Leading Senate Democrats are pushing back against the latest version of a major cryptocurrency regulation bill, arguing that a White House-backed ethics provision fails to adequately address conflicts of interest and enforcement concerns. The standoff threatens the bill's prospects as lawmakers face a tight deadline before leaving for August recess.
Sen. Cynthia Lummis (R-Wyo.), chair of the Senate Banking digital assets subcommittee, released the updated Clarity Act on Wednesday. The 616-page text merges components from both the Banking and Agriculture committees for the first time, but the most contentious element is a new ethics clause negotiated with the White House.
The provision bars public officials, employees, and their spouses from issuing or sponsoring digital assets. It also prohibits trading platforms from listing such assets and tasks the attorney general with enforcement. However, Democrats say this falls short, particularly in granting the Department of Justice sole enforcement power.
“The provision that says only the DOJ would be allowed to have the enforcement responsibility, I think is just wild and unserious and stone crazy right now, given what we have seen from them,” Sen. Angela Alsobrooks (D-Md.) said at a Semafor event Wednesday, reflecting broader unease.
Alsobrooks, along with Sens. Cory Booker (D-N.J.), Catherine Cortez Masto (D-Nev.), Ruben Gallego (D-Ariz.), John Hickenlooper (D-Colo.), Mark Warner (D-Va.), and Raphael Warnock (D-Ga.), issued a joint statement opposing the current text. They called for stronger protections on ethics, consumer safeguards, illicit finance, and market integrity, noting they have negotiated in good faith for over a year.
Ethics Provision Under Fire
The group is part of a dozen Senate Democrats central to crafting the Clarity Act and the GENIUS Act, a stablecoin bill signed into law last year. Stablecoins are digital tokens pegged to stable assets like the U.S. dollar, while the Clarity Act aims to regulate the broader crypto market.
Sen. Elizabeth Warren (D-Mass.), the top Democrat on the Banking Committee, declared the bill “dead on arrival,” arguing it does nothing to prevent President Trump from profiting from crypto. She noted Trump’s financial disclosures show over $1 billion in crypto-related income in 2025 and that the provision would expire on Jan. 20, 2029, the end of Trump’s second term, barring DOJ prosecution for past violations.
“Even if it did, the President can, and will, simply ignore the law because he handpicked his personal lawyer to lead the Department of Justice that is charged with enforcement,” Warren said in a statement, adding that state attorneys general are explicitly excluded from bringing actions.
Legislative Clock Ticking
Senate Majority Leader John Thune (R-S.D.) dampened hopes for quick passage Thursday, telling reporters he doubted the crypto bill and a college sports bill could be finished before recess. However, he suggested the Clarity Act could at least move forward. “I would like to at least get Clarity started,” Thune said, per Politico.
The measure needs at least seven Democratic votes to pass the Senate. Republicans and some Democrats are working on a counteroffer to the ethics provision, with Sen. Gallego and Sen. Thom Tillis (R-N.C.) involved, according to a source familiar with the talks.
Patrick Witt, executive director of the president’s council of advisors for digital assets, defended the provision on X, arguing that Democrats are “basically saying that ALL current federal ethics laws are meaningless because none of them are enforceable by state AGs.” He dismissed concerns about Trump’s prior crypto activities, noting that assets issued before taking office can be placed in a blind trust.
The standoff comes as Democrats face an uphill Senate battle in the midterms, with some warning that internal divisions could hurt the party. The White House has not commented on the latest objections, but the provision was cleared by the administration before release.
Experts say the current working period is likely the last stretch to pass the legislation before the 2026 midterm elections heat up. The Clarity Act’s fate now hinges on whether negotiators can bridge the gap on enforcement and conflicts of interest, with Democrats rejecting fears of a socialist takeover as they push for stronger rules.
