The National Sheriffs’ Association has dropped its opposition to the CLARITY Act and moved to a neutral stance ahead of the Senate’s Sept. 15 procedural vote. That takes one major law-enforcement headache off the bill’s back, but it does not mean the sheriffs are suddenly fans.
- NSA shifts from opposition to neutral
- Section 604 remains the main flashpoint
- Senate still needs 60 votes for cloture
- The House calendar leaves little room
The change matters because the CLARITY Act is not some throwaway crypto headline. It is Washington’s latest attempt to decide who regulates digital assets in the U.S.: the SEC for securities and investment contracts, or the CFTC for qualifying digital commodities. That split affects exchanges, developers, investors, custody rules, disclosures, and whether the U.S. keeps pushing builders into regulatory purgatory. For a fast breakdown, see this CLARITY Act Explained: SEC vs CFTC Crypto Rules in 2026.
In a Sep. 3 letter to Senate Majority Leader John Thune and Minority Leader Chuck Schumer, the National Sheriffs’ Association said it would move from opposition to a neutral stance ahead of the Senate’s Sept. 15 procedural vote. The group is not endorsing the bill. It is stepping back and letting the legislative process run. The full document is here: NATIONAL SHERIFFS' ASSOCIATION.
“We believe the most appropriate course is to step back and allow the legislative process to proceed to establish a clear, effective, and much-needed regulatory framework, ”, NSA President Sheriff Troy Wellman and Executive Director Justin Smith
That is a real shift, even if it is not a victory lap. Neutral is not support. It just means the sheriffs decided this fight was better fought from the sidelines than from the barricades.
The main clash has centered on Section 604, the part critics say could be read to weaken anti-money laundering enforcement around non-custodial crypto software. Non-custodial means the developer does not control customer funds. That distinction is the whole dispute in miniature: developers say software is not a bank, while law enforcement worries that software can still be used to move dirty money out of sight.
In a May letter to the Senate Banking Committee, the NSA warned that Section 604 could create a “blanket exemption” for mixers, tumblers and decentralized finance platforms. Mixers and tumblers are services that obscure the source and destination of crypto transactions. DeFi, or decentralized finance, is a catch-all term for financial services built on blockchains without traditional intermediaries like banks or brokerages. A related summary from this site is available at CLARITY Act Wins FLEOA Backing as DeFi and Section 604.
The association also warned that criminals could use software, algorithms, and agentic artificial intelligence to move digital assets without traceable records. In plain English, the fear is simple: if the law is drawn too loosely, bad actors will use automation to hide where funds came from and where they went. That concern is not imaginary. Crypto is absolutely used for laundering, ransomware, sanctions evasion, and other forms of illicit finance. Pretending otherwise is just wishful thinking with a blockchain logo slapped on it. Another angle on the same pushback is covered in FLEOA Backs CLARITY Act But Demands Tougher DeFi.
“Some will use evolving software, algorithms, and agentic AI to help transfer digital assets without tracing or accountability, launder money, finance terrorism, and evade sanctions, ”, National Sheriffs’ Association
The White House later invited law-enforcement groups to discuss those illicit-finance concerns after the NSA’s May warning, showing the issue had enough traction to get dragged into the policy room. That is not unusual in crypto. The sector keeps forcing Washington to answer the same uncomfortable question: how do you protect open software and financial innovation without leaving a giant hole for criminals to crawl through?
Industry groups pushed back hard. The Blockchain Association disputed the NSA’s reading of the bill, and supporters argue that treating non-custodial software like a money transmitter would be a mistake. Their point is that code is not custody. If a developer never holds user funds, they argue, that developer should not be regulated like a remittance business. A concise summary is available at The CLARITY Act: The TL;DR.
Money transmitter is the legal term at the heart of that dispute. In the U.S., a money transmitter is generally a business that moves funds for users and is subject to licensing and anti-money laundering obligations under the Bank Secrecy Act, along with related state requirements. If lawmakers draw that line too broadly, open-source developers and non-custodial protocol teams could get swept into a regime built for financial intermediaries. That would be a mess, and not the productive kind.
Supporters of the CLARITY Act say the whole point is to reduce that mess. The bill would assign securities and investment contracts to the SEC, while qualifying digital commodities and some spot market activity would fall under the CFTC. That division sounds tidy in a committee memo. In the real world, the SEC and CFTC do not approach crypto the same way, and those differences shape everything from disclosures to custody to enforcement risk. One longer explainer is Verification Successful: Waiting for Response from.
For builders and exchanges, that matters. If an asset lands under SEC oversight, the compliance expectations are far more familiar to traditional finance, and often far more burdensome. If it lands under CFTC jurisdiction as a digital commodity, the structure can look very different. Either way, the point is not academic. The bill would determine whether crypto companies can operate in the U.S. with a clear rulebook or keep living under a cloud of jurisdictional guesswork.
The bill has already moved through several checkpoints. The House passed its version by 294-134 in July 2025. Senate Republicans later released a merged draft on July 22, and the Senate Banking Committee advanced an amended proposal by 15-9, with two Democrats joining all 13 Republicans. The committee history traces back through Calendar No. 88. That is enough to show momentum, but not enough to pretend there is consensus.
The Senate math is still the bigger problem. To move the bill forward, lawmakers need 60 votes for cloture, the procedural step that ends debate and advances legislation. Republicans hold 53 seats, which means the bill needs meaningful Democratic support. That is where a lot of ambitious crypto legislation dies: not from lack of headlines, but from lack of votes.
The calendar is brutal too. House voting sessions were canceled during the weeks of Sept. 21 and Sept. 28, and Sept. 17 is the last scheduled House voting day before lawmakers leave for the November midterm election campaign. Even if the Senate moves on Sept. 15, there is not much time to reconcile changes and push the bill through both chambers. Capitol Hill loves delay until the clock starts insulting it. For a historical reminder of how awkward congressional handling of digital assets can get, see this I'm sorry, but it seems you haven't provided any HTML.
That time pressure matters because the bill is trying to solve a real problem. U.S. crypto regulation has been stuck in a bad loop for years: uncertain rules, aggressive enforcement, lawsuits, and endless agency turf wars. Supporters of the CLARITY Act say that ambiguity has pushed builders and activity overseas and that the U.S. should write the rules instead of outsourcing the job to other jurisdictions.
There is a good case for that. Clear rules would help exchanges, developers, and investors. They would also make it harder for regulators to keep improvising policy by enforcement action. That is not a healthy system, and everyone serious about decentralization, privacy, and innovation should be able to admit it.
Still, the law-enforcement concern should not be brushed aside as anti-crypto hysteria. If decentralized tools can be used for laundering, sanctions evasion, or terrorist finance, Congress cannot just wave a magic “innovation” wand and call it freedom. The counterpoint is just as important: if lawmakers write rules so broadly that they treat open-source software like a bank, they will crush legitimate development and push more activity into the shadows. Both things can be true at once.
The NSA’s move to neutral removes one political obstacle, but it does not resolve the underlying fight over DeFi, non-custodial software, and illicit finance. It simply means one major law-enforcement group is no longer actively trying to sink the bill before the Senate vote. For another take on the political side, see CLARITY Act loses key law enforcement opponent.
Key questions and takeaways
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Why does the NSA’s shift matter?
It removes a prominent law-enforcement opponent from active resistance, which helps the bill politically. But neutrality is not support, and the Senate still needs 60 votes to advance it. -
What is Section 604 really about?
It is the part triggering the biggest dispute over whether developers and non-custodial software providers could be treated like money transmitters. Critics fear an AML loophole; supporters say that would overreach into software itself. -
Why do mixers and DeFi keep coming up?
Because they can be used to obscure transaction trails, which is exactly what anti-money laundering rules are meant to prevent. The fight is over whether the law should target tools, users, or both. -
Can the Senate pass the CLARITY Act as-is?
That looks difficult. Republicans do not have 60 seats, so the bill needs bipartisan backing, and the procedural vote is a major test of whether a workable compromise exists. -
What would Section 604 mean for developers?
If written too broadly, it could pull non-custodial builders into money-transmitter rules even when they never hold customer funds. If narrowed carefully, it could preserve room for open software without giving criminals a free pass. -
What happens if Congress misses the window?
The SEC and CFTC will keep battling over crypto through existing powers, enforcement, and rulemaking. That is the slower, messier alternative to passing a statute that actually settles the jurisdiction fight.
The bigger picture is simple: this is not just a crypto bill, it is a fight over how the U.S. treats decentralized software, financial privacy, and criminal enforcement. The challenge is writing rules that hit bad actors without kneecapping open systems. That is the part Washington keeps getting wrong, and it is exactly why the CLARITY Act still has a long, ugly road ahead.
