On Sept. 15, the Senate voted down the Clarity Act, a bill that would set the first federal market-structure rules for crypto and split oversight between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). The Act is now likely shelved until after the Nov. 3 midterm elections, and it may not return even after that. In the 24 hours after the vote failed, cryptocurrencies like XRP (XRP +6.05%) fell 8.5%, while Ethereum (ETH +5.06%) and Solana (SOL +10.12%) dropped by 2.9% and 3.3%, respectively.
So far, the sell-off isn't that bad, and regulators have already signaled that they're preparing to do some of what the bill was trying to accomplish by advancing new policies of their own. Here's what comes next.
Image source: Getty Images.
This wasn't quite a party-line vote, but it was close
In the last days before the failed vote, there was a flurry of back-and-forth proposals between the Democrats and the Republicans in an attempt to reach a version of the bill that both could agree on.
Clarity's Republican sponsors published their final offer on Sept. 14, which they said included a vast number of changes to the bill's text that the Democrats had requested. Despite that, Democrats argued the ethics rules included in the new version of the bill still did too little to address the issue of the record profits generated from a handful of crypto ventures tied to President Donald Trump and his family, per CNBC. Republican Senators Susan Collins, Josh Hawley, and Jerry Moran also voted no.
CRYPTO: XRP
Key Data Points
It's uncertain whether there will be another chance for a further-tweaked version of the Clarity Act to be voted on again, although on paper, there should be one. Per the congressional schedule, the next possibility for a vote will be the lame-duck session between the election and January as the window for an attempt at passage.
But, Senator Cynthia Lummis, a vocal proponent of the bill and the Senate's top crypto champion, told reporters that "it's over" if cloture failed, which it did. On Sept. 16, Polymarket put the odds of the bill becoming law in 2026 at just 7%.
Can regulators fill the gap left by Clarity's failure?
Ripple's chief executive officer, Brad Garlinghouse, said after the vote that the SEC and the CFTC would work to create new policies to provide some of the same things that the Clarity Act was attempting to enshrine into statute, which is consistent with what the heads of those agencies have said and done recently.
On Aug. 18, the SEC proposed a collection of rules it called Regulation Crypto Assets (RCA), which would let crypto start-ups raise as much as $5 million over four years without full securities registration, according to SEC Commissioner Mark Uyeda. It also adds a safe harbor clause so a token can stop being treated as a security once its issuer finishes its promised work and ceases its managerial activities intended to increase the token's value. Then, on Aug. 20, CFTC Chairman Michael Selig said that he would directed staff to evaluate crypto market rules under his organization's existing authority.
CRYPTO: ETH
Key Data Points
So the CFTC and SEC will likely try to maintain the market's confidence that regulations will be set regardless of the bill's failure. The catch, which everyone involved admits openly, is durability. A future commission can easily rewrite agency rules, whereas legislation is much harder to change.
Still, having even a non-permanent set of written rules for the industry to operate by is probably better than the "regulation by enforcement" that many in crypto have criticized as contributing to a difficult business environment for long-term planning. Similarly, institutional investors like banks and asset managers want to know which rulebook applies before launching products like crypto exchange-traded funds (ETFs). Having clear rules for competition in crypto would likely result in the sector drawing in a lot more institutional capital, even if a later administration could technically undo or rewrite them, and chains like XRP, Ethereum, and Solana would probably be the recipients of much of the inflow.
CRYPTO: SOL
Key Data Points
If this Congress or a future Congress takes up the Clarity Act or something similar again, it would still be bullish.
For now, investors should not interpret the bill's failure as a new or major headwind for crypto; regulations are still coming, and most had already expected that Clarity would be very hard to pass.
