CLARITY Act Falls Short With 49 Votes In The Senate

This Tuesday, September 15, the Senate failed to advance the CLARITY Act, with 49 votes against 50, while 60 were needed. After a year of negotiations, political disagreements, mainly around Donald Trump’s crypto interests, thwarted the bill. This immediately shook crypto stocks on Wall Street. Can the CLARITY Act still be saved? Has Washington just indefinitely postponed the adoption of a federal framework for cryptos?

Ethical disagreements caused the compromise to fail in the Senate

For a year, the CLARITY Act bill faced many points of contention, notably rewards on stablecoins, treatment of software developers, and lawsuits. However, the conflict crystallized around Donald Trump and his interests in the crypto world.

At issue were hundreds of millions of dollars related to World Liberty Financial, which is headed by his sons, as well as his memecoin. Negotiations also failed on ethical provisions, mainly regarding the possibility for states to sue public officials and their potential application to their family members.

Many Democrats immediately linked their votes to these disagreements. Ruben Gallego said:

This bill failed simply because Republicans refuse to stand up to the president.

Angela Alsobrooks emphasized that lawmakers were ready to find common ground before, according to her and other Democrats, Republican leadership ended the discussions. Cynthia Lummis, one of the Republican architects of the bill, returned the accusation, claiming she negotiated in good faith while they engaged in maneuvers.

Democrats who justified their opposition put forward various specific grievances :

• Ruben Gallego criticizes Republicans for prioritizing Donald Trump’s demands over seeking the 60 necessary votes with Democrats ;
• Catherine Cortez Masto believes the bill would have weakened law enforcement’s ability to prosecute bad actors, kept predictive markets in their current state, and insufficiently addressed ethical concerns ;
• Angela Alsobrooks, who supported advancing the CLARITY Act in the banking committee on condition of ethical guarantees, says she remains determined to regulate cryptos and protect the millions of Americans who hold them.

Crypto stocks immediately took a hit from the vote

The market penalty was swift. Coinbase lost nearly 9% at $174.42, Circle fell 9.4% to $88.26, Galaxy Digital gave up 8%, and Gemini 7%. Robinhood dropped 3%, Bullish 5%, and eToro 4%.

Among mining companies, Riot Platforms lost 5%, while MARA Holdings, CleanSpark, IREN, and Core Scientific retreated about 3% to 4%. Bitcoin itself fell about 3% over twenty-four hours and briefly approached $75,000.

Also, investors reduced risk exposure ahead of the Federal Reserve decision expected Wednesday, while the Nasdaq and S&P 500 were trading in the red. On the legislative front, a door remains open.

After initially voting yes, Republican Thom Tillis changed his vote then requested a motion to reconsider. “This is not the end of the CLARITY Act,” he says. According to Ji Hun Kim, CEO of the Crypto Council for Innovation, this procedure allows a new closing vote within two days.

The failure of the CLARITY Act delays the American regulatory battle

The setback now goes beyond the immediate fate of the project. Brad Garlinghouse, CEO of Ripple, summed it up as “this one hurts,” before calling for a “post-crisis assessment” on the reasons for the failure. Patrick Witt, White House crypto advisor, speaks of an “immense disappointment.” He warns that the standards that global financial markets will follow tomorrow could be those of Brussels or Beijing rather than Washington and New York.

The timing adds difficulty. Even if adopted by the Senate, the bill would still need to pass the House, which would not be possible before the November elections. Regulation does not stop with the CLARITY Act. Kristin Smith, president of the Solana Policy Institute, reminds that the SEC and CFTC continue advancing on crypto policy.

Summer Mersinger, CEO of the Blockchain Association, also promises to continue discussions with both parties. Washington has therefore not closed the file: the vote mainly postponed, and politically hardened, the search for a federal framework for cryptos.