Welcome to Galaxy Research's Weekly Research Brief. Subscribe to get this newsletter delivered to your inbox every Friday morning.
In this week's edition, Alex Thorn postmortems the Clarity Act; Alex separately breaks down the SEC’s long-awaited innovation exemption; and Zack Pokorny unpacks the debate in AI over “pacing the frontier.”
Got feedback on this newsletter? Email [email protected]. We’d love to hear from you.
The Clarity Act Is Kaput, But Crypto Will Be Fine
On Tuesday, the U.S. Senate failed to advance the Clarity Act by a vote of 49-50. All Democrats voted against the bill, including previously staunch advocates Kirsten Gillibrand (D-NY), Ruben Gallego (D-AZ), and Angela Alsobrooks (D-MD). The vote required 60+ votes to enact cloture on the motion to proceed, which then would have allowed the Senate to formally “get on the bill” (take it up for debate).
Longtime champion and bill sponsor Cynthia Lummis (R-WY) blamed Democrats, saying they “were never truly serious about protecting consumers and preserving American leadership.” Alsobrooks, who worked with Sen. Thom Tillis (R-NC) to find a compromise on the stablecoin rewards issue, pinned the failure on an inability to solve the ethics issue, saying that Democrats needed “very clear ethics in place to prevent the grift and the corruption that we have seen from this administration.”
Republican Senators Josh Hawley (R-MO) and Jerry Moran (R-KS) also voted against the bill, each citing the stablecoin yield issue. Democrat Chris Coons (D-NV) was not present for the vote. Tillis switched his vote to “No” at the last minute to enact a procedural maneuver that allows the cloture motion to be re-introduced during this Congress.
Our take
We had repeatedly cautioned the market that the odds of the bill were diminishing over time following the successful bipartisan markup in May, cutting our odds as low as 10% after the chamber failed to vote on the bill before departing for August recess. While we raised the odds to 25% on Monday after Republicans released a new draft on Sunday night that offered substantial additional concessions, we knew the chances remained low.
While the failure was not necessarily unexpected, it was certainly disappointing. Dozens and dozens of staffers, industry advocates, and administration officials have worked tirelessly for two years (and some even longer) on the landmark crypto market structure legislation, with countless changes and negotiations between stakeholders. The bill was substantially bipartisan and would have enhanced investor protections, provided new tools to combat illicit finance, and created clear rules of the road that would cement American leadership in capital markets for decades to come.
Specifically, we’d like to thank members and staffers from the offices of Sens. Lummis, Tillis, Gillibrand, Hagerty, Moreno, Scott, Thune, Boozman, Gallego, Alsobrooks, Booker, Warner, and Cortez Masto. And we want to thank and acknowledge members of the administration, particularly officials at the White House and U.S. Treasury Department, whose work on the Presidential Working Group on Digital Assets and the landmark July 2025 report Strengthening American Leadership in Digital Financial Technology has been an essential effort in advancing Clarity but also U.S. leadership in digital assets generally.
More than just the fact that the vote failed to reach the 60-vote threshold, it was the partisan nature and last-minute flame-out that was so sad to see. We had word that last-minute negotiations were trending in the right direction, but that those talks were cut short and not allowed to proceed. Whatever happened at the last minute, it was enough to push all Democrats to vote no, even those who have been longtime advocates and who had worked tirelessly (and at some political cost) to find a middle ground. We understand that there are efforts behind the scenes to revive the bill and try another vote before the Senate leaves for recess in October, but ultimately, we think the odds are very low.
Crypto will be fine without Clarity, at least for the remainder of this administration. The market and banking regulators are being quite proactive and supportive of innovation, as evidenced even this week by the CFTC releasing no-action relief to exempt front-end DeFi developers from registration requirements and the SEC releasing the long-awaited “innovation exemption” for tokenized stocks. But of course, there are things that only Congress can do. While some action is possible in the next Congress, if Democrats take either or both chambers, the odds are relatively low that Clarity will advance in the 120th Congress.
The focus now turns primarily to agency work, and there is a lot there to work on and for crypto to be excited about. – Alex Thorn
SEC Paves Way for Tokenized Stocks With Secondary Trading Exemption
On Thursday, the Securities and Exchange Commission released the long-awaited “innovation exemption” creating a path for secondary trading of tokenized stocks.
At a high level, the 60-page order grants a five-year conditional exemption from the Exchange Act definition of “exchange” to certain tokenized securities venues (TSVs) that provide permissioned automated market makers (AMMs) and liquidity pools. It also grants a parallel exemption from the definition of “dealer” to certain liquidity providers using their own capital. Retail investors, institutions, and regulated financial firms can all participate, subject to the venue’s permissioning standards.
The exemption applies to National Market System (NMS) stocks (generally U.S. exchange-listed equities and certain exchange-traded products) but excludes options, rights, and warrants. The order does not provide separate relief under the Investment Company Act, meaning that registered funds may still face additional constraints even if their shares qualify as NMS stock.
SEC Chairman Paul Atkins said the exemptions would help “bring America’s capital markets into the digital age.” Commissioner Hester Peirce called it “a small step toward waking up to a tokenized tomorrow,” while Commissioner Mark Uyeda described it as “scope relief to experiment responsibly, learn, and translate old protections to new contexts.” The principal conditions include:
Five-year pilot with extensive notice requirements. The exemptions run from Sept. 17, 2026 through Sept. 17, 2031. A TSV must be a U.S. person, publish a detailed public notice at least 30 days before beginning operations, notify the SEC and continually update its disclosures as its assets, systems, or operations change.
Permissioned trading on permissionless infrastructure. The venue’s smart contracts must be public, auditable, and deployed on a public, permissionless blockchain. Access to secondary trading of tokenized securities, however, must be limited to verified or credentialed participants. That permissioning can be enforced at the AMM-pool level or through transfer restrictions encoded into the token.
Actual shares with full shareholder rights. A qualifying token must convey the same interest in the company, dividends, voting rights, liquidation rights, proxy materials, and other issuer communications as the traditionally formatted stock. The exemption is for secondary trading only; primary issuance cannot occur on a TSV. Synthetic exposure, security-based swaps, linked securities, and third-party securities representing an interest in an SPV or other wrapper do not qualify.
Issuer-sponsored tokens are expressly permitted; third-party tokenization is allowed within a narrower lane. Before listing a stock tokenized by an unaffiliated third party, a TSV must notify the underlying issuer and wait at least 30 days. If the issuer objects during that window, the TSV cannot list the token for trading.
Transparency and market-integrity protections. A TSV must publish U.S. dollar-denominated transaction data within 10 minutes and keep at least 30 days of data freely available in machine-readable form. It must halt trading whenever the underlying stock is halted on its primary exchange, report significant operational or cybersecurity events, maintain books and records subject to SEC examination, and cannot offer margin, lend assets, extend credit, or permit rehypothecation. The federal securities laws’ anti-fraud and anti-manipulation provisions continue to apply.
Our take
We enabled tokenized $GLXY on the Solana blockchain in September 2025. Shareholders can work with our transfer agent, Superstate, to convert their traditionally formatted shares into a tokenized format. But due to the lack of clarity on the secondary trading of these instruments, onchain secondary trading of tokenized $GLXY has mostly been impossible. This new exemption provides what Galaxy and other issuers need – an exemption for onchain trading venues from the exchange rules, and a clarification that those trading in tokenized stocks are not “dealing” if they trade in their own account. Over the last two years, we have met multiple times with the Securities and Exchange Commission at both the Crypto Task Force and the staff levels to advocate for an exemption that would provide breathing room for innovation that can ultimately inform more durable rulemaking. This innovation exemption creates a pathway to enable secondary trading of onchain $GLXY, and we are examining next steps.
The two threshold questions throughout this process were 1) whether onchain stock trading would need to be “allowlisted” and 2) whether tokenized shares would need to be sponsored by the underlying issuer. We followed the issuer-sponsored approach and our stock token requires KYC onboarding with our onchain transfer agent, Superstate. On the first question, the SEC came down cleanly in favor of permissioning but notably required public blockchains. The result is a sensible hybrid: public auditable infrastructure with access controls at the pool or asset level.
On the second question, the SEC did not categorically require issuer sponsorship, but the third-party pathway is considerably tighter than the phrase “third-party tokenization” may imply or the third-party wrappers we see today in the market from Robinhood, Ondo, and xStocks. The token must represent the actual NMS stock and provide all its legal, economic, and governance rights. A separate note, swap, SPV interest, or other security merely linked to the stock is outside the exemption. And the third-party issuer must still allow the underlying NMS stock issuer to opt out within 30 days.
That 30-day opt-out is a middle ground between the issuer-only and no-consent camps, but it will still be controversial. The issue was illustrated by the recent public spat between Robinhood CEO Vlad Tenev and AMC CEO Adam Aron. Aron objected to Robinhood offering an AMC-linked token on Robinhood Chain without the movie-theatre chain’s involvement. Tenev argued that issuers should control the rights attached to their shares, but not every separate financial product that references freely transferable stock. Robinhood’s Stock Tokens would not qualify for this exemption regardless, because Robinhood itself describes them as “tokenized debt securities” that provide economic exposure but no legal or beneficial rights in the underlying issuer. For third-party products that do convey full shareholder rights, however, the SEC gives the issuer a time-bounded veto. Those favoring open secondary markets will view any veto as too much, while issuer-sponsored advocates may view a one-time 30-day window as too little.
The SEC deserves credit for its thoughtful and forward-leaning leadership. Rather than shoehorn a new market structure into rules built for different technology, or wait for every question to be answered and dictate from the top down to the market, the Commission has created a bounded pathway to launch, observe, and improve. Some of the conditions will undoubtedly need refinement, but this is serious policymaking and a major step toward functional onchain capital markets. – Alex Thorn
AI Labs’ Call to 'Pace Frontier’ Give Crypto Vets FTX Flashbacks Dario
Amodei, the CEO of Anthropic, called for a slowdown of frontier AI development through embedded third-party evaluators, industrywide safety coordination, and, eventually, global government agreements.
In an essay published last weekend, titled “We Must Pace the Frontier,” Amodei outlines a three-step plan to slow the pace of AI capability gains so safety work can keep up:
Anthropic unilaterally commits to giving embedded, employee-level access to third-party evaluators like METR to verify safety practices and report incidents;
Frontier labs in democratic countries coordinate on shared safety standards and speed limits, requiring antitrust waivers from government;
Eventual global coordination, including with China, on things like pre-release testing and limits on recursive self-improvement (RSI).
Within two and a half hours of Amodei’s post, his counterpart at OpenAI, Sam Altman, publicly agreed, saying his frontier lab would adopt independent evaluators as well. President Trump rejected the idea outright, telling reporters “we're leading China in AI... and, frankly, I want to keep it that way, because whoever wins AI wins.” He chalked up the broader safety debate as something pushed by “negative forces.” Pushback also came from within the industry. David Sacks, a tech founder and investor and Trump advisor, told Amodei and Altman to “go ahead” and pace themselves, but to stop pretending they need antitrust waivers or a regulatory approval process to do it, and stop treating METR, which he called intertwined with Anthropic's investors and staff, as a neutral referee for competitors who aren't even at the frontier. Meta chief Mark Zuckerberg went even further and argued that no industry pact is needed, and that labs already face significant liability and have the incentive to self-police. Zuckerberg pointed to Meta's own delay of its Muse launch as proof it can be done unilaterally.
Our take
For crypto natives, and techno-optimists broadly, Amodei's essay sounded eerily familiar. A single company with significant power in a competitive space calling for regulation and collective, top-down coordination framed around the prevention of existential crisis? Shades of Sam Bankman-Fried.
During FTX’s heyday, effective altruism’s (EA) language of existential risk gave cover to the idea that a single individual or organization has the unilateral ability and privilege to save the world, and that this unique position justified extraordinary claims on everyone else’s behavior or preferential treatment for themselves.
The timing also didn’t help. Amodei’s essay was published within a week of the viral resignation from Anthropic and PR tour of Jacob Coxon. “The people building AI earnestly believe that it could kill us all by the end of the decade,” Coxon, who earlier worked at OpenAI, warned in the tweet announcing his move. That post was amplified by Anthropic’s alignment lead, Evan Hubinger, who put a number on it, tweeting: “I personally think it is >10% within the next decade.”
Independent of if the sequencing was intentional, the effect was to prime the public for the type of language Amodei included in his essay. Remove the careful prose of his writing and it reads uncomfortably close to: If we at Anthropic don’t make sure we ourselves and our competitors will not end the world then we may go ahead and end the world. This is a difficult argument to distinguish from a request for a moat, especially given the competitive dynamic that has been emerging between the frontier labs and open-source models and between the frontier labs themselves and lofty suggestions for government waivers.
This is not to completely dismiss the essay’s broader message or claim no risk is present at all. Obviously, AI is a powerful technology with potential for disruption and to rearrange the status quo. But much of what Amodei outlined in his essay can be managed independently by the frontier labs through technical and operational means, through market forces in a competitive space, and without the express consent of government or their peers’ approval. Consider the two broad categories of problems that Amodei says a "paced" industry would spend more time on:
Operational. Amodei’s primary example is that recent alignment incidents (namely the OpenAI/Hugging Face incident) were caused “in part by imperfect filtering of broken reinforcement learning environments.” By his own categorization, this was a process failure. Better quality assurance (QA) would have kept broken environments from training in the first place. This is a distinct claim from the deeper questions around why models responded to those broken environments the way they did, which Amodei later treats as interpretability and alignment problems. These things shouldn’t be conflated: fixing the pipeline is an execution problem that labs can solve independently, coordinating people, chips, infrastructure, and QA discipline at scale, with no regulator or peer-company buy-in required.
Research and technical. Alignment is a training technique. Interpretability, is, as described by Amodei, “almost like an fMRI scan, but for the ‘brain’ of an AI,” which is arguably a sub-discipline of alignment. Testing and evaluation is similarly methodological: building better ways to catch models that are good enough at concealment to fool existing evals. All three are difficult problems that remain unsolved, but they are for technical researchers to figure out. They are not problems that require an industry cartel or government mandate to make progress. Labs can and do compete on this today.
Once you separate these buckets, the essay's most consequential ask ("Democratic Coordination," in which frontier labs jointly set safety standards and speed limits, with government-mediated antitrust waivers to make it legal) is doing a lot of work that the operational and research buckets don't require.
The market and existing laws can do more than Amodei gives them credit for. Product liability law already exposes labs to consequences for deploying something dangerous. It is the same body of law that already governs every other consumer and enterprise software product. Zuckerberg made this point in response to Amodei’s essay, stating, “labs face significant liability if their models cause harm, so they have a strong incentive to prevent this...” without the need for an industry pact or new government buy-in.
Layered on top of legal exposure is reputational and commercial exposure. Customers will walk away from products and companies they deem to be unsafe or acting in bad faith, which serves as an economic penalty that requires no regulator to enforce it. If a lab genuinely believes what it is building could end life on earth, the simplest and most credible response is to not ask for industry-wide coordination in an essay. It should simply not release the model it deems too dangerous for public use until it’s safe to do so. OpenAI’s 2019 decision to not release the full GPT-2 model is precedent for this, and Zuckerberg highlighted that Meta did the same for Muse. In each instance, the companies made a unilateral call without waiting for industry buy-in or legal cover to limit access to the models. Whatever one thinks of these decisions in hindsight, it's proof that "we think this is too dangerous" and "we need our competitors and the government to agree with us before we can act" are two very different claims.
Strip the existential framing back to the specifics, and the details of Amodei’s writing support a narrower conclusion than the ones he assigns to them. The parts that are genuinely urgent (e.g. operational execution, alignment research, and evaluation science) don’t need industry cartelization to solve. The takeaway isn’t that the existential risk talk is prohibitively invalid, but that when a single well-capitalized and industry-leading actor asks for unilateral trust and top-down coordination under the guise of preventing catastrophe, the incentive to conflate “what's good for humanity" with "what's good for market position" is enormous and worth naming every time it shows up. - Zack Pokorny
Other News
🤝 S&P agrees to acquire blockchain security firm OpenZeppelin (price undisclosed)...
💰 ...and leads top-up of $110m Series B round for crypto data provider Kaiko
🦑🐈 Kraken parent Payward plans to offer Hyperliquid HIP-3 perps to U.S. clients
🤦♂️ Revolut leaks 680 customers’ sensitive data to hackers posing as government officials
🚨 Robinhood ex-staffers charged with misusing MNPI to trade perps on Hyperliquid
🇪🇺 Deutsche Bank plans to offer digital asset custody to European institutions by yearend
🌈 Circle launches Arc mainnet with BlackRock, Visa, DTCC among validators
🛢️ DOJ moves to seize $61m in Iranian oil money allegedly laundered on Binance
🤔 Claim: Commerce Dept. told Kalshi to nix AI compute benchmark (Commerce denies it)
Charts of the Week: CFTC Is the Captain Now
The era in which the SEC was the main regulator for digital assets in the U.S. (measured by number of enforcement and advisory actions) is over, at least for the next two years. The CFTC regulation era of crypto has begun.
Meanwhile, offshore regulators have been more active in the years since Gary Gensler’s reign at the SEC.
For more insights, follow @glxyresearch on X. – Thad Pinakiewicz
Legal Disclosure:
This document, and the information contained herein, has been provided to you by Galaxy Digital Inc. and its affiliates (“Galaxy Digital”) solely for informational purposes. This document may not be reproduced or redistributed in whole or in part, in any format, without the express written approval of Galaxy Digital. Neither the information, nor any opinion contained in this document, constitutes an offer to buy or sell, or a solicitation of an offer to buy or sell, any advisory services, securities, futures, options or other financial instruments or to participate in any advisory services or trading strategy. Nothing contained in this document constitutes investment, legal or tax advice or is an endorsement of any of the stablecoins mentioned herein. You should make your own investigations and evaluations of the information herein. Any decisions based on information contained in this document are the sole responsibility of the reader. Readers should consult with their own advisors and rely on their independent judgement when making financial or investment decisions.
Participants, along with Galaxy Digital, may hold financial interests in certain assets referenced in this content. Galaxy Digital regularly engages in buying and selling financial instruments, including through hedging transactions, for its own proprietary accounts and on behalf of its counterparties. Galaxy Digital also provides services to vehicles that invest in various asset classes. If the value of such assets increases, those vehicles may benefit, and Galaxy Digital’s service fees may increase accordingly. The information and analysis in this communication are based on technical, fundamental, and market considerations and do not represent a formal valuation. For more information, please refer to Galaxy’s public filings and statements. Certain asset classes discussed, including digital assets, may be volatile and involve risk, and actual market outcomes may differ materially from perspectives expressed here.
For additional risks related to digital assets, please refer to the risk factors contained in filings Galaxy Digital Inc. makes with the Securities and Exchange Commission (the “SEC”) from time to time, including in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, filed with the SEC on November 10, 2025, available at www.sec.gov.
Certain statements in this document reflect Galaxy Digital’s views, estimates, opinions or predictions (which may be based on proprietary models and assumptions, including, in particular, Galaxy Digital’s views on the current and future market for certain digital assets), and there is no guarantee that these views, estimates, opinions or predictions are currently accurate or that they will be ultimately realized. To the extent these assumptions or models are not correct or circumstances change, the actual performance may vary substantially from, and be less than, the estimates included herein. None of Galaxy Digital nor any of its affiliates, shareholders, partners, members, directors, officers, management, employees or representatives makes any representation or warranty, express or implied, as to the accuracy or completeness of any of the information or any other information (whether communicated in written or oral form) transmitted or made available to you. Each of the aforementioned parties expressly disclaims any and all liability relating to or resulting from the use of this information. Certain information contained herein (including financial information) has been obtained from published and non-published sources. Such information has not been independently verified by Galaxy Digital and, Galaxy Digital, does not assume responsibility for the accuracy of such information. Affiliates of Galaxy Digital may have owned, hedged and sold or may own, hedge and sell investments in some of the digital assets, protocols, equities, or other financial instruments discussed in this document. Affiliates of Galaxy Digital may also lend to some of the protocols discussed in this document, the underlying collateral of which could be the native token subject to liquidation in the event of a margin call or closeout. The economic result of closing out the protocol loan could directly conflict with other Galaxy affiliates that hold investments in, and support, such token. Except where otherwise indicated, the information in this document is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof. This document provides links to other Websites that we think might be of interest to you. Please note that when you click on one of these links, you may be moving to a provider’s website that is not associated with Galaxy Digital. These linked sites and their providers are not controlled by us, and we are not responsible for the contents or the proper operation of any linked site. The inclusion of any link does not imply our endorsement or our adoption of the statements therein. We encourage you to read the terms of use and privacy statements of these linked sites as their policies may differ from ours. The foregoing does not constitute a “research report” as defined by FINRA Rule 2241 or a “debt research report” as defined by FINRA Rule 2242 and was not prepared by Galaxy Digital Partners LLC. Similarly, the foregoing does not constitute a “research report” as defined by CFTC Regulation 23.605(a)(9) and was not prepared by Galaxy Derivatives LLC. For all inquiries, please email [email protected].
©Copyright Galaxy Digital Inc. 2026. All rights reserved.