The cryptocurrency industry's legislative push suffered a major setback Tuesday when the Clarity Act failed to advance in the Senate, prompting a swift pivot toward the Trump administration's financial regulators to set the rules for digital assets.
The procedural vote fell short as every Democrat and four Republicans opposed moving forward, dealing a blow to an industry that had invested heavily in lobbying for the bill over the past two years. Supporters, including GOP leaders and administration officials, had championed the legislation as a way to provide regulatory clarity for the rapidly growing sector.
With the bill stalled, attention now turns to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), both led by Trump appointees. Faryar Shirzad, Coinbase's chief policy officer, signaled the shift on social media, saying, "The Senate has voted and we have a different type of clarity. It's time for agencies to step forward and for crypto voters to make their voice heard."
The Clarity Act's collapse followed a breakdown in negotiations over ethics provisions. Democrats had raised concerns that the bill could benefit President Trump and his family's crypto ventures. Senate Republicans offered what an aide described as their "last, best and final offer" on Sunday, including a White House-backed ethics clause, but Democrats said it still contained "a whole lot of loopholes," as Sen. Raphael Warnock (D-Ga.) put it.
The four Republicans who joined Democrats in opposing the measure were Sens. Susan Collins (Maine), Josh Hawley (Mo.), Jerry Moran (Kan.), and Thom Tillis (N.C.). Both sides traded blame after the vote. Sen. Ruben Gallego (D-Ariz.) accused Republicans of "twisting themselves into knots to appease" the president rather than working toward a bipartisan compromise. Republicans countered that Democrats moved the goal posts. Sen. Cynthia Lummis (R-Wyo.) said Democrats "were never truly serious" about the effort.
Despite the failure, some lawmakers left the door open for future negotiations. Tillis, who voted no but filed a motion to reconsider, said the move "allows us to continue working towards a positive outcome," declaring "this is not the end for the Clarity Act." A group of seven Democrats, including Gillibrand, Booker, and Warner, issued a statement reaffirming their commitment to passing crypto legislation with strong ethics provisions, calling the vote "a setback, but not the end of that important work."
Still, many in Congress and the industry view the bill as effectively dead for this year. A Senate GOP aide said their boss "thinks it is dead." The focus now is squarely on the SEC and CFTC. Patrick Witt, the president's chief crypto adviser, pointed to the agency chairs on Tuesday, saying "you're up."
Both agencies have already signaled a willingness to act. CFTC Chair Michael Selig vowed to "get the job done using our existing statutory authorities," adding that the agency is "locked in and ready to ship its rules for the new frontier of finance." SEC Chair Paul Atkins hinted at upcoming actions, and on Thursday the commission announced a long-awaited "innovation exemption" that clears the way for tokenized stock trading by easing traditional securities rules for platforms and liquidity providers.
Industry analysts expect a flurry of pro-crypto rulemaking from the agencies. Ian Katz of Capital Alpha wrote that "the SEC and CFTC will shift into overdrive with aggressive, pro-industry proposals," and that "some of those proposals may come with an implied message to Democrats amounting to: This is what you get when you don't legislate."
The shift to agency-led regulation marks a significant change for an industry that had hoped for a legislative solution. But with a divided Congress and a president eager to support crypto, the regulatory path forward may now be shaped more by executive action than by law. As Trump's broader policy agenda continues to face legislative hurdles, the crypto industry's fortunes may hinge on the willingness of regulators to act boldly.
