Senate Review of Clarity Act Puts Token Classification at Risk

Tokens that currently sit in security territory under the Howey test are most exposed. Piwowar suggested Congress could revise the definition of an investment contract, which would be a structural change affecting every token. Tokenized real estate also faces regulatory ambiguity, though the agencies have said tokenization does not change the underlying asset’s classification. “If you’re tokenizing a stock, the tokenized stock remains a security,” Piwowar said. “It doesn’t magically become something else just because it’s tokenized.”

The strongest offsetting factor is the alignment between SEC Chair Paul Atkins and CFTC Chair Michael Selig. Piwowar said that level of agreement between the two agencies is close to 100%. Selig previously served as chief counsel to the SEC’s Crypto Task Force, led by Commissioner Hester Peirce. That coordination reduces the risk of a regulatory turf war. If the bill passes with the current chairs in place, the jurisdictional handoff should be clean.

What would make the situation worse: any Senate revision that widens the SEC’s jurisdiction would be negative for tokens that could be classified as securities. Delay or failure to pass the bill would keep the gray zone intact, leaving projects in regulatory limbo. Piwowar also warned that if either chair leaves, coordination could break down.

Piwowar testified before the House Agriculture Committee last June. The bill has passed the House. The Senate committees are reviewing it. No date has been set for a floor vote.