Democrats' sweep of Congress likely pushes the Clarity Act to the back burner and brings a more adversarial approach to crypto in Washington. Analysts expect lawmakers to scrutinize President Donald Trump's personal crypto dealings, while industry voices point to bipartisan support and regulatory rule-making as paths forward.
Democrats' sweep of Congress likely resets the political calculus for crypto, pushing industry-friendly legislation like the Clarity Act to the back burner. With crypto critic Sherrod Brown (D-Ohio) returning to the Senate and Sen. Elizabeth Warren (D-Mass) retaining significant influence over financial policy, analysts say the new Congress is likely to focus on Trump's personal crypto dealings.
Analysts see little room for Clarity
The industry spent more than $200 million to influence the midterms, hoping to elect leaders who could push a comprehensive market structure bill over the finish line. Jaret Seiberg, TD Cowen's Washington analyst, said Brown's win in Ohio damages the industry's political clout, since the industry worked to defeat him. In a Wednesday note, he said: "We did not think Clarity could advance over the next two years."
Seiberg also said Democrats will investigate Trump's crypto entanglements, including World Liberty Financial. Mike Townsend of Charles Schwab expects Democrats to push for a tougher version of the bill next year.
Industry points to bipartisan support
The stakes extend beyond market structure. The industry sees stablecoins, DeFi, banking access and tokenization as priorities for keeping the U.S. competitive in the global crypto economy.
Coinbase's Kara Calvert said the 120th Congress is on track to have more new pro-crypto members than any freshman class. As of Thursday morning, Stand With Crypto counts 19 pro-crypto candidates elected to the Senate versus eight it characterizes as anti-crypto. In the House, 228 pro-crypto candidates have won versus 106 the group deems anti-crypto.
Fairshake, the pro-crypto super PAC, has so far won 29 of the 34 races it spent on, per Reuters.
Markets brace for uneven effects
Even if the Clarity Act stalls until 2028, key financial regulators can help advance the industry through rule-making. Joseph Chalom, CEO of Sharplink, sees a clear path for stablecoins and for the tokenization of public equities under the SEC's five-year innovation exemption.
Near-term, investors should expect more volatility. James Butterfill of CoinShares said U.S. crypto equities should be more sensitive than bitcoin, particularly businesses reliant on new regulatory permissions.
Source: CNBC
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