By Erik Balsbaugh, Executive Director, Open Frontier
Open Frontier works with investors, technologists, and market participants who have spent years pushing for a clear, durable legal framework for digital assets. We are not in the business of litigating whether crypto belongs in American markets. However, there must be rules that carry protections for everyday Americans and will endure regardless of which party is in power. Right now, they might not, and Democrats have the power to fix that.
Congress is on the verge of passing the CLARITY Act, which will regulate the sale and trading of digital commodities, allow for tokenized real-world assets, and create a binding classification of which assets are commodities and which are securities. The Act tasks the CFTC and SEC with developing market structure rules under the new framework, including how digital assets will trade, how intermediaries will be regulated, and how digital asset investors are protected.
These are not abstract rulemakings. They are the foundational rules for a multi-trillion-dollar reorganization of how capital is raised, held, and transferred. And they are about to be written by agencies that Congress structured as multimember, bipartisan commissions but have only Republican members–and in the case of the CFTC, with only one of five seats filled.
The status quo in both agencies leaves Democrats without the representation that Congress intended and tradition requires. If Congress enacts the CLARITY Act without securing Democratic commissioners at these two agencies, the agencies writing the first generation of digital asset rules could do so without meaningful minority input, thereby threatening their longevity.
Democratic Senators should not be content with such an outcome–especially when Senate Republicans are in agreement that bipartisan participation is necessary to get these rules right. Indeed, Senate Agriculture Committee Chairman John Boozman has said he intends to fast-track Democratic nominees as soon as they are named.
“Volatile, episodic regulation driven by who happens to control an agency at any given moment” is not the formula for regulations that will last. It is the consistent complaint of every serious market participant we talk to. The crypto industry has lived this reality for a decade: skepticism, enforcement pressure, and fractured approaches from both parties. The instability is not a Democratic problem or a Republican problem. It is a structural problem that only consensus rulemaking can fix.
History bears this out. The CFTC’s 2011 derivatives rules, developed under Chairman Gensler with full bipartisan commissioner participation, survived three subsequent administrations largely intact because they reflected genuine regulatory consensus. By contrast, the SEC’s 2022 climate disclosure rule, developed without meaningful Republican buy-in and promulgated over sustained minority objection, was vacated in court before it ever took effect. The pattern is consistent: rules built with minority participation are durable; rules written by chair decree become litigation targets. Democrats have leverage right now that they will not have once the CLARITY Act becomes law. Several members, including those who have been most vocal on ensuring the new framework produces durable rules rather than a repeating cycle of enforcement reversals, have raised the question of agency composition privately. In fact, minority representation was a part of the original “group of 12” Democrats’ demands and principles on any market structure legislation. Market participants are raising it too. This is recoverable, and there is precedent for exactly this kind of condition on confirmations. Democrats should use that leverage now.
The ask is straightforward, and it has four parts.
First, minority representation at both the CFTC and SEC should be a precondition for Democratic votes on the CLARITY Act. It is not enough for the White House to promise that it will name Democrats to these commissions after the legislation has become law, as it leaves open the possibility that those nominations never materialize.
Second, any major market structure rulemaking under the new digital asset framework, including digital commodities regulation at the CFTC and tokenization rules at the SEC, should require a quorum of commissioners with minority representation present before it can take effect. This is not a novel procedural demand. It reflects how these agencies were designed to work, and prevents the President from unilaterally firing Democrats from office once the legislation is enacted.
Third, Democrats should make explicit what is currently only implied: the agencies that will administer the CLARITY Act’s frameworks cannot be composed unilaterally going forward. The Senate leadership of the party opposite the President should always have a say in selecting minority commissioners. The bill’s legitimacy and durability depend on the implementing agencies reflecting more than one party’s priorities.
Fourth, Democrats should call for staffing the SEC and CFTC adequately with not just lawyers, but also tech experts, to ensure that we have broad nonpartisan expertise to ensure good outcomes that will stand the test of time.
To be clear, none of these asks guarantee that Democrats will get their way on regulation. A fully constituted CFTC will have three Republicans and two Democrats, who can outvote the Democrats every time. But they do ensure that Democrats are in the room when regulations are being negotiated, allowing otherwise overlooked details to come to light. For that reason, Senate Republicans have indicated their support for these conditions, recognizing that they would ensure GOP Commissioners are able to serve during the next Democratic administration.
Demanding bipartisanship does not demonstrate opposition to digital asset legislation. The Democrats who have engaged seriously in negotiations over the past year have shown a commitment to ensuring a strong, common-sense bill becomes law. But if the White House refuses Democrats’ requirement that two Democratic commissioners serve at the SEC and two at the CFTC when digital asset regulations are being debated, Republicans will have no one to blame but themselves if the CLARITY Act fails to get 60 votes on the Senate floor.
The rules being written now will govern digital asset markets for a generation. Bipartisan agency composition is not a procedural footnote. It is the whole ballgame.