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America’s crypto market structure legislation appears dead as a doornail after Republicans seriously underestimated Democrats’ desire to rein in corruption.
- CLARITY stumbles at first hurdle, and it wasn’t even close
- GOP rolled dice (and lost) in rejecting Democrats’ counteroffer
- Political blame game begins
- White House’s stablecoin calculator failed to move banking needle
- Crypto PACs vow great vengeance and furious anger for ‘no’ voters
Tuesday’s cloture vote on the Senate’s digital asset market structure bill (the CLARITY Act) required a supermajority of 60 votes to advance, but fell well short of that mark. In the end, Republicans couldn’t even deliver all 53 members of their own party, or even a simple majority, with the final tally standing at 49 ‘ayes’ and 50 ‘nays.’
All Democrats voted in the negative while three GOP senators—Jerry Moran of Kansas, Maine’s Susan Collins, and Missouri’s Josh Hawley—joined them in rejecting CLARITY as written. Thom Tillis (R-NC) originally voted ‘aye’ but changed his vote to ‘no’ once he saw how the result was playing out.
The Tillis flip-flop was actually a procedural move that allowed him to submit a motion to reconsider the bill at some future date. Tillis later tweeted that Tuesday’s vote was “not the end” for CLARITY, saying his motion will allow senators to “continue working towards a positive outcome.”
But with the Congressional calendar tight and other high-priority issues facing legislators, the possibility of CLARITY being revived in the current Congress is slim to none. And with Democrats projected to make significant gains in both chambers in November’s midterm elections, whatever crypto legislation emerges in 2027 might look very different.
The Polymarket prediction market’s odds of CLARITY being signed into law this year hit 35% on Sunday but fell to 11% early Tuesday. In the immediate aftermath of the vote, these odds sank to 4%.
The crypto ball is now squarely in the hands of Paul Atkins and Michael Selig, respectively, the chairs of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Both have indicated their willingness (if not eagerness) to do everything in their power to craft crypto regulations in the absence of legislation indicating where their limits to craft policy might lie.
The BTC token’s fiat price was over $79,000 early Monday following the release of the GOP’s new CLARITY draft, but slipped below $76,000 early Tuesday as reality dawned that many of its revisions were largely cosmetic. As the early vote suggested doom lay ahead, BTC nearly fell below $75,000 but rebounded slightly, sitting at ~$75,700 as of Tuesday night. Ethereum’s native ETH fell even harder, losing over 5% of its value since Monday.
Crypto share prices also suffered declines, led by USDC stablecoin-issuer Circle (NASDAQ: CRCL) closing Tuesday down 11.4%. The Gemini (NASDAQ: GEMI) exchange fell 9.5%, the Bullish Global (NASDAQ: BLSH) exchange slid 5.8%, the professional BTC hoarders Strategy (NASDAQ: MSTR) fell 5.4%, while ETH hoarders BitMine Immersion Technologies (NASDAQ: BMNR) slid 8.4%.
We’ll get to political and industry reaction in a second, but first, let’s recap the events leading up to the vote. Sunday night brought a new GOP-approved version of CLARITY that quickly drew fire from many Democrats and even some Republicans. Dems announced they would deliver a ‘counteroffer’ to Republicans on Monday night, even as their GOP colleagues insisted the time for talking was over.
Tuesday morning saw the GOP reject Dems’ proposed revisions to CLARITY sections they continued to find problematic. Politico’s Jasper Goodman reported that the proposed changes included extending the bill’s ‘ethics’ restrictions to the children of public officials. That would have roped in President Donald Trump’s sons, Don Jr., Eric, and Barron, all of whom are involved in the numerous crypto projects that helped the president earn over $1 billion from crypto ventures last year.
The Dems also sought to narrow the ethics provision that would have allowed the Trump-appointed director of the Office of Government Ethics (OGE) to shield the president from prosecution by state attorneys general for violating the ethics rules. And the threshold for prosecution would have been lowered from ‘knowingly and willingly’ violating the rules to just ‘knowingly’ violated.
Public officials who held ‘significant’ stakes in crypto ventures would have been forced to divest their stakes, rather than the current text’s option of moving these stakes into a blind trust. Another ask was to require individuals publicly shilling for crypto projects to disclose who paid them and how much they were being paid.
Regarding the Blockchain Regulatory Certainty Act (BRCA) text that offered some legal immunity to noncustodial developers of decentralized finance (DeFi) platforms if said platforms were used by bad actors for criminal purposes, the Dems proposed restoring language from the House of Representatives’ version of CLARITY that specified nothing in this text modifies the U.S. Criminal Code.
Regarding the Senate Agriculture Committee’s CLARITY input, Dems proposed a number of changes, including a clause that would ensure the Act doesn’t undermine tribal gaming laws.
Tribal operators want to ensure prediction market platforms licensed as ‘designated contract markets’ (DCMs) by the CFTC aren’t allowed to offer ‘event contracts’ on sports events without first obtaining sports betting licenses from the states in which these platforms operate.
The cloture vote was viewed by some as a ‘free’ vote, in that it would only enable further debate on the Senate floor. But the GOP’s sharply negative reaction to the Dems’ counteroffer apparently convinced enough Dems that further debate wouldn’t shift Republicans from their entrenched positions.
Ahead of the vote, a Lummis spokesperson called the latest Dem offer “identical” to their previous positions, and said Dems “need to actually start negotiating instead of resubmitting the same demands and calling it progress.” A spokesperson for Senate Banking Committee chair Tim Scott (R-SC) accused Dems of choosing to “move the goalposts again.”
Mark Warner (D-VA) pushed back on this view, telling Semafor that “this is language Democrats have been seeking for the better part of the year,” so it shouldn’t have come as such a great a surprise.
Punchbowl News’ Brendan Pedersen reported that pre-vote bipartisan discussions in Tillis’s office were halted by Tim Scott staff members. Crypto in America’s Eleanor Terrett quoted a Dem staffer saying Tillis was pushing to delay the vote so the two sides could keep talking, but Scott’s staff told them to stop and get out because “we’re done.”
Senate Minority Leader Chuck Schumer (D-NY) backed up these reports, telling reporters that “Republican leadership walked in the room, broke up the bipartisan discussion and said, ‘no, we’re done,’ and killed it.”
Punchbowl’s Pedersen later wrote that the GOP’s go-it-alone approach to drafting CLARITY may have been an own-goal. Instead of involving Dems directly in the process, the GOP periodically accepted feedback from Dems and then incorporated that feedback as they saw fit, often leaving Dems scratching their heads when they saw the finished product.
Everyone’s guilty and no one’s to blame
Ruben Gallego (D-AZ), who led the Dems’ effort to work with the GOP on crafting ethics language, issued a post-vote statement saying “all President Trump wants is for the Senate to give him time to crime, and I won’t support any piece of legislation that enables him.” (Emphasis in the original.) Gallego said Republicans “were never serious about bipartisan negotiations.”
Catherine Cortez Masto (D-NV) said she worked with her GOP colleagues “until the very last minute” to arrive at a consensus, but GOP leadership “shut down conversations at the last minute.” Cortez Masto said CLARITY, as written, “clearly undermines law enforcement’s ability to both investigate crypto crimes and to ensure bad actors cannot use crypto for illicit finance.” She also mentioned the GOP’s wiliness to “allow prediction markets to continue to perpetuate illegal gaming operations that ignore state and Tribal law.”
Raphael Warnock (D-GA) told the Washington Post that Dems were “trying to find a path to get something done for consumers in a vastly unregulated area of our economy, and [Republicans are] focused on protecting Donald Trump.”
Angela Alsobrooks (D-MD), a key architect of the stablecoin reward ‘compromise’ that the banks said they couldn’t live with, told Crypto in America that GOP leaders were “playing a game” by forcing a vote without an ethics buy-in from Dems. But Alsobrooks expressed hope that CLARITY will return (someday) because “we have a responsibility to regulate.”
On the other side of this divide, Dave McCormick (R-PA) struck a similarly hopeful tone, saying that while he was “deeply disappointed” by the outcome, he will “continue to working with colleagues on both sides of the aisle” to pass market structure rules.
John Kennedy (R-LA) expressed hope that CLARITY could be revived in the post-midterms lame duck session. Kennedy also appeared to throw a little shade at the bill’s architects, adding that “we need to design a market structure for cryptocurrency that looks like somebody designed it on purpose.”
Other GOP members weren’t so gracious in defeat. Lummis tweeted that Dems had “proved they were never truly serious about protecting consumers and preserving American leadership … the once-proud Democratic party is anti-consumer and pro-illicit finance, anti-ethics, anti-free enterprise, anti-worker, anti-livable wage jobs and pro-socialism. The Democrats are now anti-American. Sad!”
Kevin Cramer (R-ND) claimed those who voted against CLARITY “couldn’t take off their TDS-tinted glasses to even debate or improve the bill.” (TDS = Trump derangement syndrome.)
Rep. Tom Emmer (R-MN), a co-author of the BRCA, tweeted that anyone upset by Tuesday’s vote should “blame a Senate Democrat. They are bad faith negotiators.” Referencing the House approving a “good, ready for primetime, nonpartisan” version of CLARITY in July 2025, Emmer said Dems “have further stalled this once-in-a-generation opportunity.”
White House crypto adviser Patrick Witt tweeted that “there’s no sense in sugarcoating it: today’s vote was a major disappointment—and, I believe, a failure of American leadership … it increases the risk that the standards that global financial markets adhere to in the future will be those of Brussels or Beijing, rather than Washington and New York.” Referencing the role that the SEC and CFTC are now expected to play, Witt tagged the chairs of both regulatory agencies and said “you’re up!”
Trump, whose refusal to submit to Dem-designed ethics rules are the primary reason we are where we are, has yet to weigh in on the day’s defeat.
We were told there’d be no stablecoin math
Banking is one of the few industries with the wherewithal to match the enormous sums the crypto sector is willing to spend to convince politicians to do what they want. Which likely explains why the White House made such a pre-vote effort to push back against the argument that banks will suffer mass deposit flight if CLARITY wasn’t amended to limit crypto platforms offering ‘rewards’ to stablecoin holders.
Ahead of Tuesday’s vote, the White House’s Witt tweeted that “if the DC banking lobby were serious about their deposit flight argument, they would be aggressively whipping Senators, both Republican and Democrat, to get on the bill and then push for changes after. Because if this bill fails, they get none of the protections they claim to desperately need. They haven’t done that. Draw your own conclusions.”
The White House simultaneously issued a document on the Effects of Stablecoin Yield Prohibition on Bank Lending that expands on views published by the White House’s Council of Economic Advisers (CEA) in April that found “an effective ban on stablecoin yield would have little effect on bank lending.”
Banks rubbished the CEA report at the time, saying it underestimated the threat and echoed “the crypto industry’s preferred narrative.” Part of this pushback was based on the CEA using the current dollar-denominated stablecoin market cap of ~$300 billion rather than the up to $2 trillion cap (or $3.7 trillion, according to Treasury Secretary Scott Bessent) the market is projected to grow to in the years to come.
The White House’s new interactive report allows you to scale the stablecoin market cap into the trillions, and claims even at those elevated figures, the volume of additional lending that banks would enjoy under a stablecoin yield ban represents only 0.22% of total loans.
On Monday, Omid Malekan, blockchain-focused author and an adjunct professor at Columbia Business School, tweeted screenshots of a 1980 letter from the Independent Bankers Association of America—its modern identity was one of the signatories to Monday’s banking letter to Senate leadership urging changes to CLARITY’s stablecoin language—to Senate leaders making many of the same ‘deposit flight’ arguments regarding money market funds (MMFs).
Malekan said history has shown that the banks’ “almost verbatim” arguments against MMFs were “dead wrong. Money market balances grew parabolically into the trillions, and yet banks remain flush with deposits.” Witt retweeted Malekan, calling the history lesson “interesting.”
Following Tuesday’s vote, Ripple Labs CEO Brad Garlinghouse tweeted “this one stings” and called for a post-mortem “on why this failed.” But Garlinghouse has some early theories, like how “the politics of the democrats (the anti-crypto army) was elevated over good policy.”
Prior to the vote, Coinbase (NASDAQ: COIN) CEO Brian Armstrong tweeted a warning to senators of both parties that a ‘no’ vote would “let other countries lead in building the future of finance. History—and the crypto voter—won’t forget.” Much later, Armstrong tweeted that while the ‘no’ vote was “a disappointment,” he expects “clarity is coming to crypto regardless”
But the Coinbase-funded astroturf group Stand with Crypto (SwC) chose to embrace Armstrong’s earlier Ozymandias mode, tweeting that senators had “failed” their constituents, choosing instead to “stand in the way of progress.” SwC added that “this November, crypto voters will show up and demonstrate their power at the ballot box.”
For the record, the ‘crypto voter’ is an invention of the crypto sector and surveys without an existential dog in this fight have found crypto near the bottom of voters’ concerns. But since Coinbase shares closed down 10% following Tuesday’s vote, we’ll indulge Armstong’s political kingmaker fantasies.
Earlier Tuesday, Semafor reported on growing alarm among Democrats in the House of Representatives re the possibility that crypto-focused political action committees (PACs) like the Coinbase-/Ripple-funded Fairshake “may not spend in their races” despite the candidates’ support of CLARITY last year.
The House’s CLARITY passed with broad bipartisan support (including 78 Dems) but the fear is that Fairshake won’t recall this solid those Dems did them. Semafor quoted a Fairshake spokesperson saying that the PAC hadn’t yet finalized its midterm spending plans.
On Monday, Politico reported on the double-edged sword that the crypto sector’s financial support is presenting to Dem candidates, who need to acknowledge the “political liability” that crypto has become for many left-leaning voters.
Rep. Brad Sherman (D-CA), a longtime crypto critic, claimed his campaign polling showed that referencing his primary opponent’s crypto financing was “the single best attack” he could make to lessen that challenger’s appeal with Dem voters.
Fairshake and its partisan offshoots had significant success in midterm primary campaigns but many of these winning candidates were considered shoo-ins from the start. Fairshake also spent in the low eight-figure range in some high-profile defeats.
Ahead of CLARITY’s Senate vote, Fairshake began running national TV ads urging viewers to contact their senator and demand a ‘yes’ vote. But as always, the spots either downplayed their crypto focus or ignored it entirely. Again, because voters hate crypto PACs and they don’t trust the Trump administration to adequately oversee crypto.
One Democratic pollster told Politico that crypto disgust is bipartisan, saying voters, regardless of party affiliation, hold “strongly unfavorable opinions” of the sector and “being perceived as a candidate who is backed by the cryptocurrency industry is a liability.”
Nonetheless, Sherman put a partisan spin on the issue, referencing Trump’s billion-plus crypto windfall by saying Dem voters were already “very skeptical of crypto before Trump embraced it. And now that Trump has embraced it, boy do they hate it.”
As Bloomberg’s Nathan Dean observed Tuesday, there could be blowback should crypto PACs fund a revenge campaign against Dem candidates and the party ends up winning control of one or both Congressional chambers for 2027-28.
The crypto sector spent $130 million in 2024 to elect the most ‘crypto-friendly Congress’ in history. And yet, their big bet failed to get CLARITY passed, in part because they also helped elect the most ethics-challenged president since Warren Harding.
After CLARITY’s failure, a lobbyist discussed the crypto sector’s outsized spending, telling Semafor “the amount of money the crypto industry spent on lobbying firms for such a staggering defeat would have been better spent curing cancer.” The crypto sector has well over $100 million left to spend in the current election cycle. Not too late to redirect those funds to something useful, guys.
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