The proposed Digital Asset Market Clarity Act was likely destined for failure.
From its inception, the bill faced significant challenges. Various political, policy, and social dynamics needed to align for it to succeed. Ultimately, a mix of factors continually reduced its chances over the past year. The bill garnered bipartisan disapproval when it reached the Senate for an essential procedural vote earlier this month, leaving its future uncertain.
Multiple warnings were issued over months about the bill’s precarious path.
Interviews over the past week with over a dozen industry insiders and legislative staffers—some speaking anonymously to share their honest views—indicate that several intertwined issues contributed to the demise of the Clarity Act.
The Senate largely disregarded the House’s own Digital Asset Market Clarity Act, which had gained strong bipartisan support. The Senate’s version was pieced together unevenly. Complications from U.S. President Donald Trump and the White House hindered negotiations. Furthermore, the cryptocurrency sector itself engaged with lawmakers in a disorganized manner. Democrats pushed back against an ethics agreement they believed did not meet their criteria, while the ticking clock of the upcoming midterm elections added pressure.
As a result, despite a comprehensive lobbying effort that culminated in “the most pro-crypto Congress ever” following the 2024 elections, one of the crypto industry’s key legislative priorities—reforming market structure—remains unachieved.
The Digital Asset Market Clarity Act aimed to establish clear regulations defining how the primary regulatory bodies, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, would govern the rapidly expanding $3 trillion cryptocurrency market. While last year’s Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS) specified oversight for stablecoins, a comprehensive market structure framework has long been sought by the industry.
Currently, crypto spot markets operate in a regulatory gray area. The CFTC holds no authority over these markets except in cases of outright fraud or derivatives issues. Additionally, the SEC has not established formal rulemaking for overseeing crypto-related securities, leading many in the industry to fret over former SEC Chair Gary Gensler’s attempts to fit crypto spot trading under existing securities laws. The lack of clear jurisdiction between the SEC and CFTC further complicates matters.
In the absence of this crucial legislation, the agencies have begun outlining their perspectives on the crypto markets through joint advisories released earlier this year. However, a dedicated market structure bill could address these complexities in a more concrete and lasting manner.
The ethics clause
It’s difficult to ascertain if the failure of the Clarity Act stemmed solely from the contentious section aiming to limit senior government officials, particularly Trump, from personal investments in cryptocurrencies, but ethical concerns clouded the bill from the start and remain a focal point in the discourse surrounding it.
Democratic worries regarding Trump’s ties to the crypto industry have been present since 2025. Last May, Sen. Ruben Gallego and eight fellow Democrats declared they couldn’t support the GENIUS Act due to Trump’s profits from digital assets. Eventually, they agreed to vote for it with minor revisions, but it was evident that Trump’s family’s crypto dealings—including World Liberty Financial, the $TRUMP memecoin, and the mining entity American Bitcoin—would linger over future market structure discussions. Trump has asserted that he does not profit from any of these ventures, stating during a “Meet the Press” interview that he supports cryptocurrencies because “many people want it.” However, his financial disclosures later revealed he made $1.4 billion from these activities in his first year back in office, accounting for more than half of his total income that year.
Democrats aimed to prevent Trump from profiting off the crypto industry, which has heavily invested in his 2024 campaign and contributed to his endeavors, like inaugural celebrations and events aimed at refurbishing the White House.
While Democrats presented the ethics provision as applicable to all current and future presidents and high-ranking officials, the crux of the issue lies in Trump’s crypto business connections, which have consistently troubled party members. There is a general sentiment among Democrats that they are genuinely concerned about this topic.
Industry advocates perhaps should not have been shocked by the emphasis Democrats put on the ethical aspect, according to one source.
In May, Sen. Kirsten Gillibrand, a long-time supporter of crypto initiatives, announced to attendees at CoinDesk’s Consensus 2026 that the bill wouldn’t progress without an ethics provision. Sen. Angela Alsobrooks, who supported the bill during a Senate Banking Committee hearing, made similar comments about needing further refinements.
Even representatives within the industry expected a definitive agreement on the ethics provision before the vote on the Senate floor—where all senators would participate. Cody Carbone, head of the Digital Chamber, mentioned after the Banking Committee’s advancement of the bill that he anticipated that “the deal will be finalized before it goes to the floor, as they would want to bring it forward only if they’re confident of securing 60 votes.”
Ultimately, bipartisan consensus eluded lawmakers. The White House and Senate Republicans presented a variety of proposals; Senate Democrats fired back with counteroffers; and Senators Thom Tillis and Gallego even suggested a bipartisan compromise earlier in the year. However, an agreement remained elusive before this month’s crucial vote.
Many pointed to Trump’s financial disclosures in June as a turning point that amplified these ethical concerns by presenting a clear figure for lawmakers to rally against Trump’s crypto holdings.
As the November elections approached, these worries intensified.
“I believe politics took precedence over policy in this case,” expressed Stu Alderoty, Chief Legal Officer at Ripple Labs. “We were advocating for good policy, and the industry must improve its political influence.”
Ron Hammond, from Wintermute, noted that both Gallego and Alsobrooks voted against the bill in its Senate iteration, highlighting how elections were looming. Others observed that even supportive Democrats couldn’t be seen as lenient toward Trump’s alleged misdeeds with the elections right around the corner.
During a recent CoinDesk Policy & Regulation event, Rep. Ritchie Torres attributed the bill’s failure to Trump’s crypto endeavors.
“While the Clarity Act’s failure had many factors, I’m convinced that without Trump, bipartisan agreement could have been reached,” he stated. “His memecoin created a political dilemma for Democrats.”
Coinbase and the delay
Another aspect under review is the industry’s role in this legislative process. Recently, The Wall Street Journal reported that some industry leaders attributed part of the failed vote to Coinbase and CEO Brian Armstrong. Armstrong had pulled support for the Senate Banking Committee’s version of the bill just before a major January vote.
Armstrong cited concerns about how the bill addressed stablecoin yields and rewards. This withdrawal initiated a protracted conflict between the crypto and banking sectors while lawmakers sought a resolution. It’s uncertain if other pressing issues were addressed during this yield debate.
Industry leaders and Sen. Cynthia Lummis came to Armstrong’s defense following the Journal’s report; however, some industry participants felt Armstrong’s tweet and the prolonged yield discussions negatively affected the chances for Clarity’s passage.
One engaged individual in crypto lobbying remarked that had the ethics proposals unveiled earlier this month been released during the spring, the likelihood of a successful vote would have increased.
Alderoty remarked that January could have offered “space for negotiations” without the looming midterm elections.
“With the January timeline, there would have been ample opportunity to discuss further without the midterms hanging over their heads,” Alderoty observed.
Similar sentiments were expressed by Charley Cooper, president and COO at Ava Labs, who asserted that the proximity of the vote to election day undermined its chances of success.
The crypto industry had a brief surge of optimism with the earlier ethics proposal, which bolstered hopes for passing the bill. However, the tumultuous political landscape, complicated by an impending election, created hurdles.
It’s worth noting that an earlier vote would not have guaranteed success. Many individuals interviewed expressed their appreciation for Armstrong and Coinbase’s contributions to the bill’s development. Yet, despite claims from the industry that the banking sector should have negotiated stablecoin yield concerns during the GENIUS Act discussions, one participant noted that the Senate Banking Committee’s July 2025 discussion draft on market structure prompted discussions about how to manage interest or yield-generating digital assets, including stablecoins.
Ultimately, the timing proved unfavorable.
Just as the Senate Banking Committee delayed its January hearing, escalating tensions with Iran began affecting fuel prices and contributing to an unstable global economic climate. Citizens’ discontent with Trump’s foreign policies and the overall economy has coincided with plummeting approval ratings for Trump over recent months. Meanwhile, progressive challengers emerged victorious in Democratic primaries, leading the party to prioritize maintaining its base over potentially adverse repercussions from supporting a crypto bill, several insiders noted.
“Neither side was inclined to undertake a significant action that could be framed as a victory for the opposing party,” Cooper mentioned. “Thus, the bill’s failure doesn’t surprise me.”
The House bill
The timing complications stem from another issue identified by multiple participants: the Senate’s decision to pursue its version of the bill initially. The House of Representatives passed its version of the Digital Asset Market Clarity Act by an overwhelming 294-134 vote in July 2025, with 78 Democrats voting in favor. Yet, the Senate largely overlooked this to develop its proposal, originally dubbed the Responsible Financial Innovation Act before adopting the Clarity Act title later in the process.
The Senate employed a similar approach with the stablecoin-focused GENIUS Act—while the House spearheaded its own version, the Senate proceeded with a distinct form of the legislation, ultimately enacting that version into law. House members expressed repeated aspirations for the Senate to consider their adaptation of the Clarity Act but were largely ignored.
“Clarity’s prospects diminished significantly due to the Senate’s choice to bypass the House’s version and forge its own instead,” noted Wintermute’s Ron Hammond.
Many of the complications that hindered the Senate’s bill in recent months were not critical last year, he shared with CoinDesk. The banking sector wasn’t lobbying on stablecoin yield issues as effectively as it had during most of 2026, political concerns were less intense, and many advocacy groups had not yet mobilized at that time.
Two additional individuals indicated that the House likely anticipated that the Senate would disregard its bill. However, the House passed it anyway. Securing over two-thirds support demonstrated to the Senate that there was substantial bipartisan enthusiasm for it.
Rep. French Hill, chair of the House Financial Services Committee, advised CoinDesk in April that the Senate did modify certain aspects from the House’s Clarity Act and its predecessor, the Financial Innovation and Technology for the 21st Century Act.
However, initiating its own Clarity version posed additional risks; if the Senate were to pass it, it would need to return to the House for approval, and the outcome was uncertain.
With the House prepared to adjourn shortly after the Senate’s return earlier this month, there was no guarantee that even a series of successful votes on Clarity would see the House act before the upcoming elections. And any action taken would likely not involve passing the Senate’s bill in its current form, a former House aide informed CoinDesk.
Tim Ryan, a former Congressman now advising several crypto firms, relayed through a spokesperson that the House would need to assess how the Senate’s bill could affect its original version before proceeding.
“A strong agreement in the Senate could have fostered real momentum for the House to act,” Ryan explained. “The crucial factors would have been the bill’s substance and the House leaders’ ability to gather sufficient support. The primary goal should be to establish sensible legislation that instills confidence for future endeavors.”
Negotiation approaches
Several individuals voiced concerns regarding the negotiation process itself. In previous years, discussions may have involved legislative staff from both parties collaborating more directly, but that did not appear to be the case this time.
Industry insiders noted that instead, Republican staff would draft legislation and share it with their Democratic counterparts for feedback, leading to a bipartisan narrative claiming combined efforts. However, in certain instances, concessions appeared to be independently offered by Republicans in hopes of gaining Democratic support, as evidenced by alterations to the Blockchain Regulatory Certainty Act.
A Democratic aide mentioned that while some provisions were agreed upon, Republican negotiators frequently retracted their commitments.
Earlier this year, after an initial ethics draft from Senate Republicans and the White House, negotiators subsequently engaged the crypto industry to discuss these details before presenting them to Senate Democrats.
“Republican staff mishandled negotiations by excluding their Democratic counterparts,” one participant asserted, arguing this gave Democrats leverage in discussions. “If you don’t agree to ‘this concession,’ you maintain power in negotiations.”
Additionally, attention was called to the release of a revised ethics proposal from Sen. Lummis’s office, which was viewed as problematic if the initiative aimed for bipartisan support.
Punchbowl News recently reported on the intricacies involved in the negotiations.
Multiple sources also directed criticism toward White House advisor Patrick Witt, suggesting he intended for the bill to advance but lacked the necessary experience to coordinate such a complex initiative. Some asserted that Witt’s updates on X, indicating successes or breakthroughs, unintentionally inflated industry expectations. Witt did not respond when approached by CoinDesk during an event last week.
Two legislative aides alongside an industry participant revealed that a final push led by Sen. Tillis, shortly before the procedural vote on September 15, aimed to submit the Tillis-Gallego ethics proposal as an amendment for the entire Senate to consider. One Democratic aide claimed they were on the “one-yard line” for a successful procedural vote when negotiations abruptly halted.
The closure of discussions was initiated by a member of Senate Banking Committee Chair Tim Scott’s team, multiple individuals reported. Both Senators Gallego and Chuck Schumer released statements indicating that a bipartisan agreement was imminent but had been “killed.”
Eleanor Terrett from Crypto in America first revealed that Scott’s staffer halted negotiations.
A source familiar with the situation explained that the staffer had advised his own team to vacate the discussion, leaving out the White House and Senate Agriculture Committee’s Republican staff from the conversation. Republicans had already dismissed a counterproposal submitted by Senate Democrats late the previous night, and formal negotiations had concluded. The staffer claimed that he did not perceive the discussions as active negotiations due to the process already being considered closed, disputing that he was responsible for halting progress.
During the voting phase, an industry participant noted that Tillis and the negotiating Republican staff lacked backing from their leadership. Another Democratic aide indicated that Republican leadership undermined Tillis and Lummis after they had seemingly secured a deal. According to the industry participant, agreement on some provisions was achieved, but final details required documentation.
Concerns were raised about the industry’s negotiation strategies; while the crypto sector did largely unify over specific elements of the bill, there were actions it could have taken to bolster its position, such as effectively demonstrating real-world applications for merchants and stakeholders. Instead, the narratives presented in Washington overly focused on hypotheticals.
Industry leaders could have actively encouraged bipartisan negotiations, another aide remarked.
The midterm elections
The year 2026 marks a midterm election. Earlier predictions indicated that control of the House of Representatives was likely to shift from Republicans to Democrats, while the Senate was expected to remain in Republican hands.
Many speculated that this dynamic rendered it untenable for Democrats to grant Trump a “victory” before the elections, especially given that progressive voters tend to oppose crypto.
Sen. Bill Hagerty cautioned audiences at a Georgetown University event last week that the closer negotiations drew to November 3, the slimmer the chances of any passage became. However, he suggested the Senate might revisit the legislation post-election.
“It’s unfortunate, but it reflects political realities,” he stated. He conveyed to CoinDesk that there might be opportunities to refine some provisions later.
The future of Fairshake
A significant query following the vote’s failure is: what lies ahead for crypto political action committees? Fairshake, the largest crypto super PAC, has already announced plans to channel $30 million against former Senator Sherrod Brown, who is running against Ohio Senator John Husted in an effort to return to the Senate. While Brown once chaired the Senate Banking Committee and has historically criticized the crypto sector, he has remained relatively silent on the subject during this campaign.
Neither party perceived significant political consequences for not advancing Clarity, noted WisdomTree’s Chief Legal Officer Ryan Louvar.
The effectiveness of Fairshake and other PACs in influencing the trajectory of the 2026 election remains uncertain. Recent polling suggests that Democrats are poised to win several House seats, and numerous Senate races are competitive. If PACs continue to ally exclusively with Republicans, it could backfire on the crypto industry, especially if Democrats reclaim control in either chamber or the presidency in 2028.
According to one insider, Fairshake is not structured for a “wave” election scenario. Additionally, the PAC has already faced two notable failures: its opposition to Illinois Lieutenant Governor Juliana Stratton’s Senate campaign, which she won, and she is likely to succeed in the general election.
It’s essential for these PACs to tread carefully; a complete estrangement from Democrats could be detrimental.
Another individual expressed uncertainty about whether Fairshake’s pressure had any positive impact on getting Clarity passed or if Democrats opted to run out the clock on 2026 to dodge multimillion-dollar ad campaigns against them.
The elusive crypto voter
Democratic aides emphasized that the crypto industry shouldn’t presume that a future administration or Congress will be uniformly supportive of crypto legislation; the political tide could shift following this term.
Another challenge for PACs like Fairshake involves the absence of adequate supporting frameworks in Washington. Even if the industry claims extensive crypto ownership among millions of Americans, without constituents illustrating its significance, lawmakers may remain indifferent. Worse still, if these elected officials return to their home communities and don’t hear discussions about crypto from their constituents, they could become skeptical of these assertions.
Alderoty, who also heads the Ripple-supported National Cryptocurrency Association, indicated that while approximately 67 million Americans are involved with crypto, they have yet to convince senators to hold discussions with these users about their experiences.
Moreover, it’s evident that crypto isn’t a pressing issue for many voters. In a CoinDesk survey of 1,000 registered voters, only 1% identified crypto as a top priority. Issues like the cost of living, employment, and healthcare were far more significant concerns for those surveyed.
Furthermore, Democratic voters, whether moderate or strongly aligned, seem to view crypto more negatively than positively, disincentivizing senators from pursuing related legislation. Independent voters also tend to harbor unfavorable opinions of the sector.
Additionally, 62% of respondents expressed skepticism regarding Trump’s administration’s ability to regulate crypto effectively.
Takeaways
The future of the Clarity Act remains uncertain. While there are hopes for reviving the bill by the year’s end, a new Congress will convene in January, necessitating a fresh legislative agenda.
According to one industry expert, it’s likely that Democrats will propose their own version of a crypto market structure bill as a starting point for discussion, even if that initiative doesn’t progress independently.
WisdomTree’s Louvar remarked that as crypto products become increasingly tangible, they’ll help inform future discourse. Innovations surrounding tokenization or blockchain applications outside of the crypto realm could illustrate their utility, even if sentiments toward cryptocurrencies remain critical.
In the absence of legislative progress, the SEC and CFTC are issuing guidance and taking measures to address regulatory gaps. However, SEC Chair Paul Atkins has consistently asserted that a market structure bill is necessary to close any authority loopholes.
“The crypto bill unfortunately devolved into an ethics debate, which is regrettable,” observed Alderoty from Ripple. “We lost a crucial opportunity.”