The Senate has only a few days left before it breaks for August recess, and the odds of the CLARITY Act passing have slipped to 26% on Polymarket. If the bill fails, the whole market won’t fa
The Senate has only a few days left before it breaks for August recess, and the odds of the CLARITY Act passing have slipped to 26% on Polymarket. If the bill fails, the whole market won’t fall together. Bitcoin and Ethereum have enough regulatory footing under existing agency definitions to hold their ground. The public crypto stocks, the miners and exchanges and custodians, are the ones that get sold down while the uncertainty drags on. And the companies building tokenization and RWA rails keep expanding into Europe, the UK, Singapore, and the UAE, where the rulebook already exists. With no law from Congress, the SEC and CFTC end up running crypto policy by default.
Bernstein spelled it out this week. A failed vote would hit crypto hard up front, and the market would bottom out in late Q3 or early Q4, putting the low just before the November midterms. Anyone buying between now and then is really betting on where that bottom lands.
That’s where the market splits, and it breaks into tiers:
Bitcoin and Ethereum hold up. The SEC and CFTC already agree on what they are, so the money stays liquid even when the headlines turn ugly.
Mid-tier tokens and DeFi get murky. Utility tokens and DeFi protocols lose the clarity a federal law would have handed them.
Stablecoin issuers fall back on the states. Without federal rules, they lean on a patchwork like New York’s.
Public crypto equities take the hardest hit. A miner or an exchange trades on forward earnings, and those get tough to model when Washington keeps the rules in limbo.
Here’s the part that outlasts any single vote. The work of putting real-world assets on-chain, tokenized treasuries, tokenized funds, and perps tied to those assets, keeps moving forward whether or not CLARITY passes. Bernstein flagged continued regulatory support for exactly those rails. The open question is which country will capture the buildout. The EU runs MiCA, and the UK, Singapore, and the UAE each have working frameworks of their own. Every month the US spends without one, more of that infrastructure sets up somewhere else, and some of it won’t come back.
There’s a political layer to this too. If CLARITY stalls out, Republicans get an easy line heading into the midterms. They’ll say Democratic leadership tanked a bipartisan crypto bill because Democrats are anti-innovation. That message will land with voters who care about crypto more than just about anything else on the ballot, with the founders who already moved their companies overseas, and with investors who’ve watched Washington sit on this for more than a year. It doesn’t have to be fair to stick. For the crypto equities, it will mean the miners and exchanges stay tied to the political headlines until voters actually decide in November.
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Neither agency picks up new power if the bill fails, so both will have to work with the statutes they already have. That effort has a name now: Project Crypto, the initiative SEC Chairman Paul Atkins launched in July 2025 and expanded into a joint SEC-CFTC project that fall.
The SEC won’t gain new authority, so it works the way it always has. Each token sale or staking program gets checked against the Howey test to see if it counts as a security. That’s where the innovation exemption comes in. It would let a new token operate for a while before that question applies.
The CFTC has anti-fraud authority over the spot markets in Bitcoin, Ethereum, and Solana, and it will use it to chase manipulation while keeping its main focus on regulated futures. What it cannot do without Congress is force spot exchanges to register, so a full supervisory system for spot crypto stays off the table. CFTC Chair Michael Selig warned that regulators will “end up writing all the rules“ for crypto if Congress doesn’t act.
If CLARITY fails, the venues that matter become the SEC, the CFTC, and eventually the federal courts. Congress steps back until after the election. The bill is stuck on two fronts: the ethics provisions the Tillis-Gallego compromise is trying to solve, and the stablecoin yield rules the banks have pushed back on hard.
For positioning, here’s where the risk actually sits:
Bitcoin and Ethereum are the safe end. Their legal status doesn’t change, so they hold up while everything around them wobbles.
The crypto stocks wear the risk premium. A miner or an exchange trades on headlines, and it’ll stay jumpy until Washington sorts this out.
The election is the clock. Bernstein’s late-Q3 to Q4 bottom lands about when lawmakers are expected to revisit the bill. Figure the discount holds until then.
There’s an upside here, oddly enough. Bernstein thinks a dead bill could actually push the agencies to move faster. Once they’re not stuck waiting on Congress, the SEC and CFTC can issue clearer guidance on token classification and self-custody on their own timeline, faster than a stalled bill would. That’s the real bull case for failure. You’d get workable rules sooner, without ever needing a floor vote.
Our read has a downside too. If that late-Q3 bottom never shows, the crypto stocks keep getting marked down, and some of the companies that already left won’t come back.
Stay tuned. We’ll keep tracking exactly how this regulatory fight unfolds.
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