Senate Blocks CLARITY Act as Crypto Market Pulls Back

Ethics Dispute Dominates Final Negotiations

Negotiations stalled before the August 2026 recess as Democratic lawmakers sought tighter restrictions on federal officials’ involvement in crypto. The dispute gained greater significance because of President Donald Trump’s and his family’s crypto-related businesses and reported financial interests, including holdings linked to World Liberty Financial and the TRUMP memecoin that were valued in the hundreds of millions of dollars.

Republicans released substantially revised text on September 13 and September 14 after negotiations with Democrats. Sen. Cynthia Lummis, R-Wyo., the bill’s lead architect, said Democrats had secured 126 concessions and had written more than half of the 635-page legislation. Republican negotiators said the final text contained 126 substantive changes requested by Democrats.

The revisions tightened ethics restrictions on certain federal officials, judges and their spouses, requiring covered holdings to be divested or placed in blind trusts. Officials would also face restrictions on issuing or sponsoring certain tokens. Another formulation in the legislation required public officials to divest a “significant financial interest” or place it in a blind trust.

Republicans also expanded the role of state attorneys general in enforcement, one of the changes Democrats had requested. The revised framework gave the Justice Department and state attorneys general enforcement authority under relevant provisions, while additional language allowed state attorneys general greater ability to pursue alleged violations.

Democrats argued the framework remained inadequate because the Justice Department would decide whether to bring an enforcement action against the president. Their Monday-night counterproposal sought broader restrictions covering Trump’s crypto interests and those of his children, including a requirement that an official with a “very large interest in a crypto company to sell it,” rather than merely placing the interest in a blind trust.

Lummis rejected the Democratic counteroffer before the vote. She had characterized the Senate decision as “now or never” as the legislative calendar tightened ahead of the midterm elections.

Several Democrats who had been viewed as possible supporters ultimately opposed advancement, including Sens. Kirsten Gillibrand, Catherine Cortez Masto, Angela Alsobrooks, Cory Booker and Mark Warner.

Warner said after the vote that negotiations had nearly resolved other major disagreements but had not adequately addressed the ethics issue.

“We got close to resolving some of the toughest outstanding issues around law enforcement and national security, but ultimately, the failure to address this fundamental conflict of interest made it impossible for me to support moving forward,” Warner said. “That is why I voted no today.”

Senator Elizabeth Warren had outlined what she considered gaps in the proposed ethics rules to Democratic colleagues, while Senator Raphael Warnock opposed advancing the legislation without stronger provisions addressing corruption concerns.

Republican support was also not uniform. Senator Susan Collins called the CLARITY Act a “moving target” and said she needed more time to examine its more than 600 pages and newly added ethics provisions. She also raised concerns about potential deposit losses at community banks and became the seventh Republican identified as raising community-bank-related concerns.

Senator John Curtis said he would support cloture while opposing final passage without additional changes. Senator John Cornyn was still considering his position before the Senate action.

Banks, Stablecoins and DeFi Add More Fault Lines

The ethics fight was only one part of the broader negotiation. Banking groups opposed provisions affecting stablecoins and crypto platforms offering yield-generating products, arguing that those products could compete with traditional deposits and reduce funding available for bank lending. Crypto industry representatives and White House officials rejected those concerns.

Republicans revised the legislation to address banking-industry objections involving stablecoin rewards, but opposition from banking groups continued. The final package also included new language addressing “non-decentralized finance protocols,” another area under negotiation. Updated Senate text had addressed circumstances under which such protocols could fall under CFTC oversight.

Illicit-finance and national-security provisions remained part of the negotiations as well. Warner’s statement indicated lawmakers had come close to resolving some of those issues before the ethics disagreement ultimately prevented him from supporting advancement.

Regulators were already proceeding separately from Congress. On March 17, the SEC and CFTC issued a joint interpretation classifying 16 crypto assets, including Bitcoin, Ethereum, Solana and XRP, as digital commodities. The CLARITY Act would go further by placing the market structure in legislation rather than relying only on agency action.

Crypto market analyst Ted Pillows said failure to advance the legislation would push the process into 2027 and said the SEC and CFTC had indicated they would continue publishing rules under their existing authority.

Grayscale said regulators were continuing work on digital asset rules through the SEC and CFTC and that it would continue engaging with policymakers and regulators on U.S. crypto regulation.

SEC Chair Paul Atkins had urged lawmakers to advance the legislation while making clear that the agency intended to continue acting independently.

“But let me be equally clear: with or without that legislation, this Administration will deliver for American investors and technological innovators—which is immensely important to our markets and to those who participate in them,” Atkins said at a Solana Policy Institute event. “Promises were made, and they will be kept.”

Crypto Prices Fall Around Senate Vote

Crypto markets moved lower around the Senate action while broader macroeconomic pressure was also building. Because the supplied information identified both developments, the market decline cannot be attributed solely to the failed procedural vote.

The price moves were:

BNB also recorded a daily loss, although no corresponding percentage or price figure was provided in the supplied information.

Bitcoin had approached $80,000 earlier in the week and reached approximately $79,600 on Monday as traders increased bets that lawmakers could reach an agreement. Political uncertainty had already pushed Bitcoin below $77,000 before the Tuesday vote, after which the asset moved toward $76,000. Ethereum subsequently moved below $2,400.

U.S. equities were also declining while Treasury yields moved higher ahead of the Federal Reserve’s Wednesday decision. Markets were pricing a high probability of a quarter-point rate increase, creating an additional source of pressure alongside the failed Senate vote.