Hoskinson Warns CLARITY Act Makes New Tokens Securities by Default

• Hoskinson called the bill a damaging piece of legislation for the US crypto industry.
• He said new projects will be defaulted to security status and put under the SEC’s thumb.
• Hoskinson stated this would kill US innovation and make the country less competitive.

Charles Hoskinson, co-founder of Cardano, has strongly criticized the proposed CLARITY Act, calling it a “horrific, trash bill” and a potentially damaging piece of legislation for the US crypto industry.

Speaking during a livestream, he highlighted the divisions within the crypto community regarding how the US should handle digital asset rules.

Hoskinson’s main concern is with how the CLARITY Act defines and regulates crypto. He says if the bill passes as is, it could trap almost every new project in a regulatory catch-22, defaulting them to security status and putting them under the Securities and Exchange Commission’s (SEC) thumb.

He added that the bill could give the SEC prolonged control over new projects, potentially forcing them to launch overseas, which would kill US innovation and make the country less competitive.

Hoskinson also said that one of the biggest problems is that this bill could put new projects automatically into an investment contract category. He warned the bill would make following the rules nearly impossible, as it basically represents a weaponized setup aimed at killing off new crypto projects before they start. 

Cardano’s co-founder pointed out that big names like Cardano or XRP might survive, but anything new would have to launch outside the US or just never get built.

The CLARITY Act tries to split crypto oversight between the SEC and the Commodity Futures Trading Commission (CFTC). If a token is decentralized enough, it gets treated as a digital commodity under the CFTC. If not, it stays under the SEC’s watch.

Regulatory Trap or Institutional Green Light?

While Hoskinson sees larger issues, a lot of banks and some crypto heavyweights think the bill could actually be a good thing for the space.

For instance, JPMorgan analysts say the bill could clear up legal uncertainty and bring more big money into crypto if it passes by mid-2026. It would also let new projects raise up to $75 million a year without full SEC sign-off, which JPMorgan thinks could bring venture capital back to US soil.

Similarly, notable names like Ripple’s Brad Garlinghouse and Coinbase’s Brian Armstrong have signaled they’re bullish on the CLARITY Act passing. Some insiders are even betting it’ll get through Congress this spring.

Related: JPMorgan Sees Mid-Year Approval for U.S. Crypto Market Bill