CLARITY Act Passage Odds Plunge to 35% Amid Senate Ethics Deadlock

Woofun AI reports that the "Digital Asset Market Clarity Act" (CLARITY Act) has been stalled in the Senate for over a year since it was passed in the House of Representatives on July 17, 2025, with a vote of 294 to 134. The legislative gridlock stems from a complex interplay of ethical review clauses concerning conflicts of interest for senior government officials regarding crypto assets, rather than purely technical regulatory disagreements. Although the Senate Banking Committee advanced the bill to the legislative agenda with a vote of 15 to 9 on May 14, 2026, the measure has not yet received a full Senate vote or been signed by the President. Odaily Planet Daily has conducted a detailed analysis of this stalemate, highlighting how the bill’s fate is now inextricably linked to broader political dynamics and market sentiment shifts.

The timeline of the CLARITY Act reveals a series of critical junctures that have progressively narrowed its window for enactment. After passing the House with a decisive 294 to 134 margin on July 17, 2025, the bill moved to the Senate, where the Banking Committee approved it 15 to 9 on May 14, 2026.

However, the path to the President’s desk remains obstructed. On July 27, Senate Majority Leader John Thune confirmed that the Senate would prioritize handling sanctions against Russia and personnel appointments in the near term, effectively pushing the voting window for the CLARITY Act into September. This delay is significant because industry and congressional negotiators generally viewed August 7 as the last realistic window for the bill to pass in 2026. Missing this deadline has led most analysts to believe that the chances of the bill being enacted this year will significantly decrease, creating a precarious situation for stakeholders awaiting regulatory clarity.

At the core of the CLARITY Act is a comprehensive framework designed to classify and define crypto assets, clearly distinguishing whether tokens are securities or commodities. This distinction is crucial for delineating the regulatory authority between the SEC and CFTC, two agencies that have historically competed for jurisdiction over digital assets. The bill also covers provisions for users to self-custody private keys, stablecoin yield mechanisms, and the registration of overseas exchanges.

However, the main controversy currently hindering the Senate vote is the ethical review clause concerning conflicts of interest for senior government officials regarding crypto assets. This clause has become a focal point for political debate, with critics arguing that it fails to adequately address potential conflicts of interest, particularly those involving high-profile political figures. The inclusion of this clause has transformed the CLARITY Act from a straightforward regulatory measure into a politically charged instrument, complicating its passage through the Senate.

Woofun AI data shows that the probability of the CLARITY Act being signed into law this year has plummeted to 35% on Polymarket, down from 82% in February. This sharp decline reflects growing market skepticism about the bill’s prospects. The probability had risen above 70% multiple times between February and May, but has continued to decline since June, indicating a clear loss of confidence among traders and investors. Currently, the cumulative trading volume on Polymarket for this outcome has reached $2.845 million, underscoring the significant financial interest in the bill’s fate. The drop from 82% to 35% is not just a statistical shift but a signal of deeper structural issues within the legislative process. As the September deadline approaches, the likelihood of the bill passing before the end of the year appears increasingly remote, forcing market participants to adjust their strategies accordingly.

Bitcoin’s price action has reflected the market’s growing pessimism regarding the CLARITY Act, although the impact has been nuanced. In late July, Bitcoin fluctuated around $65,000 to $66,000, with the market generally interpreting this movement in relation to macro liquidity factors rather than the bill itself.

However, the declining passage probability has contributed to a broader sense of uncertainty. Compass Point Research & Trading analyst Ed Engel maintains a sell rating on Coinbase but points out that even if the CLARITY Act fails to pass, there will still be enough industry events in the second half of the year to maintain market attention. Engel argues that the blockchain industry still has opportunities to prove its practical application value in the next two to three years, suggesting that the failure of the bill does not equate to an industry crisis. This perspective highlights the resilience of the crypto market, which has shown an ability to adapt to regulatory uncertainties.

The specific provisions of the CLARITY Act have had varying impacts on different sub-sectors, particularly in the stablecoin space. The March draft of the bill proposed prohibiting any stablecoin holding arrangements that are "substantially equivalent to interest," a move that triggered a significant market reaction. Circle’s stock price dropped by 20% in a single day, while Coinbase’s stock price fell nearly 10% on the same day. This reaction underscores the sensitivity of these companies to regulatory changes, particularly those affecting their revenue models.

The stablecoin yield provision is a critical component of the bill, as it directly impacts the profitability of stablecoin issuers and distributors. The fact that the market reacted so strongly to the draft suggests that the final details of the provisions will be more important than the bill’s passage itself. If the bill fails to pass, the impact on these companies will depend on how the regulatory landscape evolves in the absence of federal clarity.

Coinbase’s stock performance has been closely tied to the probability of the CLARITY Act’s passage, with recent declines reflecting growing investor caution. On July 28, COIN closed at $165, down 3.8% over the past five days, with the decline attributed to selling pressure from the weakening outlook for the bill. In the week of July 24, COIN had dropped from a price level of $169, prompting several analysts to adjust their target prices. Raymond James set a target price of $158, about 6.5% lower than the then-current stock price, while Oppenheimer lowered its target price to $209. Baird reduced its target price from $160 to $142, maintaining a neutral rating. These adjustments suggest that institutions believe Coinbase’s stock will likely trade in the $140 - $160 range if the CLARITY Act does not pass.

However, most analysts have not directly linked Coinbase’s long-term investment logic to the success or failure of the bill. TipRanks analysts believe that Wall Street’s trend toward institutional allocation of crypto assets will still support Coinbase’s long-term growth, regardless of the bill’s fate. Coinbase is set to release its second-quarter earnings report on July 30, with market expectations for earnings per share of $0.19, a significant improvement from a loss of $1.49 per share in the first quarter. This earnings beat could offset some of the negative sentiment surrounding the bill’s delay.

Circle’s situation is more complex, with some analysts arguing that the failure of the CLARITY Act may not necessarily be bad for the company. Mizuho analyst pointed out that if the CLARITY Act passes smoothly and brings a clearer regulatory framework, it may actually attract more competitors into the stablecoin space, accelerating the homogenization of stablecoin business and potentially reducing Circle’s revenue in the long run.

This year, the stablecoin sector has seen the emergence of the Open USD project, supported by over 140 institutions including Visa, Mastercard, Stripe, and BlackRock, posing direct competition to Circle’s USDC. Mizuho had previously downgraded its rating on Circle due to this project. On the other hand, the provisions regarding stablecoin yield restrictions in the CLARITY Act, if ultimately implemented, would weaken Coinbase’s high-margin revenue obtained through USDC distribution agreements, thereby shifting bargaining power towards Circle in the renegotiation of their commercial agreement scheduled for August 2026.

Morgan Stanley analyst Thielen believes that a stricter federal regulatory framework is generally favorable for licensed issuers with compliance capabilities, asset scale, and credit backing, and Circle stands to benefit in this context. Bitwise Chief Investment Officer Matt Hougan believes that the sell-off of Circle’s stock triggered by the bill’s draft was "overinterpreted," and that the bill itself does not change Circle’s long-term investment logic.

In the short term, if sentiment continues to weaken, several repeatedly mentioned support levels are around $61.70, and in more extreme cases, the market has mentioned a possible drop to this year’s low of $49 in February. For crypto treasury companies like Strategy (formerly MicroStrategy, ticker MSTR), the stock price is more closely correlated with Bitcoin prices than with the CLARITY Act itself.

As of July 1, affected by Bitcoin’s price dropping below $59,000, MSTR’s stock price fell to the range of $85 to $86, marking the eleventh consecutive month of decline, down about 84% from its historical high of around $540 in November 2024. Citigroup analysts have linked their benchmark judgment of Bitcoin reaching $100,000 with expectations for the passage of the CLARITY Act, believing that if the bill passes smoothly and drives Bitcoin to $100,000, the value of Bitcoin held by Strategy will rise to about $84 billion.

Recently, Strategy disclosed that its model estimated the annualized return lower limit for Bitcoin to be -11.34%; if actual returns fall below this level, the company may need to consider restructuring its debt. Two publicly traded companies have already sold a total of 511 Bitcoins within 24 hours to repay about $31.7 million in debt, highlighting the financial pressure facing these companies. Strategy is set to release its second-quarter earnings report during the week of July 30 to 31, and the market expects its stock price volatility to further increase during this period.

The Senate’s political dynamics present a significant hurdle for the CLARITY Act, with the bill requiring the support of 7 to 9 Democratic senators to break the 60-vote threshold. On the Republican side, Senators Josh Hawley and Rand Paul are expected to vote against it based on substantive positions, meaning that even if all 53 Republican senators are present, it will still not be enough to push the bill through alone. On the Democratic side, Arizona Senator Ruben Gallego is seen as a relatively stable source of support.

However, the Democratic resistance to the bill is not solely aimed at the regulatory framework for the crypto industry itself; it is largely related to the over $1 billion in crypto asset investments disclosed by Trump and his family. Several Democratic senators view the ethical clause as a means to counterbalance potential conflicts of interest for the President, and Senator Angela Alsobrooks previously referred to a compromise proposal put forth by the White House as "not a serious proposal." This has tied the legislative process of the CLARITY Act to the larger goal of opposing Trump, rather than being purely a technical debate on industry regulation. The political entanglement of the bill with broader ideological battles makes its passage increasingly difficult, as senators are reluctant to support a measure that could be perceived as benefiting a political opponent.

If the CLARITY Act ultimately fails to pass in 2026, most analysts believe this will not lead to a regulatory vacuum but rather mean that the crypto industry will continue to rely on the existing two paths in the short term. One path is the GENIUS Act, which took effect in July 2025, specifically regulating payment-type stablecoins and their issuers. The other path is the regulatory agendas being advanced by the SEC and CFTC, with the SEC’s Regulation Crypto proposal expected to formally enter the rule-making process in the second half of 2026.

From a timing perspective, the midterm elections in November 2026 are a key variable affecting the subsequent progress of the bill. Most analysts believe that if the window before the August recess is missed, the likelihood of the bill resuming consideration in the fall will be significantly compressed due to disputes over appropriations bills and the approaching election cycle. Substantial progress may have to wait until 2027, which will be in a phase of political reshuffling after the midterm elections, reducing the chances of the bill continuing the previous bipartisan consensus.

Some industry lobbyists have proposed an alternative path of incorporating the core provisions of the CLARITY Act into a comprehensive bill that must be passed by the end of the year, but as of now, no senator has publicly confirmed that this strategy is being seriously considered. This marks a critical juncture for the crypto industry, as the failure of the CLARITY Act could delay regulatory clarity for years, forcing companies to navigate an uncertain and fragmented regulatory landscape.