House Democrats are reportedly discussing a broader crypto market structure bill built partly on Rep. Maxine Waters' earlier investor-rights proposals.
Related Law CLARITY Act: US Digital Asset Market Structure United States · Passed
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Industry sources who spoke with Democratic staff form the basis of that account, and the bill text remains unpublished.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.
Waters' proposal
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.
What September already did
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.
Related Person Cynthia Lummis Member, U.S. Senator for Wyoming · U.S. Senate
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.
Waters' text set a uniform 24-hour deadline and a 12-per-year attestation schedule, affirmative consent for staking and lending, customer-first order priority and affiliated-trading bans, and compensation mechanisms.
September described principles, and a Democratic successor could turn principles into enforceable rights with deadlines, reporting standards, and penalties.
A bigger SEC role for crypto
The CFTC oversees derivatives and has antifraud and antimanipulation authority over spot commodity markets, but full spot exchange supervision needs new statute, which September's draft sought to provide.
A Democratic text could add SEC oversight of intermediaries, issuers or customer standards, or redraw the definitions that sort activity between agencies.
Exchanges would face added registration, disclosure, order-handling, and custody duties; custodians would face higher segregation and verification standards; and smaller platforms would face higher fixed compliance costs.
The March 2026 SEC and CFTC interpretation treats Bitcoin as a digital commodity, and exchange regulation and token classification are separate legal matters.
Related Asset Bitcoin BTC · $80,275.63 24-hour change: up 2.10%
A customer holding BTC on an exchange would be affected by withdrawal deadlines, reserve verification, and insolvency treatment, while a self-custody holder has a different exposure.
Three crypto promises that differ
PCAOB investor-advocate staff has cautioned that ordinary proof-of-reserve reports differ from full audits and can omit liabilities, ownership rights, and borrowed assets.
SIPC says non-security crypto assets sit outside its protection even at a SIPC-member brokerage, so an equivalent mechanism would need its own terms on eligible entities, limits, and funding.
Take a hypothetical exchange holding $1 billion of customer crypto that can execute transfers equal to 15% of balances in a day. A 20% withdrawal rush leaves a $50 million processing gap, and a 40% rush leaves $250 million.
The gap reflects operations at a fully backed firm, and the inputs are assumptions. The Waters text also set one-year effectiveness, up to 18 months for joint SEC and CFTC rules and a possible extra year for small entities.
Path to become law
Cloture on the motion to proceed needed 60 votes and drew 49 in favor and 50 against, with four Republicans voting no. The vote concerned proceeding to the bill, and a passage vote awaits any revival.
Any successor needs identical text from both chambers and a presidential signature or a veto override. Open items include the split of SEC and CFTC authority, the cost of new exchange obligations, DeFi and developer treatment, and bank worries over stablecoin incentives and ethics enforcement.
Agencies can act within existing law, as the SEC did with its August Regulation Crypto Assets proposal, the Sept. 17 Innovation Exemption and the Oct. 1 custody proposal, whose comments are due Dec. 7. Compensation schemes and jurisdiction over all spot markets need statute.
If lawmakers pair CFTC spot oversight with explicit customer standards, initial compliance costs rise, and regulatory certainty lasts longer than agency guidance.
If jurisdiction and ethics deadlock continues, customers depend on existing law, state rules, and each platform's terms, and a major custody failure could force faster, harsher rules.
The next crypto fight may hinge more on whether ordinary investors gain enforceable rights when an exchange delays a withdrawal or fails.