Coinbase, Kraken, and Gemini are lobbying lawmakers to strip a “readily susceptible to manipulation” provision from the anticipated CLARITY Act, arguing the standard would make listing smaller tokens impractical. The three largest U.S. crypto exchanges submitted recommendations to Congress earlier this year, according to reporting by POLITICO. Robin Cook, Coinbase’s Federal Policy Director, characterized the current CFTC approach as creating a “chicken-and-egg problem” for lower-liquidity assets. The push represents a direct conflict with the exchanges’ stated commitment to comprehensive oversight.
What the CLARITY Act Requires
The CLARITY Act establishes a long-awaited regulatory framework for crypto markets, splitting oversight between the SEC and CFTC. The Senate Agriculture Committee controls the CFTC’s half of the framework. Under current CFTC policy, commodity platforms must self-certify that underlying contracts aren’t readily susceptible to manipulation before trading begins. Exchanges argue this standard, borrowed from traditional futures and swaps regulation, doesn’t translate to spot crypto markets. The provision has delayed the CLARITY Act in Congress for months as stakeholders debate its practical application.
Exchanges Seek Lighter Standards for Spot Assets
Coinbase, Kraken, and Gemini contend that the manipulation standard should apply to derivatives and swaps but not spot crypto trading. Cook stated the exchanges support expanded CFTC authority and comprehensive oversight to protect American crypto market participants. However, sources familiar with the matter characterized the lobbying push as “a very large walk back” from earlier bill drafts, suggesting the exchanges are seeking what amounts to “light-touch regulation” on this specific safeguard. The $2.63 trillion crypto market cap underscores the stakes: 70% of Americans surveyed say crypto legislation is needed.
Investor Protection vs. Market Access
The tension is stark. Exchanges claim they support robust investor protections while simultaneously requesting removal of a specific protective provision. Smaller tokens, which typically have lower trading volumes and higher price volatility, face real challenges under strict manipulation standards. Yet the removal of these requirements could expose retail traders to assets with minimal liquidity safeguards. The CFTC has not publicly responded to the exchanges’ position. The Senate Agriculture Committee will ultimately decide whether the manipulation standard survives in the final CLARITY framework.
What Comes Next
The CLARITY Act remains stalled in Congress as lawmakers balance exchange concerns against investor protection mandates. The manipulation provision will likely become a focal point in negotiations. How senators weigh exchange practicality against manipulation risks will determine whether smaller tokens can be listed more easily or whether current safeguards remain intact. The outcome will shape the competitive landscape for U.S. crypto platforms for years.
