Crypto shifts focus to Trump regulators after coming up short in Senate

A cryptocurrency regulation bill appears to have little momentum left in the Senate after it came up short in a floor vote Tuesday, with the industry now turning its attention to Trump administration regulators to set the rules of the road.

The Clarity Act failed to secure enough support to clear a procedural hurdle Tuesday afternoon, with every Democrat and several Republicans voting against the effort to advance the bill.

It was a stinging loss for an industry that has poured extensive resources into lobbying Congress for the legislation over the past two years, as well as the GOP lawmakers and administration officials who championed the push.

But crypto leaders are quickly shifting their hopes to a pair of financial regulators in the Trump administration: the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

“The Senate has voted and we have a different type of clarity. It’s time for agencies to step forward and for crypto voters to make their voice heard,” Faryar Shirzad, Coinbase’s chief policy officer, wrote in a post Tuesday on the social platform X.

Support for the Clarity Act crumbled after crypto-friendly Democrats and Republicans failed to reach an agreement on ethics language ahead of Tuesday’s vote.

Ethics were a longtime concern for Democrats, who voiced worries about passing legislation that could potentially boost President Trump and his family’s crypto businesses.

Senate Republicans put forward what an aide described as their “last, best and final offer” on Sunday with a new White House-backed ethics provision.

But Democrats indicated Monday the updated language still fell short, with Sen. Raphael Warnock (D-Ga.) telling reporters there were “a whole lot of loopholes.”

Talks continued up until Tuesday’s vote, in which Democrats ultimately blocked the legislation. They were joined by four Republicans — Sens. Susan Collins (Maine), Josh Hawley (Mo.), Jerry Moran (Kan.) and Thom Tillis (N.C.).

Both sides traded blame after the measure came up short. Democrats accused Republican leaders of cutting negotiations short and failing to stand up to Trump.

Sen. Ruben Gallego (D-Ariz.) argued Tuesday that his GOP counterparts spent time “twisting themselves into knots to appease” the president rather than working with Democrats to “craft a bill that could pass with strong ethics provisions.”

Republicans tossed the onus back on their colleagues across the aisle, accusing them of continuously moving the goal posts. Sen. Cynthia Lummis (R-Wyo.) suggested the vote showed that Democrats “were never truly serious” about the effort.

“I sat at the table with Senate Democrats working in good faith to get this done while they played games,” she said in a statement.

Several senators have attempted to leave the door open to future talks.

Tillis, who switched his vote to “no” at the last minute and put forward a motion to reconsider the bill, underscored Tuesday that the move “allows us to continue working towards a positive outcome,” declaring this is “not the end for the Clarity Act.”

A group of seven Democrats — Sens. Kirsten Gillibrand (N.Y.), Angela Alsobrooks (Md.), Cory Booker (N.J.), Catherine Cortez Masto (Nev.), Mark Warner (Va.), Gallego and Warnock — similarly argued Wednesday that they were still committed to getting the bill across the finish line.

“Democrats have spent the last two years working to pass crypto legislation that would expand opportunity, protect consumers, punish bad actors, create regulatory certainty, and include strong, commonsense ethics provisions for elected officials,” they said in a statement.

“This week was a setback, but not the end of that important work,” they continued. “We remain committed to working in a bipartisan fashion to get this legislation passed.”

But many in Congress and the industry viewed the failed vote as the end of the line for the Clarity Act this year. One Senate GOP aide told The Hill on Tuesday that their boss “thinks it is dead.”

In a signal of where momentum is headed, Patrick Witt, the president’s chief crypto adviser, pointed to the chairs of the SEC and the CFTC on Tuesday, saying “you’re up.”

The two financial regulators were always expected to oversee the crypto market. The Clarity Act chiefly sought to figure out how to split responsibilities between the SEC and the CFTC, drawing a line between when digital assets are securities and commodities.

While the industry preferred the more permanent nature of legislation, both agencies have been making moves to tee up their own regulations.

“We think the SEC and CFTC will shift into overdrive with aggressive, pro-industry proposals,” Ian Katz, managing director at Capital Alpha, wrote in a note Tuesday. “The Republican leadership at those agencies will be able to pass regulations without Democratic approval.”

“Some of those proposals may come with an implied message to Democrats amounting to: This is what you get when you don’t legislate,” he continued.

CFTC Chair Michael Selig vowed Wednesday to “get the job done using our existing statutory authorities,” adding in a post on X that the agency is “locked in and ready to ship its rules for the new frontier of finance.”

SEC Chair Paul Atkins similarly hinted Wednesday at upcoming action from the agency. On Thursday, the commission announced its long-awaited “innovation exemption.”

The order helps clear the way for tokenized stock trading by exempting platforms and liquidity providers from traditional securities rules.

“Earlier this week, Congress was unsuccessful in advancing the CLARITY Act despite the tireless efforts of many,” Atkins said in a statement Thursday.

“So today, the Securities and Exchange Commission is taking a significant step forward, within its statutory authority, to bring America’s capital markets into the digital age by facilitating onchain trading of certain tokenized stocks through the ‘Innovation Exemption.’”

It marks the latest in a series of efforts by the Trump regulators to bring rules to the crypto market, even as lawmakers attempt to hash out legislation.

The SEC previously put forward rulemaking in August to create a pair of new exemptions, allowing issuers to offer crypto assets without needing to register first with the commission.

The agency also clarified what types of digital assets fall under its purview earlier this year, noting that digital or tokenized securities are largely the only crypto assets within its domain. The CFTC said it would administer commodities law consistent with this view.

As the two regulators charge ahead, the prospect that Congress revives the Clarity Act later this year are “dim,” Katz noted.

The House is out of session up until after the midterms, and there are only about five more weeks in 2026 when both chambers are in session, leaving little time to maneuver.

While the measure could be reintroduced next year in the new Congress, “much of the bill would have to be reworked,” Katz added. Democrats are widely expected to take control of the House, with Senate control still up in the air.

“Lawmakers wouldn’t quite be starting from scratch, but it would probably feel like that to the bill’s proponents,” he said. “It’s also possible that Democratic demands would be so unpleasant for the crypto industry that it might prefer no bill at all.”