Key Insights
- The CLARITY Act failed to advance after a 49–50 cloture vote, with all voting Democrats and four Republicans opposing it.
- Democrats argued the bill did not go far enough to address President Donald Trump’s crypto profits, while Republicans pointed to 126 substantive changes made during negotiations.
- Sen. Thom Tillis voted against the bill specifically to trigger a motion to reconsider, leaving a procedural route for the measure to return.
The U.S. Senate failed to approve the Digital Asset Market Clarity Act on Tuesday, a bill championed by President Trump, which would regulate the cryptocurrency market.
The draft failed to reach the required 60 votes in the Senate, finishing ten votes below the required threshold.
Senators Jerry Moran, Susan Collins, Josh Hawley, and Thom Tillis joined every Democrat senator in voting against the draft, which tallied 50 votes in favor and 49 against.
The defeat sends the measure “on ice,” as Congress heads into recess before the November midterms.
Senate Republicans released a revised 616-page draft just hours before the vote, reflecting a year of negotiations and “126 substantive changes” at Democrats’ request.
In comments on that text, GOP negotiators pointed to new ethics provisions and a stablecoin “circuit breaker.”
Ethics Provisions Under Scrutiny
Opponents centered on new ethics provisions tied to President Trump’s crypto business. Sponsor Sen. Cynthia Lummis (R-WY) highlighted that the bill’s final text “includes more than 120 of Democrats’ demands” and said Trump had agreed to “unprecedented ethics restrictions.”
Those safeguards covered Trump’s ability to issue or sponsor crypto assets, a longstanding stumbling block.
Moreover, they argued the ethics language still contains loopholes. Senate Banking Ranking Member Elizabeth Warren (D-MA) warned the bill “does nothing to prevent [Trump] from vacuuming up his next $1.4 billion in crypto profits,” noting that it would bar state attorneys general and the next Justice Department from enforcement.
She said the act posed “massive risks to families…[and] will turbocharge President Donald Trump’s ability to rake in billions and billions of dollars from crypto.”
Other Democrats and some Republicans echoed those concerns, saying the language does not fully close the ethics loopholes.
Senator Ruben Gallego (D-AZ), who led ethics talks for Democrats, vowed he “wouldn’t support any piece of legislation that enables” Trump’s crypto profits, accusing Republicans of “twisting themselves in knots to appease President Trump” instead of crafting a bipartisan compromise.
The controversy centered on whether the ethics language truly insulates Trump’s holdings. Opponents noted the bill’s rules explicitly let federal officials hold crypto and barred state and private enforcement. This means Trump’s $1.4 billion crypto windfall would go largely untouched.
Banking and Community Protection Concerns
Stablecoin yield rules were also a flashpoint. Community bankers had “fiercely opposed provisions allowing rewards on stablecoin holdings,” fearing deposit outflows.
The final text included a provision allowing the Treasury to freeze outflows, but banks and their allies were unimpressed.
Senator Tillis was the one who moved the no-vote at the last moment so that Republicans could bring the bill back up later.
However, with lawmakers heading back to campaign, it is unlikely to happen before the new Congress is elected.
Crypto Industry Reaction
The news was disappointing for cryptocurrencies – Bitcoin dropped more than 5% on Tuesday, its biggest one-day decline since June, and the shares of Coinbase and Circle fell nearly 10%.
Coinbase CEO Brian Armstrong called the result “disappointing” and urged regulators to take action within the framework of current laws.
In the absence of legislation, rulemaking by the SEC and CFTC will proceed, but analysts warn that piecemeal regulation is slower and less certain than the written framework the Clarity Act would have provided.
Democrats and Republicans alike have recognized that the window for action in the legislature has shut. “It’s going to leave crypto firms and investors in limbo, waiting for new legislators and new proposals to act on before federal regulations take shape,” said a senior aide.
This article is for informational purposes only and does not constitute legal, financial or investment advice. Legislative proposals can change during negotiations and may not become law in their current form.
