Will the CLARITY Act, with only a 50% chance of passing this year, succeed before the midterm elections?

_Original Author / _galaxy

Compiled by / Odaily Planet Daily Golem (@web 3_golem)

As the agenda for the 119th Congress approaches, legislation on cryptocurrency market structure is also nearing completion.

The “CLARITY Act” received strong bipartisan support in the House of Representatives in July 2025 (294 votes in favor, 134 against), and has been a focal point of intensive negotiations in the Senate since January this year. The Senate Banking, Housing, and Urban Affairs Committee is expected to announce hearings this week, likely during the last week of April.

Chairman Tim Scott (Republican) stated that three key issues remain unresolved: stablecoin yield terms, DeFi provisions, and how to secure votes from all Republican members of the committee. Additionally, other unresolved issues include how the “Blockchain Regulatory Certainty Act” treats non-custodial software developers, ethical clauses related to government officials holding cryptocurrencies, and issues concerning the U.S. SEC, which could complicate future legislation.

After passing the Senate Banking Committee, the bill still needs to secure 60 votes in the full Senate, be reconciled with the version from the Agriculture Committee, and with the bill passed by the House, before being signed into law by the President. Each step takes time, and the legislative schedule is rapidly shrinking: the CLARITY Act must compete for limited Senate review time alongside debates on Iran military authorization, unresolved DHS funding stalemates, and backlog of nominations.

On Monday, Punchbowl News reported that key negotiator Senator Thom Tillis (R-NC) called for delaying Senate Banking Committee hearings until May. If hearings are postponed until after mid-May, the likelihood of the bill passing in 2026 drops significantly. Wyoming Senator Cynthia Lummis warned that if not passed this year, market structure legislation could be delayed until 2030 or later.

Galaxy estimates the probability of the CLARITY Act being signed into law by 2026 at about 50%, possibly even lower. This uncertainty stems not from any single issue but from numerous unresolved questions that must be addressed sequentially under tight time constraints.

Treasury Secretary Scott Bessent (left) calls for review of the CLARITY Act. Senate Banking Committee Chair Thom Tillis states that three major issues remain.

CLARITY Act Progress Overview

The “Digital Asset Market Transparency Act of 2025” (abbreviated CLARITY Act) was passed by the U.S. House of Representatives on July 17, 2025, with 294 votes in favor and 134 against. All 216 Republican members voted in favor, with no opposition, and 4 abstentions. On the Democratic side, 78 members voted yes, and 134 voted no.

The bill was introduced by French Hill (R-Arkansas), Chair of the House Financial Services Committee, on May 29, 2025, and was approved on June 10 by a joint hearing of the Financial Services Committee (47-6) and the Agriculture Committee (32-19).

The overwhelming House vote reflected a broad consensus that a federal digital asset regulatory framework is urgently needed: the bill clearly delineates jurisdiction between the SEC and CFTC; establishes a “mature blockchain test” to determine whether certain cryptocurrencies qualify as securities; provides pathways for token networks to achieve full decentralization and be treated as non-security assets; and for the first time, includes digital commodity intermediaries within federal registration and AML obligations. The Senate Banking Committee released its draft in July, and the bill was submitted to the Senate on September 18, then referred to the Banking Committee.

In the Senate, work on the CLARITY bill has been ongoing in parallel. The Agriculture Committee released its discussion draft in November, and on January 29, submitted the main focus— the “Digital Commodity Intermediary Act,” which grants CFTC authority over digital commodity markets (including spot markets)— for committee review.

Additionally, on January 12, the Senate Banking Committee, chaired by Tim Scott with Elizabeth Warren as lead member, released a 278-page alternative amendment (ANS) as the basis for negotiations. This draft far exceeds the House bill, covering nine titles including securities innovation, illicit finance, DeFi, banking, software developer protections (“Blockchain Regulatory Certainty Act,” BRCA), customer asset protections in bankruptcy, and more.

Originally scheduled for Senate floor vote in mid-January, the bill was delayed due to disagreements over stablecoin yield restrictions. A second vote attempt was also canceled. Before the bill can go to the Senate floor, the versions from the Banking and Agriculture Committees must be reconciled, merged, and then coordinated with the House version, all before final submission to the President.

Since January, the main obstacle has been disputes between banking and crypto firms over stablecoin rewards. (The GENUIS Act, signed into law last year, prohibits stablecoin issuers from sharing yields directly with holders but allows exchanges to pay rewards to users holding stablecoins on their platforms; banks want to ban such incentives.) On March 20, Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) announced, under White House mediation, a principled agreement. The deal would ban rewards solely for holding stablecoins but permit clearly defined rewards tied to activities like payments, transfers, or platform use.

Since David Sacks’ departure in March, Patrick Witt, Executive Director of the President’s Digital Asset Advisory Committee, has been the main person responsible for crypto legislation at the White House. He described the compromise as durable and confirmed that some previously thorny issues have been resolved behind the scenes. Crypto industry representatives reviewed the draft on March 23, initially criticizing its restrictive language; Coinbase opposed it at first but changed stance on April 10 after Treasury Secretary Scott Bessent publicly called for amendments and Coinbase CEO Brian Armstrong expressed support.

On April 8, the White House Council of Economic Advisers released a 21-page analysis showing that a total ban on stablecoin yields would only increase bank loans by $2.1B (0.02% of total outstanding loans), and consumer costs would rise by $800 million. This undermines the banking industry’s core argument that unrestricted stablecoin yields threaten deposit stability. As of now, Chairman Scott has not announced a hearing date.

On April 14, Scott told Fox Business that three issues remain unresolved: stablecoin yield terms, DeFi provisions, and securing votes from all Republican members. Senator Tillis, responsible for the revised yield language, said last week that a draft is unlikely this week and called for delaying hearings until May. No hearings can be scheduled until the draft is released and the 48-hour notice period required by committee rules expires.

Senator Thom Tillis, a key negotiator for the Senate Banking Committee

Importance of Passing the CLARITY Bill Before Midterms

The CLARITY Act provides a crucial and lasting legislative foundation for the digital asset industry: classifying different types of digital assets and their regulation; clarifying jurisdiction between agencies; protecting non-custodial developers; empowering the Treasury to combat illicit finance, among others.

It offers the legal and regulatory certainty needed to advance the integration of crypto markets with traditional capital markets, modernize U.S. capital markets, and for the first time, provides clear, substantive safeguards, disclosures, and investor protections. It addresses many unresolved issues that previously hindered institutional capital and infrastructure from entering or moving overseas.

Overall, the CLARITY Act is a powerful bill both technically and policy-wise.

Given the delicate balance of power between the House and Senate (Republicans hold a narrow majority), Galaxy believes that passing and signing the CLARITY Act into law before the November midterms is critical. While it has strong Democratic support (78 Democrats in the House voted for it in 2025), the balance of power in the 120th Congress (which convenes in January 2027) could shift, greatly reducing the chances of passage after November 2026.

If Democrats gain control of both chambers, new committee chairs, different legislative priorities, and a potentially different attitude toward crypto legislation could emerge. More specifically, the current version of the CLARITY bill is unlikely to pass the Senate Banking Committee chaired by senior members Elizabeth Warren or Sherrod Brown.

Sherrod Brown, who chaired the Senate Banking Committee in the 118th Congress, was defeated in 2024 by Bernie Moreno. Brown is now running in Ohio’s November special election against Republican Jon Husted, appointed by Governor Mike DeWine after JD Vance resigned to become Vice President. Husted’s term would last only until 2028, highlighting the fragile and shifting Senate power structure.

Brown’s previous tenure might give him an edge over Warren for the Senate Banking Committee chairmanship, though this remains uncertain; both senators have historically been hostile to the digital asset industry.

If Elizabeth Warren or Sherrod Brown become chair of the Senate Banking Committee, the current version of the CLARITY bill is almost certain not to pass.

The bipartisan coalition today is built on specific conditions: White House support for crypto, Republican-led Banking Committee, successful passage of the GENUIS Act (demonstrating bipartisan cooperation), and active lobbying and significant investments by the crypto industry to elect pro-crypto lawmakers and convert skeptics into supporters in the 2024 elections. These conditions may not persist in the future.

Senator Lummis has publicly warned that if the CLARITY bill is not passed this year, comprehensive market structure legislation could be delayed until 2030 or later because the new Congress would need to restart the legislative process, with new committee compositions and potentially different political motivations affecting progress.

Even if Republicans retain the majority, during the lame-duck session (Odaily note: the period after elections but before the new Congress convenes, when the previous Congress still meets), or in the initial months of the new Congress, political enthusiasm for complex, multi-stakeholder financial regulation may wane as leadership shifts focus to forming committees, confirming nominations, and setting new agendas. Therefore, the current window is extremely favorable and may not reappear soon.

Without the CLARITY Act, a favorable regulatory environment for crypto might only last until President Trump’s term ends. Regulators have already shown they can advance crypto development through administrative remedies, interpretive guidance, and formal rulemaking, prompting major banks, brokerages, and exchanges to build blockchain infrastructure and offer digital asset services. The level of integration achieved by traditional capital market participants over the next two and a half years might be enough to prevent significant setbacks even if future administrations are hostile.

However, the key is timing and durability. So far, regulatory progress—such as joint SEC-CFTC interpretive statements, SEC no-action letters, and OCC guidance on bank crypto activities—are outside statutory law, meaning future administrations could overturn these measures without congressional approval.

Even without the CLARITY bill in 2026, the crypto industry might not face a crisis, but its survival could be shortened. Long-term, a comprehensive market structure law is vital for guiding the industry’s development over the coming decades.

Ongoing Senate Negotiation Issues

While “stablecoin rewards” dominate headlines and are widely seen as the main (possibly sole) obstacle to the bill’s progress, other key issues are simmering beneath the surface. The main sticking points include:

( Stablecoin Rewards

We await Senator Tillis to publicly release the compromise draft he reached with Senator Alsobrooks (D-MD).

According to Galaxy, the draft still bans rewards “just for holding” stablecoins but allows clearly defined rewards linked to activities like payments, transfers, or platform use. If true, this is similar to Coinbase’s rejection of an agreement in January.

However, we need to see the actual text, which senators have kept under wraps. The April 8 report from the White House Council of Economic Advisers (CEA) states that a total ban on yield-bearing crypto would only increase bank loans by $2.1B (0.02% of total outstanding loans), and consumer costs would rise by about $800 million, significantly weakening the banking industry’s argument about deposit outflows.

The American Bankers Association quickly rebutted, claiming the CEA analysis is flawed; it only examined the current ~$300 billion stablecoin market and did not model future yield-bearing stablecoins capable of competing with the $18 trillion bank deposit base. The scope and assumptions of each side’s analysis differ greatly, and the final outcome may hinge on these differences.

Coinbase CEO changed his opposition stance on April 10, seemingly removing the industry’s biggest obstacle. The bill’s text may not differ substantially from the January rejected version, but political considerations have shifted: public pressure from Bessent, the CEA report, and Coinbase’s application for a national bank charter—all influence Coinbase’s position.

However, tensions between exchanges and banks over stablecoin yield business remain.

) “Blockchain Regulatory Certainty Act” (BRCA)

As Section 604 of the Senate Banking Committee’s annual notice (ANS), BRCA explicitly states that software developers and infrastructure providers who do not hold or control user funds are not considered remittance providers under the Bank Secrecy Act.

Crypto advocates see this as a red line, vital for keeping open-source development within the U.S. The clause faces opposition from law enforcement and bipartisan resistance in the Senate Judiciary Committee. In January, Chair Chuck Grassley (R-IA) and lead member Dick Durbin (D-IL) jointly wrote to Chair Scott and lead member Warren, opposing inclusion of BRCA in federal law.

They argue that the Banking Committee, without consulting the committee responsible for federal criminal law, unilaterally amended Title 18 of the U.S. Code (notably Section 1960, which prohibits unlicensed remittances). They warn this could create “blind spots” for state and local law enforcement agencies relying on FinCEN registration info to investigate money laundering, terrorism financing, and drug or human trafficking.

Nevada’s former Attorney General and Banking Committee member Catherine Cortez Masto (D-NV) has pushed for amendments to address law enforcement concerns. The National Sheriffs’ Association and National District Attorneys Association have also expressed concerns, warning that provisions on DeFi could limit prosecutors’ ability to pursue financial crimes.

Crypto industry counters that BRCA does not amend Sections 1956 and 1957 of Title 18 AML laws; it does not restrict prosecution of fraud or sanctions evasion; it merely aligns FinCEN guidance and DOJ positions that truly decentralized, non-custodial software does not constitute money transfer.

Whether the bill can meet Grassley and Masto’s demands without significantly weakening the clause is one of the most complex negotiations.

Ethical Amendments

Democrats have pushed to include provisions banning senior government officials, elected officials, and their families from holding or profiting from crypto assets during their tenure. This directly targets projects involving Trump’s family and has been a Democratic priority throughout negotiations.

While not included in the January draft of the Senate Banking Committee’s annual resolution, several Democratic senators have indicated they will push for a ethics amendment during committee review or Senate floor debate. Though unlikely to block committee approval, it could become a focal point on the floor, as any senator can propose amendments, requiring Democratic votes to reach 60.

SEC Exemption Authority

Section 505 of the Senate Banking Committee’s annual resolution concerns tokenization of securities and other real-world assets. Some market participants and former regulators believe this overly restricts the SEC’s ability to use exemptions and non-enforcement tools to foster innovation.

In short, many worry this would hinder the SEC’s “innovation exemption” programs, or even be illegal, by imposing rigid statutory requirements that limit the agency’s discretion under laws like Section 28 of the Securities Act and Section 36 of the Exchange Act.

Legal and compliance professionals involved in tokenization projects, along with some Democrats, share this concern, viewing the provision as an overreach that curtails the SEC’s current progressive stance on crypto. Under Chair Atkins, the SEC has actively used no-action letters and staff guidance to promote digital assets; Section 505 could restrict this flexibility.

SEC Quorum

The SEC currently has five commissioners, three appointed by Republicans: Chair Paul Atkins, Hester Peirce, and Mark Uyeda. Longstanding practice limits commissioners of the same party to no more than three; two vacancies are expected to be filled by Democrats.

Senate Minority Leader Chuck Schumer and President Trump have yet to agree on nominees. If the CLARITY bill passes, Democrats might see these vacancies as leverage and a way to restore bipartisan balance—ensuring two Democratic commissioners and giving Democrats influence over rulemaking once the bill is in effect.

Some Senate Democrats have privately suggested that progress on SEC nominations could facilitate the bill’s passage in the Senate. This is more a political sequencing issue than a legislative one, but it’s critical for the 60-vote threshold needed for passage.

Not all issues are final deal-breakers, but they pose significant risks to negotiation timelines. Any one could delay negotiations by days or weeks, which the Senate cannot afford.

Schedule and Probabilities

It’s widely expected that the Senate Banking Committee will announce hearings this week, aiming for late April. However, key member Senator Thom Tillis (R-NC) said Monday that hearings should be delayed until May.

From now until the President signs, the process involves five steps:

1. Senate Banking Committee review and vote;
2. Full Senate vote with 60 votes;
3. Reconciliation between the Banking and Agriculture Committee versions;
4. Merging with the House-passed CLARITY Act (July 17, 2025);
5. Presidential signing.

Each step takes time, and the legislative schedule is tightening. The bill text will be made public shortly before hearings. Once scheduled, the committee must debate and vote on amendments, then move the bill forward. The full Senate vote requires 60 votes to invoke cloture, followed by debate and amendments, potentially taking a week or more.

Between now and the August recess, Senate schedule is tight and competitive. The Senate will recess after April 30 until May 11, then reconvene May 11-22, work three weeks in June and July, take a two-week break around July 4, and resume in early August, then recess for five weeks starting August 10.

During this period, CLARITY will compete for time with key issues: ongoing Iran military authorization debates, unresolved DHS funding, and a backlog of judicial and administrative nominations.

Senator Bernie Moreno (R-OH) has publicly said the bill must be submitted for full Senate review before May to avoid midterm election delays. Senator Bill Hagerty (R-TN) is confident it can pass the Banking Committee in April and be sent to the full Senate by month’s end.

However, Chairman Scott’s April 14 comments suggest this timeline has been pushed back. Scott currently holds the initiative, and as of this writing (late April, second last week), each week’s delay compresses the final steps needed for the bill’s signature. Still, if hearings occur in early May, passage is not impossible, especially if committee votes are bipartisan and the bill appears viable on the floor.

Galaxy estimates the most likely scenario is that the Banking Committee reviews the bill in early or mid-May, then attempts a full Senate vote sometime in May or June. If hearings are delayed past mid-May, the chance of passing in 2026 drops sharply: the remaining legislative steps are hard to fit into the tight schedule, especially with congressional time constraints. A full vote in July is possible but would require extraordinary political will and coordination given the approaching August recess and midterm elections.

Senator Lummis warned that if not passed this year, comprehensive market structure legislation could be delayed until 2030 or later.

Thus, Galaxy estimates the probability of the CLARITY bill becoming law in 2026 at about 50%, possibly lower, with Polymarket currently setting the passing rate at 50%. The uncertainty isn’t due to any single issue but to many unresolved questions that must be addressed sequentially under tight deadlines.

The stablecoin reward issue is likely to be resolved in the coming weeks, but BRCA, ethics amendments, SEC exemption authority, SEC quorum politics, DeFi provisions, and the challenge of securing 60 Senate votes for a complex, novel financial regulation bill all remain uncertain. Any one factor could cause delays of days or weeks, and time is tight.

Key upcoming milestones include:

• Release of Tillis’ revised stablecoin yield language, signaling Senate Banking Committee review;
• Chairman Scott’s announcement of hearing dates;
• Committee vote results and support levels;
• Whether Majority Leader John Thune schedules a Senate session before the July recess.

If the CLARITY bill passes the Banking Committee with strong bipartisan support, it would be a strong signal that subsequent steps can proceed smoothly. If it passes only along party lines or narrowly, the difficulty of reaching 60 votes in the Senate and the prospects for passage in 2026 will be significantly diminished.