CLARITY Act nears Senate vote as ethics fight stalls 616-page bill

Senate Republicans are rushing the 616-page CLARITY Act to a vote before leaving town this week, a framework that would end SEC-CFTC overlap but remains stalled on an ethics provision tied to Trump's $TRUMP token.

"The CLARITY act represents a ton of bi-partisan work to finally establish clear rules for crypto in America, which 70% of Americans say we should already have," Coinbase Chief Executive Brian Armstrong said on X this week, urging senators to approve the bill.

The bill, released in updated form July 22 by Senator Cynthia Lummis, assigns securities jurisdiction to the SEC and commodity oversight to the CFTC, shields open-source developers from liability, and sets registration standards for exchanges, brokers and custodians. Tokens sold to raise money for an enterprise — including the Trump family's WLFI token — would be treated as securities, while Bitcoin and other decentralized networks would be classified as commodities.

The stakes extend beyond crypto. The stablecoin market has grown more than 50 percent to roughly $315 billion since the GENIUS Act gave payment stablecoins a legal home, drawing in BlackRock, JPMorgan and Visa. A framework covering the entire digital-asset ecosystem would unlock institutional capital in tokenized securities and real-world assets — or, if it stalls, push that activity toward the EU's MiCA regime and Singapore's MAS framework.

The ethics fight that froze the bill

Democrats are refusing to support the bill without stronger restrictions on federal officials issuing and promoting cryptocurrencies while in office. The dispute centers on President Trump's $TRUMP memecoin, which blockchain data analyzed by The New York Times shows earned Trump-linked entities about $636 million while nearly one million buyers lost an estimated $3.8 billion.

Senators Thom Tillis, a North Carolina Republican, and Ruben Gallego, an Arizona Democrat, are drafting compromise language. Senators Elizabeth Warren and Richard Blumenthal sent a letter to SEC Chairman Paul Atkins on Aug. 4 requesting an investigation into $TRUMP, citing the loss asymmetry. The SEC under Atkins has scaled back crypto enforcement and issued a February 2025 staff statement declaring memecoins generally outside its jurisdiction.

The loopholes critics want closed

The Wall Street Journal editorial board flagged two provisions it says could destabilize the financial system. One would let crypto exchanges offer "rewards" to stablecoin holders — lower-rate margin loans, trading credits, cash bonuses — a workaround to the GENIUS Act's prohibition on stablecoin issuers paying interest. That could draw deposits out of small banks and reduce lending to small businesses, the board argued.

The bill would also exempt decentralized networks from anti-money-laundering and know-your-customer rules, a gap critics say criminals could exploit to route illicit payments. The crypto lobby is pressing Republicans to pass the bill as is, the WSJ reported.

For traders, the CLARITY Act's progress functions as a macro signal. A confirmed path to enactment would likely fuel a sustained risk-on move across digital assets as sidelined institutional capital gains a green light. A stall keeps the enforcement-by-litigation status quo, with capital and talent continuing to flow toward clearer jurisdictions. The Tillis-Gallego compromise language is the near-term chokepoint to watch, with the September legislative calendar the next hard deadline.

This article is for informational purposes only and does not constitute investment advice.