What the CLARITY Act Leaves Open: Tax, ERISA and State Property Law

On September 15 the Senate voted 49 to 50 against taking up the CLARITY Act, eleven votes short of cloture. Senator Tillis filed a motion to reconsider, so the bill is parked rather than buried. Within two days the SEC and CFTC said they would write crypto rules under the authority they already have, which while helpful, leaves a lot of ground uncovered.

Tax: still property, with a bill in the queue

Nothing in the agency rulemaking touches the Internal Revenue Code, and the Code has not moved. Digital assets are property under Notice 2014-21, every swap is a § 1001 realization event, paying gas is a disposition, and staking rewards are income the moment you control them (Rev. Rul. 2023-14).

The day after the Senate vote, House Ways and Means reported H.R. 10357, the Digital Asset Tax Certainty Act, 38 to 5. It would exempt network and transaction fees of $10 or less (dispositions after 2027), extend § 1058 to traded digital assets, open the § 475 election to crypto traders and dealers, extend the § 864(b)(2) safe harbor back to January 2026, and apply the wash sale and constructive sale rules to dispositions after September 14, 2026, the day the bill was introduced.

“Anyone harvesting losses this fall is trading against a provision that, if enacted, already applies.”

The bill defines a “wrapped digital asset” without saying whether wrapping is a realization event, and its lending rule assumes the identical asset comes back, which a liquid-staking deposit does not obviously do.

ERISA: a safe harbor for the menu, not the window

CLARITY never had an ERISA title, so its failure changed nothing for plan fiduciaries. A 401(k) committee that adds a bitcoin fund answers to the § 404(a)(1)(B) duty of prudence and the duty to monitor. Since the Labor Department withdrew its 2022 “extreme care” release in May 2025 there has been no digital-asset-specific standard, which cuts both ways: no heightened scrutiny, and no cover.

On March 30 DOL proposed a process-based safe harbor for selecting plan investment options (RIN 1210-AC38), implementing Executive Order 14330: six documented factors, asset-neutral, digital-asset vehicles expressly in scope. A final rule is expected by year-end. It covers the plan menu and excludes self-directed brokerage windows. It does nothing for a plan that wants to hold tokens directly: the § 403 trust requirement, the § 404(b) indicia-of-ownership rule, and prohibited-transaction exposure on staking through an affiliated validator are untouched.

State law: Article 12, and whose coins they are at the custodian

Ownership, transfer, and collateral in digital assets are state law. The 2022 UCC amendments, with new Article 12 on controllable electronic records, make “control” the functional equivalent of possession, let a good-faith purchaser take free of adverse claims, perfect a security interest by control ahead of mere filers, and supply a choice-of-law waterfall. Some three dozen states and the District of Columbia have enacted them. New York’s took effect June 3; a dozen or so states, Wisconsin among them, have not moved. Until the map is complete, the governing-law clause in a lending or custody agreement is doing property-law work. Article 12 also governs the record, not the thing it points to: a tokenized share is still an Article 8 security living in the issuer’s securityholder records, and nothing federal supplies the tether.

Custody is one of the more painful losses of a no-go on CLARITY. Section 701 would have made customer digital assets customer property in an intermediary’s bankruptcy. Without it the controlling authority is still In re Celsius Network LLC, 647 B.R. 631 (Bankr. S.D.N.Y. 2023), where the terms of use passed title to Celsius and Earn customers became unsecured creditors. The SEC’s custody proposals tell advisers how to hold client crypto; they do not tell a bankruptcy court whose crypto it is.

What to watch

1. Oct 20Agency rules. Comments on Regulation Crypto Assets close; the CFTC’s proposal follows. Whatever the two commissions finish, the next two chairs can undo in a way a statute cannot.
2. After Nov 3H.R. 10357. A House floor vote (or not). Watch whether Senate Finance picks up the Daines or Lummis text instead. The Sept. 14 wash-sale date is already written in.
3. Year-endDOL’s final safe harbor. Read it for what it still does not say about brokerage windows and direct holdings.
4. OngoingArticle 12 map. The Uniform Law Commission’s enactment table, and your own custody and lending agreements: the only property-law instruments you actually control.
5. 2027CLARITY itself. Parked with a motion to reconsider; the midterms decide whether the next Congress revives it or starts over.

The gaps did not shrink when the bill stalled; they lost their most plausible fix.