CLARITY Act and Ethereum ePBS: What US Arbitrage Flows Look Like in H2 2026

The second half of 2026 will bring two big changes to the US-based crypto arbitrage landscape. The first is the passage of the CLARITY Act, which (after being updated in May) establishes how digital assets will be classified between the SEC and CFTC. Prediction markets have suggested that there’s been a significant likelihood increase for the passage of this bill compared to three months prior. The second major change is Ethereum’s Proposer-Builder Separation upgrade, which is slated for release in Q3 2026 and will set the stage for formalizing the MEV supply chain at the protocol level.

Both of these proposals will impact arbitrageurs directly: CLARITY establishes a definition as to which exchanges and tokens are legally clean; and ePBS will change the economics surrounding how to capture MEV and on what terms.

This article will address: what are actually the contents of the bills and upgrade; what are the operational changes associated with cross exchange arbitrage; and which arbitrage strategies become easier versus which become harder.

What Are the Contents of the CLARITY Act?

The Senate text of the CLARITY Act was published in May 2026. This version of the bill is substantially different from the original (from 2024 House version), with the following core mechanics:

Digital Commodity vs Digital Security – establishes a Defined Test
Tokens that pass the defined test, which the CLARITY Act establishes to define a digital commodity versus a digital security, would have to meet ALL of the following three conditions: a) have a mature blockchain (have no controlling entity and be decentralized); b) have validators who are distributed across multiple entities; and c) be a token governed by a smart contract.

Tokens that do not meet any of the above three conditions would fall under the SEC’s jurisdiction.

Self-Custodial Tokens – are expressly provided for within the CLARITY Act
In addition to being exempt from the broker dealer definition, the holder of a digital token may hold the digital token in a non-custodial wallet (meaning the holder does not use a third party to hold) without triggering the broker dealer obligations of the wallet provider.

Dex Transactions – third party services exempt from Money Transmitter Definition
Transactions that solely use smart contracts and no third party operator collecting a fee will be outside of the definition of a money transmitter. Third party operators based in the US must still comply with the money transmitter definition.

Stable Coin Rules – a defined but separate framework from the CLARITY Act
Stablecoins that are issued by a bank or federally-licensed non-bank issuer can operate using the same standards set forth in the CLARITY Act. Rather than scale based on market cap, new disclosure requirements will be scaled according to circulating supply - this is important for tokens that have a small float and large fully diluted valuation (FDV).

As of this writing, the bill is not yet law. Senate floor vote timing will depend on the actions of the Senate regarding calendar dynamics in Q4. Markets are currently pricing in the likelihood of passage of the still pending bill in 2026 for now at a materially high rate (but it isn’t guaranteed).

What is Changing for US-Touching Arbitrageurs

If we assume the bill passes as written, the changes that will take effect include:

A clean trading environment for additional tokens on US-facing centralized exchanges (CEX). Currently, US-based CEX, such as Coinbase, Kraken, and Gemini, have conservative listing committees due to the unresolved regulatory debate between the SEC and the CFTC. Under the new law (if it passes), dozens of mid-cap tokens will now qualify as legally allowable to list so the spread ends up being compressed between US-based CEX and offshore-based CEX that already list the new tokens, resulting in a new arbitrage window for US-CEX that add these tokens.

The closure of spatial arbitrage across the US and offshore. In the past, there used to be a disparity between COIN and Binance in their listings due to Binance's broader alleged interpretation. If COIN can correct this disparity by either discontinuing trading of certain altcoins or listing new token/altcoins on the platform, geographic arbitrage for mid-cap altcoins will lose the structural space that has historically existed.

Clean DEX-CEX arbitrage within the US-facing venue. Self-custody will enable US-based traders to trade on Uniswap and Coinbase while self-custodyying tokens without fear that the act of self-custody triggers a regulatory issue. The closure of this will expand the number of US citizens trading on both DEX and CEX and will reduce DEX-CEX arbitrage spreads.

The introduction of new stablecoin arbitrage opportunities. As there are multiple regulated stablecoin issuers, the number of stablecoins available on US exchanges will also be multiple, hence creating arbitrage opportunities among those stablecoin issuers. The USDC and PYUSD spread versus a newly created central bank digital currency becomes a tradable instrument within a clearly defined regulatory framework.

The broad summary here is: clarity creates arbitrage opportunities, but will probably have a negative effect on arbitrage profits because it introduces competition into the market with improved tools. This is because the market will be more competitive, and so the "edge" will shift from differences in access to trading venues to speed of execution, capital efficiency and information.

ePBS - The MEV Restructure in Q3 of 2026

ePBS represents the formalization at the protocol level of the proposer-builder split that exists today through MEV-Boost. Currently, validators/proposers outsource block construction to specialized builders via the relay layer. Builders earn blocks by paying validators with MEV.

After ePBS has been implemented, this split will be baked into the consensus protocol, as follows:

• The relay layer becomes optional and the auction becomes the default method for creating blocks.
• Builder competition will have standardized timing and clear rules.
• Censorship resistance will be enhanced, as the protocol will enforce participation requirements rather than relying only on social pressure on the relay layer.
• The economic supply chain will be more transparent and visible.

From an arbitrageur's perspective, the changes that will matter most are:

Predictable inclusion economics: Today when there is congestion and you want to get included in the block, you have to guess what the builder will do. After ePBS, you will be able to calculate what the builder will do and the auction will be the same each time. This makes arbitrage execution more predictable.

Changes in MEV revenue distribution: Validators will receive defined shares and builders will receive defined shares. The side payments between builders and searchers are much more visible. Some searcher strategies that were based upon the lack of visibility will become less profitable.

Economic Shift of Sandwich Attack: With the new classification of Sandwich Attacks as possible Market Abuse by ESMA in 2025, along with the addition of greater transparency into the supply chain by the ePBS, continuing pressure from both an increased level of Regulation and more structural impediments to Sandwich Extraction indicate the end of the era of viewing MEV as an unregulated technical oddity.

For Retail Arbitrageurs: The Net effect of the ePBS is Slightly Positive. The structural protections against being "Sandwiched" are improved; thus it will be more predictable to determine the cost of including only Legitimate Arbitrage.

The Strategies Which Become Easier to Use

Several Arbitrage Strategies will be more accessible in the post-CLARITY and post-ePBS environment:

• US CEX Listing Arbitrage: As Coinbase, Kraken and Gemini bring tokens previously held back because of regulatory uncertainties into their listings; this opens the way for Listing Spreads on these tokens to the US venues, where historically these types of Listing Spreads existed only in the offshore exchanges. Thus, for US-Based Arbitrageurs it is possible to capitalize on US based tokens without using offshore exchanges.
• Stable Coin Basis Trading: The number of regulated stable coins now being created means that the basis used to price stable coins is now a multi-faceted value; these include USDC, PYUSD and new bank issued stable coins, none of which will trade at 1:1 even throughout the different intervals of the redemption cycle.
• Self-Custody to CEX: More clearly defined Self-Custody requirements mean that US traders can maintain larger levels of inventory in self-custody wallets; thus there's incrementally more capital available for Cross Venue Arbitrage.
• Cross Chain Arbitrage with Ethereum L2: The inclusion Economics will be clearer now, post-ePBS; thus the predictability of Ethereum L1 as a settlement layer for executing Arbitrage Closing on Base, Arbitrum or Optimism will improve.

The Strategies That Become Harder to Use

Some Arbitrage Patterns will Lose their Edge:

• Geographic Spread Arbitrage between US and Offshore will become Wildly Compressed as CEX and offshore venues start to Converge.
• Pure DEX based MEV Searchers will become More Competitive. The ePBS will make the market more level for the systematic searchers of established brands; however, due to technical know-how and a higher technical barrier to entry; new entrants will be entering competition with more sophisticated Searchers. There are some traders using offshore exchanges to take advantage of tokens that may not yet be available on U.S exchanges. The launch of the CLARITY Act will change this.

Where Should US Arbitrageurs Focus?

In our opinion, the practical options for US arbitrageurs in H2 2026 is threefold:

Funding rate arbitrage; with the expansion of financing rate arbitrage between U.S. based perpetual exchanges (that have adopted clarifications) and offshore exchanges. Currently, there exists significant volatility between the perpetual markets in the U.S and in international markets. The expected earnings on these trades are significant and present a viable investment opportunity since the market will continue to have a high level of pricing uncertainty.

Basis trading; as new and regulated stablecoins enter the digital asset marketplace, there will be more frequent basis trades. While the average basis will be relatively small (5-30 bps), it will be incredibly capital efficient and provide predictable returns.

Cross-chain settlement arbitrage on ePBS Proof of Stake L2s; as ePBS helps define certainty on L1 settlement, as a result of ePBS there are greater opportunities for arbitrage between the L1 and L2 networks. The spread remains primarily in the 10–40 bps range for stablecoin trades across Base, Arbitrum, and Optimism.

The Tools Needed for Arbitrageurs

Arbitrageurs will require a comprehensive suite of tools to facilitate trades:

• A scanning tool that will provide detail in regards to US facing and offshore CEX(s) in order to identify convergence/existence of arbitrage. ArbitrageScanner provides traders with normalized data across an ample amount of regulated exchanges.
• A DEX scanning tool to facilitate cross-chain trading. With well over 25 DEXs performing trades across 40 different Blockchains, DEX platforms provide traders with sufficient opportunities to take advantage of trading arbitrage.
• A funding rate scanner; we have developed a perp screener which will aggregate funding rates from both U.S & offshore venues.
• A calendar that provides a listing of both US- and offshore-based tokens, enabling you to observe tokens that will converge as well as tokens that will only remain offshore.
• Using wallet intelligence, detect possible repositioning due to regulatory changes prior to any price changes.

Frequently asked questions

1. When will the CLARITY Act become law?

If the Senate holds to its current schedule, a vote on the Senate floor would occur during the 3rd or 4th quarter of 2026. Agency rulemaking historically takes 6 to 18 months after the passage of law. We recommend that you do not change your business based solely on this schedule, but rather prepare for the new regime.

2. Will the CLARITY Act impact non-US based traders?

Yes, but indirectly. US-based exchanges will have more tokens to trade, and US-based market makers will have increased access to trade. This will tighten the spreads on many global tokens compared to the spreads of non-US based assets. The strategy advantage that non-US based traders have will change, but it will not disappear.

3. What is the exact time frame for ePBS?

The rollout of the ePBS (Enshrined Proposer-Builder Separation) is planned for the 3rd quarter of 2026. The implementation dates of hard forks have a history of slipping anywhere from weeks to months, so be conservative in your modeling.

4. Are sandwich attacks illegal?

Sandwich attacks are subject to the potential finding of market manipulation (ESMA). The CLARITY Act does not specifically address MEV (Maximum Extractable Value), however, it lays the groundwork for the future enforcement of market manipulation laws related to US connected DeFi activities. Therefore, large scale sandwich attacks will likely be subjected to growing scrutiny.

5. What do you think is the biggest opportunity created by both events?

We believe that the biggest opportunity is to capitalize on the differences between the prices of backed stablecoins and memecoins. In the long term, these price differences can create opportunities for capital-efficient trading that have less risk than trading memecoins. Although this activity might not be quite as sexy as trading memecoins, it is certainly much more reliable over time.

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IMPORTANT! You should be aware that we are software developers and do not provide investment recommendations or guarantees of income. Our software is manual in nature, so you will always maintain complete control of your money. We may show you examples of how our customers have achieved arbitrage profits in the past; however, we do not recommend that you do so yourself. Ultimately, your success is based on your individual actions and the market.