Cryptocurrency markets tumbled late Tuesday and into Wednesday as investors absorbed a defeat that few in the industry had anticipated. The US Senate's procedural vote on the CLARITY Act—formally the Digital Asset Market Clarity Act—fell far short of the 60 votes needed to advance, with 49 in favor and 50 against. The bill, which had been the product of more than a year of bipartisan negotiations, aimed to establish a federal rulebook for digital assets, dividing oversight between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
Bitcoin slid nearly 4% over 24 hours, trading below $76,000, while HYPE, the token behind the Hyperliquid decentralized exchange—a project that stood to benefit from the legislation—also dropped about 4% to under $78. Most major tokens followed suit, reflecting the market's disappointment.
A deal that still wasn't enough
The bill's defeat is striking given the concessions already made. President Donald Trump had agreed over the weekend to ethics restrictions he had long resisted, including a requirement that federal officials and their spouses divest significant crypto holdings or place them in a blind trust, and a role for state attorneys general in enforcing those rules. Republican negotiators noted that over 120 Democratic requests were incorporated into the final text of the more than 600-page bill, underscoring the bipartisan effort.
Yet it wasn't enough. Four Republicans—Jerry Moran, Susan Collins, Josh Hawley, and Thom Tillis—joined 45 Democrats in voting against the motion. Democratic Senator Chris Coons did not vote. Senator Elizabeth Warren, the bill's most vocal opponent, argued on the Senate floor that it "fails to adequately protect investors, our financial system and our national security," and also attacked Trump's crypto ventures.
Thom Tillis's vote was a procedural exception. Having publicly backed the ethics package that morning, he voted no to preserve a motion to reconsider, leaving the door open for another cloture vote. But Senator Cynthia Lummis, the Wyoming Republican who has led crypto legislation since co-authoring the Responsible Financial Innovation Act in 2022, was blunt: "I think we're done. It's over." She went further online, accusing the Democratic Party of being "anti-consumer and pro-illicit finance, anti-ethics, anti-free enterprise, anti-worker, anti-livable wage jobs and pro-socialism."
The failed vote likely means the crypto industry will have to wait until next year for clearer rules. With US midterm elections just seven weeks away, bringing the bill back for consideration in the short term is complicated. Senators are scheduled to leave Washington in early October and not return until after the election, while the House recesses even earlier, at the end of this week. Many lawmakers, especially those in tight races, are eager to return to their home states and campaign.
Regulators inherit the problem
The legislation's failure does not mean nothing happens—it means the rules are more likely to be written by agencies instead. The SEC under Paul Atkins and the CFTC under Michael Selig have already been building a framework without Congress. In March, the two agencies signed a cooperation agreement and issued a joint interpretation sorting tokens into five categories, with Atkins stating that most crypto assets are not, in themselves, securities. The SEC's agenda includes registration exemptions for token launches, a safe harbour for projects decentralising away from central control, and rules on custody and trading venues. Analysts expect that work to accelerate now.
For European observers, the US regulatory vacuum is a reminder of the contrasting approach taken by the European Union, which has moved forward with the Markets in Crypto-Assets Regulation (MiCA), providing a comprehensive legal framework for the sector. The US setback could prompt some crypto firms to look more favourably on Europe as a base, though the global market remains deeply interconnected. As the US midterms approach, the fate of crypto regulation there will continue to be watched closely from Brussels, Berlin, and Paris.
