Blab Crypto
CLARITY Act Stalls as Senate Delays Ethics Vote, DeFi and Stablecoin Provisions Face Pushback
The Digital Asset Market Clarity Act (CLARITY) has hit a standstill in the U.S. Senate, with no cloture vote scheduled before senators head back from their summer recess. The legislation, which seeks to lay out a clear regulatory framework for cryptocurrencies, is being held up by a pending ethics amendment that would curb the President’s ability to profit from crypto ventures.
White House silence on the ethics language has left Democratic senators, led by Sen. Angela Alsobrooks (D‑MD), unwilling to support the bill in its current form. Alsobrooks said she would not back the legislation unless the ethics provisions were strengthened, citing the need to prevent public officials from benefiting from crypto activities.
The ethics amendment was sent to President Trump on July 31 after a bipartisan rewrite. The revised text may remove a ban that previously prevented state attorneys‑general from prosecuting government employees who violated ethics rules. Trump’s own crypto earnings—over a billion dollars in 2025—have fueled the debate.
DeFi exemptions have also become a sticking point. The Major Cities Chiefs Association (MCCA) supported recent changes to the illicit‑finance language, arguing that the revisions improve law‑enforcement access to digital‑asset crimes. However, the National Sheriffs’ Association (NSA) opposed the bill, warning that broad exemptions for non‑custodial DeFi platforms could facilitate money‑laundering and other illicit activity. The NSA’s memorandum calls for narrowing the exemptions to “least risky” developers such as oracles and node operators.
The Blockchain Association (BA) counters that the bill protects developers, not criminals, and that it does not exempt them from regulatory oversight. White House crypto adviser Patrick Witt tweeted that other law‑enforcement groups have accepted the revised language, questioning why the NSA remains opposed.
Stablecoin reward provisions have drawn criticism from the banking lobby. The American Banking Association (ABA) urged Senate leaders to tighten the language that would allow third‑party platforms to pay interest or rewards to stablecoin holders. The ABA argues that the current wording could let banks circumvent the GENIUS Act’s prohibition on stablecoin interest by offering “creative” rewards. ABA CEO Rob Nichols said the changes were minor and that the crypto and banking sectors could coexist.
Tribal gaming operators have also raised concerns. They seek an amendment that would ban prediction‑market operators such as Kalshi and Polymarket from offering sports‑betting services that conflict with state gambling laws. A Senate Indian Affairs Committee roundtable highlighted the potential impact on tribal revenue, though no legislative change has yet been adopted.
If CLARITY fails to advance, the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) could accelerate their own rulemaking under Project Crypto. Analysts note that the agencies could implement a “let‑them‑cook” approach to crypto operators in the absence of federal legislation.
Polling data shows that Democratic primary voters largely view crypto negatively. A recent survey of 800 Democratic primary voters found only 9% held a favorable impression of the industry, with 57% rating it very unfavorable. The top association was “scam/crime.” The data suggest that Democratic candidates who accept crypto campaign contributions may face voter backlash.
New anti‑crypto advocacy groups have emerged, including Crypto Watchdog and Investors for Transparency (IFT). IFT has run ads urging senators to reject CLARITY, citing concerns that the bill would undermine law‑enforcement tools and expose Americans to crypto scams. The groups have not disclosed funding sources.
The Senate’s schedule remains crowded, and the ethics amendment appears to be the primary obstacle to a CLARITY vote. The bill’s fate will hinge on whether the White House can secure a favorable amendment and whether law‑enforcement and banking stakeholders can reconcile their divergent views on DeFi and stablecoin provisions.
The outcome will shape the regulatory landscape for digital assets, potentially accelerating agency‑led rulemaking or leaving the industry in a state of regulatory uncertainty.
White House silence on the ethics language has left Democratic senators, led by Sen. Angela Alsobrooks (D‑MD), unwilling to support the bill in its current form. Alsobrooks said she would not back the legislation unless the ethics provisions were strengthened, citing the need to prevent public officials from benefiting from crypto activities.
The ethics amendment was sent to President Trump on July 31 after a bipartisan rewrite. The revised text may remove a ban that previously prevented state attorneys‑general from prosecuting government employees who violated ethics rules. Trump’s own crypto earnings—over a billion dollars in 2025—have fueled the debate.
DeFi exemptions have also become a sticking point. The Major Cities Chiefs Association (MCCA) supported recent changes to the illicit‑finance language, arguing that the revisions improve law‑enforcement access to digital‑asset crimes. However, the National Sheriffs’ Association (NSA) opposed the bill, warning that broad exemptions for non‑custodial DeFi platforms could facilitate money‑laundering and other illicit activity. The NSA’s memorandum calls for narrowing the exemptions to “least risky” developers such as oracles and node operators.
The Blockchain Association (BA) counters that the bill protects developers, not criminals, and that it does not exempt them from regulatory oversight. White House crypto adviser Patrick Witt tweeted that other law‑enforcement groups have accepted the revised language, questioning why the NSA remains opposed.
Stablecoin reward provisions have drawn criticism from the banking lobby. The American Banking Association (ABA) urged Senate leaders to tighten the language that would allow third‑party platforms to pay interest or rewards to stablecoin holders. The ABA argues that the current wording could let banks circumvent the GENIUS Act’s prohibition on stablecoin interest by offering “creative” rewards. ABA CEO Rob Nichols said the changes were minor and that the crypto and banking sectors could coexist.
Tribal gaming operators have also raised concerns. They seek an amendment that would ban prediction‑market operators such as Kalshi and Polymarket from offering sports‑betting services that conflict with state gambling laws. A Senate Indian Affairs Committee roundtable highlighted the potential impact on tribal revenue, though no legislative change has yet been adopted.
If CLARITY fails to advance, the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) could accelerate their own rulemaking under Project Crypto. Analysts note that the agencies could implement a “let‑them‑cook” approach to crypto operators in the absence of federal legislation.
Polling data shows that Democratic primary voters largely view crypto negatively. A recent survey of 800 Democratic primary voters found only 9% held a favorable impression of the industry, with 57% rating it very unfavorable. The top association was “scam/crime.” The data suggest that Democratic candidates who accept crypto campaign contributions may face voter backlash.
New anti‑crypto advocacy groups have emerged, including Crypto Watchdog and Investors for Transparency (IFT). IFT has run ads urging senators to reject CLARITY, citing concerns that the bill would undermine law‑enforcement tools and expose Americans to crypto scams. The groups have not disclosed funding sources.
The Senate’s schedule remains crowded, and the ethics amendment appears to be the primary obstacle to a CLARITY vote. The bill’s fate will hinge on whether the White House can secure a favorable amendment and whether law‑enforcement and banking stakeholders can reconcile their divergent views on DeFi and stablecoin provisions.
The outcome will shape the regulatory landscape for digital assets, potentially accelerating agency‑led rulemaking or leaving the industry in a state of regulatory uncertainty.
