The Senate's departure for its August recess without holding a vote on the cryptocurrency regulatory framework has significantly reduced the likelihood of passage before the midterms, according to analysts and lawmakers.
The Clarity Act, which aims to establish a comprehensive regulatory structure for digital assets, now faces an uphill battle when senators return for a brief three-week session in September. Industry advocates remain cautiously optimistic, but the legislative calendar is crowded with pressing items, and a key ethics provision remains unresolved between Republicans and Democrats.
"I do think the odds drop in September," said Ian Katz, managing partner at Capital Alpha. "You just have a tight window. There aren't many legislative days. There's always other issues competing for attention." He added, "I don't think it's dead yet, but it doesn't look good."
Majority Leader John Thune (R-S.D.) announced last Thursday that the bill would be queued for floor action in September, citing Democratic insistence on blocking a vote. "The Dems are insistent on no Clarity vote... I worked with sponsors of the bill. @SenLummis was great, and we're getting that queued up first thing when we come back," Thune posted on X.
The delay has dampened expectations. Sen. Thom Tillis (R-N.C.) told reporters Friday that the probability of passage "probably drops in half on getting it done." Tillis has been central to negotiations over the ethics language, which Democrats want to prevent elected officials from profiting from crypto ventures, particularly given President Trump's family business interests.
Late last month, the White House agreed to a Republican-crafted ethics provision that would ban public officials and their spouses from issuing or sponsoring digital assets, with enforcement by the Department of Justice. However, Democrats balked, preferring state attorneys general to handle enforcement. Tillis and Sen. Ruben Gallego (D-Ariz.) sent a counteroffer to the White House last week, but Trump's acceptance remains uncertain.
"President Trump is really the ultimate decider on this," Katz noted. "You could have well-intentioned people in both parties who are very motivated to get this through. But if the Democrats come up with something that's acceptable to them on the ethics provision and Trump just says no, that means this isn't going to happen or the Democrats just have to completely capitulate."
In an interview with Punchbowl News, Trump said he would not object to placing his crypto assets in a blind trust, adding, "I don't run my stuff anyway. I let my kids run it, and I never talk to them about things... They're not involved in government." That stance might align with the White House-approved proposal, but the Tillis-Gallego counteroffer reportedly demands divestment from some crypto assets, per Politico.
Gallego suggested the extra time could help. "Look, at the end of the day, at the least the portion I've been working on heavily in terms of the ethics language, we haven't seen anything come back from the White House," he said. "They need to take that very seriously."
Beyond the ethics impasse, the bill faces internal Republican resistance. Sen. Josh Hawley (R-Mo.) voiced concerns about its impact on community banks, echoing earlier disputes over stablecoin provisions. "I'm open to being persuaded on this," Hawley said, "My farmers in particular are very, very worried that this will cause massive flight from community banks, and we've got to have our community banks." Sens. Mike Rounds (R-S.D.) and Jerry Moran (R-Kan.) have also called for adjustments, particularly on stablecoin issues.
The banking industry argues that last year's stablecoin law left a loophole that could drain deposits from community banks, reducing lending capacity. A bipartisan agreement in May added restrictions, but banks say they are insufficient. With the Senate's return, the Clarity Act's fate hinges on resolving these disputes in a narrow window. The broader legislative agenda, including government funding and other priorities, will compete for attention, making passage before the midterms increasingly unlikely.
