The Digital Asset Market Clarity Act (or CLARITY Act) was supposed to usher in a new era for the crypto industry. It was going to give them special treatment to skirt securities regulation, and enshrine that special treatment in statute. It was going to bring the appearance of legitimacy that only an official regulatory framework can bring to an industry inundated with fraudsters, sanction evaders, and terrorists. If the bill passed, it was absolutely going to be worth the staggering $206 million the industry has spent on the midterms so far, more than any other corporate interest, on top of the $133 million spent on congressional races the last time around.
Except it didn’t happen. On Tuesday, Senate Democrats and a small group of Republicans shot down a vote to advance the bill on the Senate floor, delivering a devastating blow to the crypto world and their once formidable political machine.
The crypto industry emerged as an apparently unstoppable force in Washington politics in 2024 after spending tens of millions to oust a prominent critic in then-Banking Committee Chairman Sen. Sherrod Brown (D-OH), and a successful courtship with President Trump shortly before he won re-election. But Tuesday’s vote—and the months of repeated delays and fruitless negotiations leading up to it—pulled back the curtain. What stands behind is a deeply unpopular financial product with no legitimate use cases, and a political arm poisoned by its association with Donald Trump, who has (along with his family) been running nonstop crypto scams since he took office. Crypto’s vast money was no match for the anger rising among the electorate sparked by Trump’s egregious corruption and corporate influence over politics.
Despite regular threats of an Ohio repeat from the industry, not a single Democratic senator voted to advance the bill, not even the most pro-crypto among them, or the vulnerable Sen. Jon Ossoff (D-GA), running for re-election in a purple state this fall. What’s more, they were joined by three Republicans (not including Sen. Thom Tillis (R-NC) who changed his vote to no as a procedural matter) citing concerns about the impact the bill might have on community bank lending. Among them was Sen. Susan Collins (R-ME), who is currently locked in a tight race for her Maine Senate seat.
The crypto industry emerged as an apparently unstoppable force in Washington politics in 2024.
Perhaps these senators realized what critics of the crypto industry have been saying all along: Most of their threats of electoral hellfire are empty. For one, crypto typically only invests in candidates who are going to win anyway; Brown’s 2024 opponent Sen. Bernie Moreno (R-OH) is one of only a handful of exceptions. As Corey Frayer, director of investor protection with the Consumer Federation of America, points out, “it was an incredibly uphill battle for [Brown] to win that state with Trump on the ticket.” In fact, Brown led Kamala Harris by seven percentage points in 2024.
Conditions have changed greatly in two years. Now, enormous spending in some Democratic primaries seems to be backfiring. The Israel lobby spent an unprecedented $60 million failing to defeat Abdul El-Sayed in the Michigan Senate primary. And with national conditions increasingly looking like a Democratic wave, El-Sayed and other progressives might sweep easily into office no matter what opponents spend. Indeed, Brown himself looks likely to be returning as a senator from Ohio.
More importantly still for Democrats: Despite crypto’s attempts to paint themselves as bipartisan, the industry will always pick the more openly corrupt, anti-regulation Republican Party when they can. “This whole maneuver that Gillibrand and Schumer thought they were being smart on to court crypto money was always going to be a failure and drag along with it some pretty heavy baggage that they weren’t serious about Trump’s corruption,” Frayer said.
FOR THE LAST FEW WEEKS AND MONTHS, it’s been one problem after another for the CLARITY Act’s proponents. A loophole allowing stablecoin issuers to offer deposit-like rewards to account holders touched off an aggressive lobbying campaign from community banks and agriculture groups worried about the threat to deposit bases that could affect local lending. There were law enforcement groups pushing back against exemptions from the Bank Secrecy Act for decentralized finance, known as DeFi in the crypto world, that would make it harder for them to prosecute financial crimes. Tribal leaders worried about challenges to their sovereignty from the Commodity Futures Trading Commission. And on and on. But in the end, the death knell for the bill was the crypto industry’s association with Donald Trump and his corruption in office.
Democrats demanded an ethics provision to limit the ability for senior government officials and their families, including the president, to profit off of digital asset businesses while in office. Corruption is a key message for the party as they look to take back Congress in November’s midterms, and Trump’s wildly blatant crypto corruption has been the focus of headlines and increasing outrage all summer long. Trump, of course, won’t sign anything that even makes it appear as if Democrats are reining in his profit machine, and Republicans in the Senate refused to hold him to even the flimsy standards proposed by Democrats the night before the vote.
It was also the standstill over ethics, more than anything else, that led to the persistent delays for CLARITY over the last few months, especially after a financial disclosure released in June revealed Trump had brought in $1.4 billion from his crypto ventures alone in 2025. No progress was made in the weeks leading up to the August recess, which many of the bill’s supporters saw as their last chance before the rapidly approaching midterms made passage too politically contentious. Once the vote was actually scheduled for September—a consolation prize for the industry from the Republican Senate leadership—Trump’s continued refusal to come to the table on ethics looked worse and worse for the legislation’s outlook as time went on.
And then, on Sunday night, a Hail Mary from Senate Republicans in the form of a new draft with an updated ethics provision suddenly revived hope for the CLARITY Act’s chances. The draft included a nod to a key demand from the Democrats to give state attorneys general the power to enforce the ethics rules instead of limiting any power to hold Trump accountable to the law to his own attorney general, as the last Republican draft proposed. But a nod is all it was. The version didn’t actually give state AGs any power to bring enforcement action against the president or any other official, only the power to sue the attorney general of the United States, who still retains sole enforcement authority, to compel action. And they wouldn’t even be able to do that if Trump’s Office of Government Ethics, run by political appointees, decided to stop the lawsuit.
A separate demand from Democrats to require Trump to divest from his existing crypto assets wasn’t included at all. It would have allowed him to continue to profit off of the same business that made him that $1.4 billion in the first place.
“They put in some new words that pretended to solve the problem,” Sen. Elizabeth Warren (D-MA) told reporters on Tuesday morning before the vote. “The changes were nonsense.”
Still, despite the “nonsense” changes, it seemed, for a moment, as if the crypto-friendly Democrats in the Senate might actually fold at the last minute.
It wouldn’t be the first time. Over a year ago, a critical group of Democrats helped their Republican colleagues in the Senate advance the CLARITY Act’s companion establishing a light-touch regulation framework for stablecoin (a type of crypto token designed to facilitate trading between traditional currencies and digital assets), the GENIUS Act. Back then, too, Democrats demanded an ethics provision, among other changes, to limit conflicts of interest for senior government officials issuing stablecoin. But thanks to a last-minute deal, they agreed to give away all of their leverage and advance the GENIUS Act past the filibuster’s 60-vote threshold needed to move to a final vote, which only requires a simple majority.
Last month, Trump’s crypto firm World Liberty Financial was granted a conditional bank charter by the president’s handpicked comptroller of the currency, Jonathan Gould, the first step to becoming a Permitted Payment Stablecoin Issuer under the GENIUS Act.
For Democratic voters, crypto has become synonymous with Trump’s rampant corruption and corporate America’s outsized influence.
A similar scene played out earlier this year with the CLARITY Act itself during the bill’s markup in the Senate Banking Committee. The banking lobby, which seemed to be losing ground to its digital counterpart in a battle to influence Congress, appeared for a minute as if it could stop the bill from advancing without a proper fix to the stablecoin yield loophole. It came right down to the wire, but a deal that was struck after the proceedings were already under way brought over Sen. Ruben Gallego (D-AZ) and Sen. Angela Alsobrooks (D-MD) and saved the bill in the end.
Flash forward to this past weekend, when rumors were swirling that the crypto-friendly portion of the Democratic caucus might consider a similar last-minute deal, even if it meant giving away any leverage ahead of the final vote. There was real optimism in the crypto industry that the new Republican language would be enough justification for lawmakers scared of crypto’s money to concede. Politico reported that Sen. Kirsten Gillibrand (D-NY)—one of crypto’s fiercest advocates in Washington, whose son also happens to run a crypto startup funded by major industry players—was privately encouraging her fellow Democrats to vote for the language as it stood.
Crypto lobbyists, many sporting the signature orange tie of Bitcoin enthusiasts, swarmed the capital in a final, desperate push to get their legislation over the finish line. The industry’s leading advocacy group Stand With Crypto, backed by major crypto exchange Coinbase and responsible for scoring and endorsing candidates across the country, posted on X Monday morning “providing notice” that they planned to “score the upcoming cloture vote on the motion to proceed to the CLARITY Act.” The “notice” came weeks after the organization released a slate of House endorsements but said they would hold back on the Senate until closer to the election.
But as the Senate’s first day back in session dragged on, more and more senators in the group of about a dozen possible yes votes among Democrats told reporters they still had real issues with the bill, and the ethics provision in particular. That night, on the eve of the vote, they produced a counteroffer, according to reports, even though Republicans insisted their last draft was the “last, best, and final offer.”
The Democratic counteroffer didn’t exactly offer a shining example of stringent ethics requirements itself. It left the weak enforcement power for state attorneys general and the Office of Government Ethics’ ability to shut down any lawsuit intact. The only thing it did was add in some divestment requirements for currently held assets. “It’s barely a set of technical corrections,” Frayer told the Prospect in a message.
Efforts from lobbyists and lawmakers alike continued on Tuesday in the hours before the vote when staff for Banking Committee Chairman Sen. Tim Scott (R-SC) abruptly shut down negotiations, according to several Democratic staffers involved in the eleventh-hour talks.
A year ago when the CLARITY Act landed in the Senate, its passage seemed inevitable. But after hundreds of millions of dollars and months and months of ultimately fruitless negotiations, the bill only received 49 yes votes on the floor, falling far short of the 60 needed to advance. Even Gillibrand ended up voting against it.
CRYPTO’S SHALLOW THREATS MAY HAVE been enough to force the GENIUS Act through Congress, but in the year since, the politics within the Democratic Party have seen a significant shift. Moderate Democrats spent the summer watching as candidates backed by big money consistently lost out to more progressive opponents speaking out against widespread corporate influence over American politics. More and more Democrats in competitive races are embracing the anti-crypto label—and winning. This year, Democratic candidates for Congress have purchased three times as many anti-crypto social media ads as in 2024. The industry just suffered two major defeats by proudly anti-crypto candidates in Minnesota and Florida.
The industry tried a brute-force strategy to muscle through deregulatory legislation with mountains of money and aggressive lobbying. But there was never any real public demand for the CLARITY Act or any comprehensive crypto legislation at all. Most consumers aren’t interested in a product from what they see as a fraud-filled industry. For swing voters, crypto barely registers compared to the cost of living. And for Democratic voters, cryptocurrency has become synonymous with Trump’s rampant corruption and corporate America’s outsized influence over Washington politics. Lawmakers are beginning to realize supporting crypto may be more dangerous than even the hundreds of millions of dollars the industry is hanging over their heads.
Now, crypto faces a choice: spend big against the traitorous no votes in an unfavorable political environment and risk both being humiliated by major losses, and incurring the ire of a party poised to take back the majority in at least one chamber of Congress, or stand down and reveal just how empty their threats truly are. Either way, the smoke and mirrors behind the industry’s electoral power is beginning to fall apart.
It is a major blow. But the fight isn’t over yet. For at least the next two years, crypto has Trump and his regulators ready to push as much of the industry’s agenda as they can get through, Congress be damned. The next time progressives have an opportunity, not only will they have serious damage from these four years to undo, but they’ll have to be prepared to codify real regulation into law before another administration can let the crypto industry write whatever rules it wants.
