When a crypto exchange collapses, customers lose. They join a long queue behind lawyers and creditors, often recovering only a fraction of their assets. Senator Cynthia Lummis, one of the CLARITY Act’s most prominent advocates, says her bill fixes that.
Lummis believes that the problem is not hypothetical. “When a crypto exchange goes bankrupt today, customers are forced to get in line behind lawyers and creditors with low priority in hopes of maybe recouping a fraction of their assets,” Lummis wrote.
When a crypto exchange goes bankrupt today, customers are forced to get in line behind lawyers and creditors with low priority in hopes of maybe recouping a fraction of their assets. The Clarity Act ensures consumers’ assets are protected just like they would be with traditional…
— Senator Cynthia Lummis (@SenLummis) September 4, 2026
The FTX Effect
FTX collapsed in November 2022, and customers lost billions. Bankruptcy courts treated customer funds as estate property, leaving ordinary users competing against institutional creditors for whatever remained. Similar outcomes followed at Celsius, Voyager, and BlockFi. Each collapse exposed the same gap where crypto customers had no legal priority over their own assets.
Traditional finance does not work this way. Under existing securities law, customer funds held at a licensed broker are segregated from company assets. If the broker fails, customers get their money back first. Crypto had no equivalent protection, and the CLARITY Act was written to change that.
What the Bill Does
The legislation classifies digital commodities as customer property under the U.S. Bankruptcy Code. That classification places customer assets outside the general estate of a failed exchange. Customers recover before anyone else in the queue.
Sections of the bill connect digital commodities to the bankruptcy framework that already governs commodity contracts. It also adds mandatory segregation requirements. Exchanges and brokers must hold customer assets at qualified digital asset custodians, separate from company funds. The commingling that made FTX so damaging becomes prohibited.
Lummis and the Fight for the Bill
Lummis has pushed the CLARITY Act for years. She serves on the Senate Banking Committee and has been central to the bill’s progress in the Senate. She has publicly defended the bill against criticism. She has also warned that failure to pass the bill in the current legislative window could push crypto regulation to 2030. A Senate cloture vote is scheduled for September 15.
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The Impact on Crypto Holders
XRP holders and the wider crypto community have closely tracked the CLARITY Act. It represents the first federal framework that would give digital asset holders the same recovery rights that stock and commodity investors already have.
If the bill passes the vote on September 15, it could be delayed in the House, but Republicans are eager to get it to the President’s desk. Once the bill passes, the next exchange failure, whenever it comes, would play out under different rules. Customers would not be last in line.
Disclaimer: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are advised to conduct thorough research before making any investment decisions. Any action taken by the reader is strictly at their own risk. Times Tabloid is not responsible for any financial losses.
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