Hougan argues that the market’s response makes more sense when looking at what happened after the legislation stalled. In his view, several compromises included in the bill would have been less favorable to parts of the crypto industry than regulatory actions subsequently taken by federal agencies.
One example is stablecoins. The GENIUS Act prohibits stablecoin issuers from paying interest or yield, but it does not impose the same explicit restriction on rewards offered by intermediaries such as exchanges. The Clarity Act negotiations had sought to address that gap amid concerns from banks over competition for deposits.
Hougan argued that the bill’s failure therefore benefits platforms such as Coinbase that use stablecoin rewards to attract customers.
He also sees established crypto exchanges as potential beneficiaries. The Clarity Act was designed to create a more comprehensive federal market structure for digital assets, which could have reduced some of the regulatory barriers facing new competitors.
With the legislation stalled, Hougan argues incumbents retain advantages built through their existing state licenses and infrastructure. Tokenization is another area where he says regulators have moved faster than Congress would have.
Two days after the Senate vote, the SEC approved a five-year conditional “innovation exemption” allowing qualifying venues to trade tokenized US-listed stocks through permissioned automated market makers and liquidity pools without registering as traditional exchanges. Certain liquidity providers also received conditional relief from dealer registration.
Hougan argued that immediate experimentation under the exemption could prove more useful to tokenization companies than waiting years for studies and subsequent rulemaking contemplated by legislation.
His fourth area is revenue-generating tokens, particularly protocols that use revenue to repurchase their own tokens.
SEC staff clarified on September 25 that when a crypto network is functional, announcing a buyback program for a non-security crypto asset does not by itself constitute a promise of the “essential managerial efforts” used in determining whether an investment contract exists under the Howey test.
The guidance is staff guidance rather than an SEC rule and does not carry the force of law. Hougan said that clarification reduces uncertainty for protocols including Hyperliquid, $NEAR and Uniswap that use or have adopted mechanisms tied to protocol revenue and token supply.
The tradeoff, he acknowledged, is durability. Agency interpretations and exemptions can be changed by future regulators, while legislation would provide rules that are more difficult for a future administration to reverse.
That concern has also been raised by market observers following the Clarity vote. JPMorgan analysts said agency action could fill some of the regulatory gap but noted that rules created by the SEC and CFTC are less durable than legislation because future administrations can modify them and courts can challenge them.
Hougan nevertheless argues that growing adoption by major financial institutions could make a broad reversal increasingly difficult over time.
“Crypto sacrificed long-term certainty and got better rules, faster,” Hougan wrote.
