CLARITY Act Setback Shifts Crypto Policy Toward Regulators and House Bills

CLARITY Act Can Still Return to the Senate

Negotiations broke down largely over ethics provisions involving President Donald Trump's crypto interests.

Democrats argued that the proposed restrictions did not adequately address conflicts involving crypto interests described as being worth hundreds of millions of dollars.

Several Democrats who participated in drafting or negotiating the legislation ultimately voted against advancing it. Republicans rejected a Democratic counteroffer before the procedural vote.

JPMorgan analysts led by Kenneth Worthington said the CLARITY Act was “not fully dead,” although its legislative window had become “extremely narrow and only getting narrower.”

Tillis' motion to reconsider keeps the bill on the Senate calendar and creates a route for another vote.

JPMorgan pointed to an earlier crypto bill as precedent:

“Recall, the GENIUS Act (now law) also failed its first cloture vote, so there is precedent in crypto-related legislative proceedings.”

However, time was running short.

JPMorgan estimated that only about two-and-a-half weeks of Senate time remained before the midterm elections, followed by a lame-duck session.

The analysts also warned that frustration among supporters could reduce their willingness to spend more floor time renegotiating the bill.

Analysts Disagree on CLARITY Act's Remaining Chances

StoneX Financial analysts led by Mark Palmer took a more pessimistic view.

They said the legislation was effectively dead for the current Congress because only 14 working days remained before campaign season.

StoneX cited Sen. Cynthia Lummis' comment that the next realistic opportunity for the CLARITY Act might not arrive until 2030.

The firm also noted that prediction-market odds of enactment during 2026 had fallen from 82% in February to 16% before the procedural vote.

Those percentages reflected prediction-market pricing rather than StoneX's own legislative forecast.

Digital Sovereignty Alliance managing director Adrian Wall offered another possible route on September 16.

Wall said senators from both parties were discussing a potential lame-duck attempt to revive the legislation.

“There is an appetite to put this forward even during the lame duck period of Congress,” Wall said. “Is it easy? No. It’s going to be very complicated. It’s a long shot.”

Wall said his information came directly from senators.

He added:

“I’ve heard it directly from senators on both sides [...] saying they have a strategy to engage the other side and see if there’s a last chance to do it.”

Wall described the failed cloture vote as a “huge blow,” but said Congress could continue working on market-structure legislation even if the current effort failed.

SEC and CFTC Prepare to Move Without Congress

The Senate setback increased attention on the Securities and Exchange Commission and Commodity Futures Trading Commission.

Leaders of both agencies said they would continue crypto rulemaking under their existing statutory authority.

SEC Chairman Paul Atkins said:

“I have been unequivocal: with or without legislation, we will act decisively within the SEC’s statutory authority to deliver certainty for American investors and for the entrepreneurs shaping our technological future. Stay tuned.”

CFTC Chair Mike Selig said his agency was:

“locked in and ready to ship its rules for the new frontier of finance.”

Selig called the Senate result “unfortunate” and said investors deserved “regulatory clarity, legal certainty, and consumer protections in crypto asset markets.”

He also said:

“President Trump promised to deliver a future-proof crypto asset regulatory market structure one way or another, and we will help him get the job done using our existing statutory authorities.”

Coinbase CEO Brian Armstrong responded:

“The CFTC and SEC are stepping up. Go time.”

Analysts Expect Faster Crypto Rulemaking

Bernstein analysts led by Gautam Chhugani expected regulators to focus on “specific rule-making” after the congressional setback.

Potential areas included:

• Native-token classification
• DeFi protections
• Self-custody infrastructure
• Equity tokenization
• Real-world-asset perpetual futures
• Single-stock perpetuals
• Sports event contracts

JPMorgan also expected investors and crypto companies to shift attention toward regulators.

The bank said agency action could create “some guardrails to appease the crypto-ecosystem and instill some confidence into incremental capital flows.”

However, JPMorgan warned that regulation created by agencies could be less durable than legislation because future administrations could reverse it and courts could challenge it.

One SEC proposal being watched by the industry was a potential “innovation exemption” covering crypto projects, including tokenized equities.

JPMorgan said reports indicated that the SEC had been waiting to see whether the CLARITY Act passed before moving ahead.

Stablecoin Reward Rules Remain Unchanged

The Senate defeat also left the existing framework for stablecoin rewards unchanged.

Bernstein said the CLARITY Act compromise would have prohibited rewards on idle stablecoin balances while allowing rewards connected to customer activity.

Without that provision becoming law, platforms such as Coinbase could continue offering rewards on idle balances, according to Bernstein.

“Stablecoins should be just fine since they are governed by GENIUS,” the analysts wrote.

StoneX identified another possible regulatory issue.

The firm said proposed OCC and FDIC rules could presume that a stablecoin issuer violates the GENIUS Act's issuer-yield restrictions if it pays an affiliate that then provides rewards to stablecoin holders.

StoneX said the dispute could eventually reach the courts after GENIUS takes effect in January 2027.

House Advances Digital Asset Tax Bill

Congressional crypto legislation continued on a separate track in the House.

On September 16, the House Ways and Means Committee advanced the Digital Asset Tax Certainty Act, H.R. 10357.

Committee Chair Jason Smith, R-Mo., called it the first federal tax framework specifically for digital assets.

“This is a historic moment for this Committee: after more than a year of working together, Republican and Democrat Members have come together to establish the first-ever tax framework for digital assets,” Smith said.

The tax bill would exempt qualifying crypto network or transaction fees of $10 or less from tax.

The exemption would not apply to service providers carrying out transactions for other people.

If enacted, that provision would begin in December 2027.

Crypto Mining and Staking Tax Rules Included

The legislation would also require the Treasury Department to establish a Digital Asset Voluntary Disclosure Program within 12 months of enactment.

Eligible taxpayers could use the program to amend previous returns and settle taxes, interest and penalties.

Mining and staking rewards would be treated as ordinary income.

Certain investment trusts could also stake their holdings without staking alone changing their tax status.

However, lawmakers removed an earlier option allowing income recognition to be deferred.

Rep. Steven Horsford, D-Nev., said:

“This package establishes ordinary income treatment, but leaves that timing question unresolved.”

The House was preparing to leave Washington until after the November elections, making the lame-duck session the next likely opportunity for action.

Bitcoin Reserve Bill Clears House Committee

The House also advanced legislation designed to put President Trump's executive-order Bitcoin reserve policy into law.

The American Reserve Modernization Act of 2026, H.R. 8957, would establish:

• A Strategic Bitcoin Reserve
• A separate Digital Asset Stockpile

Both would sit within the Treasury Department and hold federally controlled bitcoin and other digital assets obtained through criminal or civil forfeiture.

Rep. Nicholas Begich, who introduced the measure on May 21, said:

“We cannot allow Bitcoin to be held by the federal government to languish in fragmented and inconsistent custody.”

The U.S. government was estimated to hold 324,527 BTC worth approximately $24.7 billion.

That estimate came from Arkham Intelligence rather than an official federal accounting.

Bitcoin Would Face 20-Year Holding Requirement

Under the proposal, bitcoin placed in the Strategic Bitcoin Reserve would have to remain there for at least 20 years.

Federal agencies would also need to provide a full accounting of digital assets they hold or control.

Transparency requirements would include:

• Quarterly proof-of-reserve reports
• Third-party audits
• Federal digital-asset accounting

The legislation would also require a study of budget-neutral methods for expanding the Bitcoin reserve.

States would be allowed to store their bitcoin with the Federal Reserve.

The bill separately affirms private Bitcoin ownership and self-custody rights, describing control over private keys as:

“fundamental to the principles of financial sovereignty, privacy, and personal liberty in the digital age.”

Bitcoin Policy Institute Executive Director Connor Brown called the committee vote a “genuinely historic step for Bitcoin policy.”

Strive CEO Matt Cole had previously called the proposal “the single most important crypto legislation that can come out of DC.”