CLARITY Act’s Collapse Isn’t the End — It’s a War Over Who Writes the Rules

A decade-long effort to establish a durable regulatory framework for digital assets in the United States has not ended — it has fractured into a multi-front lobbying war, with banks, crypto exchanges, law enforcement agencies, and the White House all competing to control the pen on the next draft of what could become landmark crypto market structure law.

The Context

The CLARITY Act — formally, the digital assets market structure bill — has been years in the making, designed to resolve a foundational question that has paralyzed U.S. crypto policy: which federal regulator, the Securities and Exchange Commission or the Commodity Futures Trading Commission, has jurisdiction over which digital assets, and under what conditions. That jurisdictional ambiguity has left American builders and investors operating in a legal grey zone while jurisdictions including the European Union, the United Kingdom, Singapore, the UAE, and Japan have codified their own frameworks.

The bill’s failure to clear a Senate cloture vote — the procedural threshold needed to advance legislation to a full floor debate — was widely reported as a setback. But a closer read of the post-vote landscape reveals something more structurally significant: virtually no major stakeholder wants the bill dead. What they want is authorship credit, and the leverage that comes with it. As Blockgeni has tracked, the optimists who called the CLARITY Act’s failure a temporary bump have underestimated the structural obstacles that remain — but the pessimists who called it dead may be equally wrong.

The Move

The immediate trigger for renewed turbulence was a January Senate markup version of the bill that Coinbase CEO Brian Armstrong publicly opposed on social media. Armstrong argued the draft had “major issues” across four domains: decentralized finance (DeFi) protections, tokenization rules, CFTC authority, and stablecoin reward provisions. His public intervention effectively killed that iteration — and set off a chain reaction of stakeholder counter-moves that has continued ever since.

“In January I opposed a draft of the bill going into a committee vote, because it needed a lot of work on DeFi, tokenization, CFTC authority, and stablecoin rewards,” Armstrong wrote in a recent social media post. “We worked with a number of parties who improved the bill and made it passable. All four of the items I called out were fixed in the draft that then went through the committee about four months later. I’m proud to have done it, and would do it again, because it helped create a better bill.”

The irony Armstrong did not explicitly acknowledge: his willingness to block and then reshape the bill established a template that every subsequent stakeholder group has now adopted. The banking lobby, law enforcement agencies, ethics advocates, and regulatory watchdogs all followed with their own versions of the same play — identify a problem, threaten obstruction, extract concessions. The result is a bill that has been pulled in more directions than perhaps any financial regulation in recent memory.

Complicating the legislative picture further, June financial disclosure reports revealed that President Trump had accrued approximately $1.4 billion in crypto-related earnings — a figure that ignited bipartisan calls for ethics provisions and injected the executive branch’s financial interests directly into what had been framed as a regulatory-clarity debate. Trump had publicly called on Congress to pass the CLARITY Act, but those calls now carry a more complicated political valence.

Taken together, Armstrong’s January intervention and the subsequent disclosure of Trump’s crypto holdings represent two distinct but reinforcing forces that have transformed the CLARITY Act from a technical regulatory bill into a high-stakes political asset. Armstrong demonstrated that a single powerful industry actor could reshape legislation by going public at the right moment; Trump’s financial exposure demonstrated that the executive branch has skin in the game that goes beyond policy preference. The convergence of these two dynamics — industry leverage and executive entanglement — makes the next iteration of the bill simultaneously more urgent and more politically volatile than any previous draft.

The Stakeholders

The Banking Lobby

Banks were the first major counter-force to Armstrong’s January intervention, triggering a series of White House mini-summits that brought crypto executives and bank representatives into the same room. The banking industry’s core concern centers on stablecoin yield policy — specifically, whether yield-bearing stablecoins would allow crypto platforms to compete directly with bank deposit accounts without equivalent regulatory oversight. After the cloture vote failed, the banking lobby signaled it is not standing down. In a statement following the vote, the industry said: “The nation’s banks continue to support creating a strong, durable regulatory framework for digital assets that will set the course for U.S. global leadership for decades to come. We believe Congress can accomplish that goal while protecting the bank lending that drives economic growth. As lawmakers consider next steps, we encourage them to adopt targeted changes to stablecoin yield policy.”

That last line is doing significant work. It signals that the banking lobby views stablecoin yield as a negotiating chip — one it intends to deploy in the next Congress.

The Crypto Industry

Despite the cloture failure, crypto trade associations have adopted a posture of disciplined optimism. Blockchain Association CEO Summer Mersinger — who announced her resignation effective last Friday — said after the vote: “This is not the end of our work to provide long-overdue consumer protection provisions and regulatory clarity for America’s digital asset users and entrepreneurs. Tens of millions of Americans hold digital assets, and American builders still have no clear federal rules, while Europe, the United Kingdom, Singapore, the UAE and Japan have established regulatory frameworks of their own. We won’t rest until our industry has clarity in the United States.”

Mersinger’s departure adds an organizational transition layer to the industry’s challenge. The Blockchain Association will need to reconstitute leadership at a moment when its most important legislative battle is heading into a pivotal next phase. Meanwhile, the broader crypto industry must contend with ongoing SEC guidance on when tokens constitute securities — a question the CLARITY Act was designed to resolve legislatively but which regulators are increasingly addressing through agency action.

Law Enforcement and Ethics Advocates

Law enforcement agencies pushed back specifically on developer liability protections embedded in the bill, raising concerns that broad safe harbors could create exploitable loopholes for illicit finance. Catholic groups and law enforcement organizations formally warned that the CLARITY Act creates crypto crime loopholes — a coalition that signals the opposition is not purely partisan or ideological but includes institutional actors with durable political relationships on both sides of the aisle.

Senator Elizabeth Warren and the Democratic Caucus

Perhaps the most underreported development in the post-cloture period is that Senator Elizabeth Warren — long cast as the crypto industry’s chief antagonist in Washington — has not called for the bill’s death. According to reporting on the legislative dynamics, Warren wants authorship influence, not veto power. Her ongoing engagement, alongside bipartisan negotiations between the Senate Banking and Agriculture Committees, suggests the ideological gulf is narrower than the industry’s framing often implies.

How the CLARITY Act Compares to International Digital Asset Frameworks

Sources: European Commission MiCA regulation; UK FCA; Monetary Authority of Singapore; UAE VARA. U.S. status reflects post-cloture vote as of October 2025.

The comparison underscores the competitive pressure that Mersinger and others invoked in their post-vote statements. The U.S. remains the only major financial market without a codified digital asset market structure — and the gap is widening as peer jurisdictions move from enactment to active enforcement.

Key Figures Leaving Washington

Any honest analysis of the CLARITY Act’s path forward must account for a significant variable: some of its most effective architects are leaving. Senator Thom Tillis of North Carolina, who brokered the compromise on stablecoin yield with Democratic Senator Angela Alsobrooks of Maryland, and who secured bipartisan ethics measures working alongside Senator Ruben Gallego of Arizona, will not seek a third term. He exits at year’s end.

Senator Cynthia Lummis of Wyoming — Chair of the Banking Subcommittee on Digital Assets and the bill’s most prominent Senate champion — has opted not to pursue reelection, citing a return to her ranch. Lummis built her reputation on cross-aisle engagement, most visibly in her collaboration with New York Senator Kirsten Gillibrand on the GENIUS Act stablecoin legislation. Her departure leaves a subcommittee chairmanship vacant and removes a decade of institutional crypto expertise from the chamber.

At the regulatory level, SEC Commissioner Hester Peirce — widely known in the industry as “Crypto Mom” for her consistent advocacy for clearer digital asset rules since 2018 — departed the Commission on October 2, 2025. In her farewell letter shared on X, Peirce wrote: “Maximizing people’s freedom to choose what is best for themselves and their families within sensible regulatory parameters designed to give them the confidence to transact with others is a delicate and vitally important task for the regulator.” She expressed confidence in SEC Chairman Paul Atkins and Commissioner Mark Uyeda to continue that work — but her institutional voice and seven-year track record at the Commission will not be easily replicated. The CFTC, meanwhile, has been advancing its own crypto rulemaking through executive channels, suggesting that agency-level action may partially fill the legislative vacuum — at least temporarily.

What This Means for the Industry

The CLARITY Act’s post-cloture landscape is less a graveyard than a staging ground. Most stakeholders — the bank lobby, the crypto trades, bipartisan Senate negotiators — are privately planning for the next Congress, and the institutional infrastructure for a renewed push is already being assembled. Some are eyeing a lame-duck session after midterm elections; others are focused on regulatory agencies as a near-term substitute for legislative clarity. But the consensus view among serious participants is that the 120th Congress represents the most realistic window.

What changes in the next round is the composition of key players. The departure of Tillis, Lummis, and Peirce removes three figures who had accumulated rare institutional credibility across partisan lines — the kind of credibility that cannot be transferred by appointment or replaced by a committee reshuffling. Incoming lawmakers will face a steeper learning curve on technical questions around DeFi protocol liability, CFTC jurisdiction over commodity-classified tokens, and stablecoin reserve standards. That learning gap creates opportunity for well-resourced lobbying operations on all sides — and risk for policy outcomes that reflect lobbying power more than sound regulation.

For investors and market participants, the regulatory ambiguity is not a neutral condition. Capital allocation decisions — particularly for institutional players building DeFi infrastructure, tokenized asset platforms, or stablecoin payment rails — remain constrained by the absence of a clear federal framework. Cross-border stablecoin flows have surged even as regulatory clarity remained elusive, suggesting that market participants are proceeding despite the uncertainty — but the absence of clear rules introduces compliance risk that a durable legislative framework would substantially reduce.

The actors best positioned for the next round are those with established relationships on both sides of the aisle and the institutional patience to operate across multiple legislative cycles. The bank lobby has both. The crypto industry’s major trade associations are rebuilding leadership and recalibrating strategy. Law enforcement and ethics advocates will continue to function as swing-vote proxies — groups whose sign-off, or at least neutrality, may be necessary to secure the bipartisan threshold the bill requires. What Congress has never managed is a bill that satisfies all sides simultaneously. The CLARITY Act’s next iteration is unlikely to be the first. But a bill that satisfies enough of the right stakeholders — at the right moment in the legislative calendar — remains a plausible outcome, not a guaranteed one.