Definition
The Financial Innovation and Technology for the 21st Century Act, universally abbreviated as FIT21, is the most comprehensive digital asset regulatory legislation in US history to have advanced through a full chamber of Congress. Introduced by House Agriculture Committee Chairman Glenn Thompson (R-PA) and House Financial Services Committee Chairman Patrick McHenry (R-NC), FIT21 passed the House of Representatives on May 22, 2024, by a vote of 279-136, with 71 Democrats joining all but three Republicans in support — a bipartisan margin that reflected the broad political consensus that the absence of a digital asset regulatory framework was both a competitive disadvantage and an investor protection problem. As of early 2026, FIT21 remains pending in the Senate, where it is undergoing review by the Banking Committee and the Agriculture Committee, though the changed political environment following the 2024 elections has improved prospects for Senate consideration.
FIT21’s central innovation is a framework for allocating digital assets between SEC and CFTC jurisdiction based on the degree of decentralization of the underlying blockchain network. Under FIT21, a digital asset that is issued on a “blockchain system” where no single person or group has unilateral control — termed a “digital commodity” — would be regulated by the CFTC, subject to its markets regulation framework. A digital asset issued on a blockchain system that is not sufficiently decentralized, or that otherwise constitutes an investment contract under the Howey Test, would be regulated by the SEC as a “digital security.” The legislation establishes a certification process by which issuers can petition the SEC to have their asset reclassified from digital security to digital commodity if the network has achieved “functional maturity” — defined by criteria including decentralized governance and utility functionality.
Key Facts
- The 279-136 House vote on May 22, 2024, included 71 Democratic votes — unusual bipartisan support reflecting both parties’ interest in establishing a clear regulatory framework ahead of the 2024 elections.
- President Biden issued a veto threat against FIT21 in May 2024, citing concerns that the bill’s CFTC-focused framework for decentralized assets would create regulatory gaps for investor protection; the bill was not sent to the Senate for a vote before Biden’s term ended.
- FIT21 would create a new “digital commodity exchange” registration category with the CFTC for platforms trading digital commodities, separate from existing designated contract markets and swap execution facilities.
- The “functional maturity” certification process requires an issuer to certify to the SEC that its digital asset blockchain is sufficiently decentralized, triggering a 60-day SEC review period during which the asset continues to be treated as a digital security.
- FIT21 explicitly preserves SEC anti-fraud jurisdiction over all digital assets, regardless of whether they are classified as digital securities or digital commodities.
- Consumer protection provisions require digital asset exchanges to segregate customer assets, maintain reserves, and disclose conflicts of interest — provisions directly responding to the FTX collapse of November 2022.
- FIT21 is distinct from the companion Digital Asset Market Structure Act introduced in the Senate, though both address the SEC/CFTC jurisdictional divide.
Relevance to Tokenization
FIT21 is directly relevant to the US tokenization industry because it would establish, for the first time, a clear and legally certain framework for determining whether a given digital asset requires SEC or CFTC regulation. The current environment, in which the SEC and CFTC have overlapping jurisdictional claims over various digital assets without a legislative resolution of the boundary, creates compliance paralysis for tokenization platform operators who cannot structure products with confidence about which agency’s rules apply. FIT21’s functional maturity certification process — while imperfect — provides a defined pathway for token projects to achieve the jurisdictional clarity they need to build compliant products.
For tokenized securities specifically, FIT21 confirms and preserves SEC jurisdiction, which means that the existing framework of registration exemptions (Reg D, Reg A+), broker-dealer requirements, and ATS rules continues to apply. This is broadly consistent with the current state of practice and provides no significant change for established tokenized security platforms. The more significant implication is for the governance tokens of DeFi protocols and blockchain networks: FIT21 would create a legitimate regulatory framework under CFTC oversight for assets that are currently regulated only through enforcement actions, which could enable DeFi protocols to operate with legal clarity and, over time, interact with tokenized security markets without creating regulatory cross-contamination.
The Senate’s approach to FIT21 and related digital asset legislation will determine the long-term regulatory architecture for US tokenization. If a comprehensive market structure bill incorporating FIT21’s core framework passes the Senate and is signed into law in 2025-2026, the US will have leapfrogged other major jurisdictions (including the EU with its MiCA framework) in establishing a comprehensive digital asset regulatory framework that explicitly addresses the needs of the tokenization industry. If the legislative process stalls, the tokenization industry will continue operating under a patchwork of SEC enforcement actions, no-action letters, and informal guidance — a less efficient but still functional regulatory environment.
Related entries: Commodity Exchange Act, Securities Act of 1933, The Howey Test