How the Clarity Act's Defeat Handed the SEC and CFTC the Wheel on Crypto

For anyone tracking the twists and turns of crypto policy in Washington, it was a long and bruising week. It also marked a shift in the center of gravity from Congress to the regulators.

On Tuesday, the Senate failed to advance crypto's landmark market structure bill in a dramatic procedural vote that exposed how deeply President Trump's crypto dealings have eroded Democrats' willingness to work with Republicans on regulating an industry they themselves say badly needs oversight.

Democrats voted as a bloc against advancing the bill, while Republican Sens. Susan Collins (R-ME), Josh Hawley (R-MO), and Jerry Moran (R-KS) joined them in opposition. Senator Thom Tillis (R-NC) initially voted yes before switching to no, a procedural maneuver that preserved the option of bringing the bill back at a later date.

That left the final recorded tally at 49-50, well short of the 60 votes needed to advance the bill after more than a year of grueling bipartisan negotiations.

Down in the basement of the Capitol, those negotiations continued right up until the vote began. A Democratic staffer told Crypto In America that Tillis was willing to delay the vote to keep negotiating, but that a staffer for Senate Banking Committee Chair Tim Scott (R-SC) abruptly ended the talks without explanation.

The breakdown quickly gave way to finger-pointing on both sides, with Republicans accusing Democrats of never being serious about passing the bill and Democrats accusing Republican leaders of forcing the vote before negotiations were finished to protect what one staffer called Trump's "grift."

"Senate Democrats proved they were never truly serious about protecting consumers and preserving American leadership," the bill's chief architect, Sen. Cynthia Lummis (R-WY), said. "I sat at the table with Senate Democrats working in good faith to get this done while they played games."

But some of the same Democrats who voted no insist the bill isn't dead.
'It's Now or Never' for Clarity Act, Says 'Bitcoin Senator' Lummis

"It's not going to die," Sen. Angela Alsobrooks (D-MD) told Crypto In America immediately after the vote. "You know why it's not going to die? Because over 70 million Americans are engaging in an industry that is unregulated, and we have a responsibility to regulate."

Alsobrooks was joined by six other Democrats involved in the negotiations: Sens. Kirsten Gillibrand (D-NY), Mark Warner (D-VA), Cory Booker (D-NJ), Catherine Cortez Masto (D-NV), Ruben Gallego (D-AZ), and Raphael Warnock (D-GA). The group called this week's vote "a setback, but not the end" and said it remained "committed to working in a bipartisan fashion" to pass the Clarity Act.

The statement landed amid early efforts to restart bipartisan talks and gauge appetite on both sides for returning to the table, according to three sources familiar with the discussions.

But there is significant fatigue across the industry, with many now looking to regulators to write the rules of the road rather than waiting on Congress.

"Congress passed the GENIUS Act and pushed hard on the Clarity Act, but the political will to get it across the finish line wasn't there. Congress had its chance and didn't rise to it," said Solana Policy Institute President Kristin Smith. "We're now looking to regulators for guidance, and that's the more viable path forward right now."

SEC Chairman Paul Atkins explicitly tied the agency's new innovation exemption to the Clarity Act's failure to advance in the Senate. The SEC released the highly anticipated measure Thursday, opening a pathway for tokenized U.S. stocks to trade onchain and fueling fresh excitement across the industry as regulators move to take the lead.

The CFTC is also moving ahead. Staff issued a no-action position for passive software providers, while the agency submitted a broader crypto markets rulemaking proposal to the White House for review. Details of the proposal are not yet public.

The industry is getting clarity in one form or another. For now, it will come with a lowercase "c," delivered by regulators rather than Congress.

Crypto in America is a newsletter written by Eleanor Terrett. Follow the link to read in full and subscribe.

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