---
type: source
title: "Digital Asset Market Clarity Act: Token Classification Framework and Secondary Market Transition"
author: "Multiple sources (Congress.gov, Arnold & Porter, CoinGecko, Banking Committee)"
url: https://www.congress.gov/bill/119th-congress/house-bill/3633/text
date: 2026-03-00
domain: internet-finance
secondary_domains: [grand-strategy]
format: legislation
status: null-result
priority: high
tags: [regulation, CLARITY-Act, token-classification, securities, CFTC, SEC, digital-commodities]
processed_by: rio
processed_date: 2026-03-11
enrichments_applied: ["Living Capital vehicles likely fail the Howey test for securities classification because the structural separation of capital raise from investment decision eliminates the efforts of others prong.md", "futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires.md", "the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy because prediction market trading must prove fundamentally more meaningful than token voting.md"]
extraction_model: "anthropic/claude-sonnet-4.5"
extraction_notes: "Extracted two major claims about the Clarity Act's classification framework. The secondary market transition provision is the most significant new regulatory concept — it introduces dynamic lifecycle reclassification rather than static Howey analysis. This fundamentally changes the ownership coin regulatory strategy from 'prove it's not a security' to 'manage the transition from security to commodity.' Enriched three existing claims about Living Capital securities classification with the new lifecycle framework. Updated NASAA entity with their regulatory opposition. The curator's hint about lifecycle reclassification as a NEW framework was accurate — this is not captured anywhere in the existing KB."
---

## Content

**The Digital Asset Market Clarity Act** (passed House late 2025, under Senate committee review as of March 2026) establishes a comprehensive classification framework for digital assets.

**Three Token Categories:**
1. Digital commodities — regulated by CFTC
2. Investment contract assets — regulated by SEC
3. Permitted payment stablecoins — regulated under GENIUS Act

**Classification Logic:**
- Token value linked to a specific company → SEC treats as security
- Tokens trading openly on markets without tie to single company → more likely commodity
- Classification is NOT permanent — tokens can transition between categories

**CRITICAL PROVISION — Secondary Market Transition:**
"If the digital asset is resold or otherwise transferred by a person other than the issuer or its agent, the digital asset no longer bears status as a security — even if it was first distributed as an investment contract asset, meaning that as soon as the digital asset is sold in a secondary market transaction, it becomes purely a digital commodity."

This means: tokens issued as securities can BECOME commodities once they trade on secondary markets. The initial distribution may require securities compliance, but ongoing trading operates under CFTC commodity regulation.

**Current Status:**
- Passed House late 2025
- Under Senate committee review (as of March 2026)
- Delayed by debates over DeFi provisions and ethics rules
- Stablecoin yield compromise being negotiated alongside

**NASAA Concerns:**
The North American Securities Administrators Association (state securities regulators) has expressed concerns about the Act's potential to weaken investor protections by reclassifying securities as commodities.

## Agent Notes
**Why this matters:** The secondary market transition provision is TRANSFORMATIVE for the ownership coin thesis and Living Capital. If ownership coins are initially distributed via securities-compliant ICO but then reclassify as digital commodities on secondary markets, the ongoing regulatory burden drops dramatically. This could make the Howey test analysis partially moot — even if initial distribution IS a security, secondary trading wouldn't be.
**What surprised me:** The lifecycle reclassification concept. No existing KB claim captures this — our regulatory analysis assumes static classification (either it's a security or it's not). Dynamic classification based on trading context is a fundamentally different model.
**What I expected but didn't find:** Specific provisions about DAOs, futarchy, or prediction market governance. The Act appears to classify based on asset characteristics, not governance mechanisms. This means our "futarchy makes it not a security" argument may be less relevant than the simpler "secondary market trading makes it a commodity" argument.
**KB connections:** DIRECTLY challenges/complicates Living Capital vehicles likely fail the Howey test for securities classification — if the Clarity Act passes, the question shifts from "is this a security?" to "is this initial distribution a security, and does it matter if secondary trading reclassifies it as a commodity?" Also updates futarchy-governed entities are structurally not securities — the structural argument may matter less than the lifecycle transition argument. And the NASAA concerns connect to the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy — state regulators pushing back on reclassification.
**Extraction hints:** Key claim candidate: "The Clarity Act's secondary market transition provision creates a lifecycle model for token classification where initial distribution may require securities compliance but ongoing secondary trading operates under commodity regulation, potentially making the Howey test analysis irrelevant for mature ownership coins." This is a major shift in the regulatory landscape that needs its own claim.
**Context:** This is the most important piece of crypto legislation since the GENIUS Act. JPMorgan identified 8 catalysts from the Act. If signed into law, it fundamentally restructures the SEC/CFTC jurisdictional split for digital assets.

## Curator Notes (structured handoff for extractor)
PRIMARY CONNECTION: [[Living Capital vehicles likely fail the Howey test for securities classification because the structural separation of capital raise from investment decision eliminates the efforts of others prong]]
WHY ARCHIVED: Secondary market transition provision fundamentally changes the token classification landscape — lifecycle reclassification model not captured in existing KB
EXTRACTION HINT: Focus on the lifecycle reclassification concept as a NEW framework that supplements (possibly supersedes) the static Howey test analysis for ownership coins


## Key Facts
- Digital Asset Market Clarity Act (H.R. 3633) passed House late 2025
- Act under Senate committee review as of March 2026
- JPMorgan identified 8 catalysts from the Act
- Negotiations ongoing over DeFi provisions and ethics rules
- Stablecoin yield compromise being negotiated alongside
