orders under best-execution practices, and affiliated proprietary traders or market makers would be barred from trading against customers on the same platform.

Human support would be reachable around the clock within five minutes, and customers and regulators would hear of specified security breaches within 48 hours.

The text added a one-page fee disclosure, next-business-day settlement, and an indicator showing the share of customers holding an asset at a loss. Its insurance language covered losses from a covered entity's regulatory violations through bonds, insurance or insured trusts, a narrower promise than compensating every market loss.

The House Rules Committee voted 8-4 on July 14, 2025 against making the amendment eligible for floor consideration, and the amendment died in committee.

The Congressional Research Service's Sept. 15 analysis describes customer-property protections, limits on commingling and bankruptcy treatment for digital asset customers.

It also lists CFTC registration for exchanges, brokers and dealers, core principles covering crypto market manipulation, conflicts and customer protection, and Bank Secrecy Act duties.

The SEC kept a role in investment-contract offerings, including an exemption for qualifying token originators up to $200 million with accompanying disclosures.

Sens. Cynthia Lummis, John Boozman and Tim Scott said their Sept. 14 revision included 126 substantive revisions requested by Democrats.

Among them were ethics provisions drawing on the Tillis-Gallego approach with state attorney general enforcement, and Treasury authority to restrict stablecoin incentives when bank deposit outflows are large.

The figure is the sponsors' tally, which stands apart from Democratic endorsement of the text. The ethics text required certain covered officials with large financial interests to divest or use blind trusts, and the sides remained divided over its scope and enforceability.