How the Investment and Securities Act 2025 Changed Crypto Trading in the U.S.
Jul, 19 2025
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The Investment and Securities Act 2025 didn’t just tweak rules-it rewrote the playbook for crypto trading in the United States. Before this law, traders and firms operated in a legal gray zone. The SEC could sue you for selling a token it deemed a security, but no one could tell you which tokens were which until after the lawsuit. That chaos ended in July 2025, when Congress passed the Clarifying Law Around Investment Token Sales (CLARITY Act), the centerpiece of the broader Investment and Securities Act 2025. For the first time, there’s a clear, federal map showing what’s legal, who regulates it, and how you trade it.
Three Categories, One Rulebook
The CLARITY Act doesn’t treat all crypto the same. It splits digital assets into three buckets, each with its own regulator and rules:
- Digital commodities - Think Bitcoin and Ethereum. These are under the CFTC, the same agency that oversees futures and commodities like oil and wheat.
- Investment contract assets - Tokens sold as promises of profit from others’ work, like many altcoins issued in ICOs. These stay under the SEC, which enforces securities laws.
- Permitted payment stablecoins - USD-backed coins like USDC and USDT. These are regulated under the separate GENIUS Act, which requires issuers to hold reserves, disclose audits, and get federal licenses.
This structure killed the old "Howey test" guessing game. Before, the SEC would say, "This token looks like a security," and you’d have to fight it in court. Now, if your token is a Bitcoin-like asset used for peer-to-peer transfers, it’s a commodity. No ambiguity. No surprise enforcement actions.
What This Means for Traders
If you’re an individual trader, the biggest change is access. Brokerages like Fidelity, Charles Schwab, and Robinhood can now legally offer trading in Bitcoin and other digital commodities without fear of being shut down by the SEC. That’s because the law explicitly says: "The SEC shall not deny exemption eligibility to a trading platform solely because it lists digital commodities."
Before 2025, platforms had to choose: offer stocks and get SEC approval, or offer crypto and risk being labeled an unregistered exchange. Now, they can do both. You can buy Bitcoin alongside Apple stock in the same account, with the same protections, under one roof.
For day traders and long-term holders, this means lower fees, better liquidity, and more reliable platforms. It also means fewer scams. If a token is listed on a major exchange and labeled as a digital commodity, it’s been vetted under clear rules-not just a marketing pitch.
How Institutions Are Adapting
Institutional investors didn’t wait. By October 2025, over 70 registered investment advisers had updated their compliance manuals to reflect the new classifications. Before, a portfolio manager had to report every Bitcoin trade under SEC Rule 204A-1, even though Bitcoin wasn’t a security. Now, if it’s classified as a digital commodity, those trades are exempt from personal trading surveillance requirements.
Asset managers like State Street Global Advisors and Galaxy Asset Management launched new ETFs and actively managed crypto funds under the new framework. SPDR Galaxy ETFs, for example, now hold Bitcoin and Ethereum directly, with full SEC and CFTC compliance. These funds didn’t exist a year ago. Now, they’re managing billions.
Custody changed too. Before, banks couldn’t hold crypto because federal securities custody rules didn’t cover it. Now, state trust companies can hold digital commodities under new SEC no-action guidance from September 2025. That means pension funds, endowments, and family offices can finally store Bitcoin with regulated, insured custodians-not on a cold wallet in a vault somewhere.
The Compliance Shift
Compliance teams are no longer playing detective. They’re following a checklist:
- Is the asset a digital commodity? → CFTC rules apply. No SEC reporting needed.
- Is it an investment contract? → SEC rules. Full disclosure, registration, anti-fraud rules.
- Is it a USD stablecoin? → GENIUS Act rules. Reserve audits, licensing, redemption guarantees.
Firms that used to spend $500,000 a year on legal fees to guess what the SEC would do next now spend $150,000 on training and software updates. That’s a 70% drop in compliance costs for mid-sized crypto firms.
One major hedge fund told us they automated their trade reporting system to tag each asset by category. If a trade involves ETH, it’s flagged as a commodity. If it’s a new DeFi token with yield farming, it’s flagged for SEC review. No more manual review. No more lawsuits.
What’s Still Unclear
Not everything is settled. The law doesn’t yet define how DeFi protocols-like Uniswap or Aave-fit into this system. Are they platforms? Service providers? Or just software? The CFTC and SEC are still working on guidance, but for now, developers are being told: "If you’re not holding user funds or acting as an intermediary, you’re probably not regulated."
Also, state-level laws haven’t fully aligned. Some states still try to impose their own crypto taxes or licensing rules. But the CLARITY Act makes digital commodities "covered securities," meaning states can’t apply their own blue sky laws. That’s a win for nationwide platforms, but smaller crypto startups still face patchwork compliance.
And while the law protects retail traders from arbitrary enforcement, it doesn’t stop the SEC from going after outright fraud. If someone sells a token as a "guaranteed return" and it turns out to be a scam, they’re still going to jail. The law doesn’t protect bad actors-it just stops regulators from pretending every token is one.
Why This Matters Beyond the U.S.
The world is watching. The European Union’s MiCA regulation is broader but more restrictive. It treats most tokens as securities unless proven otherwise. Japan and Singapore have rules, but they’re fragmented. The U.S. now has the clearest, most business-friendly framework.
As a result, crypto companies that once moved to Switzerland or the Cayman Islands are now setting up offices in New York and Texas. In Q3 2025, U.S.-based crypto firms raised $12 billion in venture capital-up 210% from 2024. That’s not because the market is hotter. It’s because they can finally build without fear of being shut down tomorrow.
What You Should Do Now
If you trade crypto:
- Check how your exchange labels assets. If it says "digital commodity," you’re trading under clear rules.
- Don’t assume all tokens are equal. A token labeled "investment contract" by your broker means it’s under SEC scrutiny-research it harder.
- If you’re using stablecoins for payments or savings, stick to ones with public reserve audits (USDC, USDT, and regulated bank-backed coins).
If you manage money:
- Update your compliance software to auto-classify assets by the three categories.
- Train your team on the new reporting exemptions-Bitcoin trades no longer need to be pre-cleared for employees.
- Consider custody partners that are state trust companies approved under the SEC’s September 2025 letter.
This isn’t the end of regulation. It’s the beginning of a real market. The rules are out. The doors are open. The question now isn’t whether crypto belongs in finance-it’s how fast you’ll use it.
Is Bitcoin now legal to trade in the U.S. under the Investment and Securities Act 2025?
Yes, Bitcoin is explicitly classified as a digital commodity under the CLARITY Act, which is part of the Investment and Securities Act 2025. It’s regulated by the CFTC, not the SEC, and can be traded on any SEC-registered platform without legal risk. Major brokerages now offer Bitcoin trading alongside stocks.
Do I need to report my Bitcoin trades to the IRS differently now?
No. Tax reporting to the IRS hasn’t changed. You still report capital gains or losses on Bitcoin trades. The Investment and Securities Act 2025 affects regulatory jurisdiction (CFTC vs. SEC), not tax law. The IRS still treats crypto as property for tax purposes, regardless of its regulatory classification.
Can I still trade altcoins like Solana or Cardano?
Yes, but it depends on how they’re classified. Solana and Cardano are currently treated as digital commodities by regulators, meaning they’re under CFTC oversight and can be traded freely. However, if a new altcoin is launched with promises of profit from a development team’s efforts, it may be classified as an investment contract and fall under SEC rules. Always check how your exchange labels the asset.
What happens to DeFi platforms like Uniswap under this law?
DeFi protocols that don’t hold user funds or act as intermediaries are currently not regulated under the Investment and Securities Act 2025. The law targets entities that custody assets, execute trades, or issue tokens as investment contracts. Decentralized, non-custodial platforms like Uniswap are not directly regulated-but if a DeFi project starts offering tokenized yield products with guaranteed returns, those could be classified as securities and fall under SEC jurisdiction.
Are crypto ETFs safer now under the new law?
Yes. ETFs that hold digital commodities like Bitcoin or Ethereum are now fully compliant with federal law. The CLARITY Act removes regulatory uncertainty that previously blocked institutional adoption. These ETFs are now listed on major exchanges, held by regulated custodians, and subject to SEC disclosure rules-making them as secure as traditional ETFs.
Will this law make crypto prices more stable?
Not directly. Price volatility is driven by market demand, not regulation. But the law reduces risk from sudden enforcement actions or platform shutdowns, which historically caused panic sell-offs. With clearer rules, institutional money is flowing in, which can lead to deeper liquidity and less extreme swings over time.
vinay kumar
November 21, 2025 AT 12:40The CLARITY Act finally killed the SEC's witch hunt era
Abhishek Anand
November 22, 2025 AT 09:30Let’s be honest-this isn’t regulation, it’s institutional capture. The CFTC was never meant to oversee digital commodities, yet here we are, repackaging Bitcoin as soy futures with a blockchain veneer. The SEC still holds the leash, just with a different name on the collar. The real innovation isn’t in the law-it’s in the PR. They’ve turned chaos into compliance theater, and Wall Street is clapping like trained seals. Meanwhile, the average trader still doesn’t know the difference between a security and a commodity, and the regulators are fine with that. The system doesn’t want you to understand-it wants you to trade.
Lara Ross
November 22, 2025 AT 23:58This is the most significant step forward for American crypto since the dawn of blockchain. Clear rules mean real innovation. No more guessing games. No more legal threats hanging over every startup. Fidelity, Schwab, Robinhood-they’re now fully empowered to bring crypto to millions who’ve been locked out. This isn’t just about trading. It’s about financial inclusion. The U.S. is leading the world because we finally chose clarity over chaos. The future is here, and it’s regulated, secure, and accessible.
Leisa Mason
November 24, 2025 AT 09:40Let’s not pretend this is progress. They just gave the CFTC a new toy to play with while the SEC quietly keeps its claws in every altcoin that dares to rise. DeFi is still a legal gray zone, stablecoins are still under threat, and the IRS hasn’t changed a thing. This law doesn’t protect retail-it just makes the cage look prettier. The real winners? Asset managers who can now launch ETFs without explaining why their 10% fee is justified. The rest of us? Still paying for the privilege of being watched.
Rob Sutherland
November 25, 2025 AT 08:23There’s something beautiful about turning chaos into structure. For years, crypto existed in this liminal space-between rebellion and regulation, between freedom and fraud. Now, for the first time, we have a map. Not a perfect one, but one that doesn’t require you to guess where the cliffs are. That’s not just legal reform-it’s psychological liberation. You can finally breathe. You can build. You can trust. And that’s worth more than any price chart.