Lummis: CLARITY Act Fixes Crypto Bankruptcy Consumer Gap

Senator Cynthia Lummis is making the consumer protection case for the CLARITY Act, warning that without it, digital asset exchange customers have no guaranteed right to their own assets in a bankruptcy. Under the current legal framework, customers join a general creditor queue alongside Wall Street firms and their lawyers — with no priority claim on the assets they deposited.

Lummis framed the gap as a congressional failure that the CLARITY Act is designed to close. The legislation would establish clearer property rights for digital asset holders, ensuring that exchange insolvency doesn't automatically convert customer funds into estate assets subject to creditor distribution.

The argument echoes the lessons of the FTX collapse, where customers waited years in bankruptcy proceedings with no guarantee of full recovery.