Paradigm adviser says CLARITY Act is dead as Democrats draft crypto bill

What happened

Justin Slaughter, a senior advisor at Paradigm, said during an Unchained livestream on Thursday that the CLARITY Act does not appear likely to pass in the lame-duck session. According to Unchained's account of the livestream, Slaughter said Democrats want an opportunity to rewrite the legislation. The bill had already stalled in the Senate in September.

Slaughter also said House Financial Services Committee staff are reportedly working on a market structure bill of their own. He said his best information was that the draft involves four main changes: stricter ethics requirements for government officials' crypto ownership and involvement in crypto companies, which he linked to President Donald Trump and his family's crypto dealings; stricter DeFi rules than those in the Blockchain Regulatory Certainty Act; more consumer protections associated with Representative Maxine Waters, the likely incoming committee chair, including 24-hour payouts and strong independent audits; and a broader shift of jurisdiction from the CFTC to the SEC. He described the outline as a rough draft.

Slaughter said Democrats who follow crypto closely acknowledge that most of CLARITY is acceptable, with the fight centered on a smaller share that includes issues the industry strongly cares about. He said DeFi in particular should pay close attention as Democrats draft the bill. Unchained noted that his outline partly matches a Nov. 4 report by journalist Eleanor Terrett, who said House Democrats were weighing a broader bill built on Waters' Crypto Investor and Consumer Bill of Rights, with a larger SEC role and ethics restrictions aimed at Trump and other officials, according to three industry sources who spoke with Democratic staffers. Slaughter's DeFi point went beyond that report.

Why it matters

The shift matters because any House Democratic bill would still need to move through the Senate, where the balance between the party's more aggressive and more pragmatic wings is an open question. Mike Katz, a partner at Manatt, said on the livestream that Waters is the presumptive chair but may face a challenge, possibly from Representative Sean Casten; Roll Call reported in October that Casten had entered the race to lead the committee's Democrats.

Slaughter said he does not expect SEC and CFTC crypto rules to move over the next two years. He said his understanding is that SEC Chair Paul Atkins knows to pursue a few rules rather than a large suite, though Slaughter saw some risk that an appropriations rider could stop work on certain rulemakings. Cointelegraph reported that the midterm results give Democrats a chance to reshape the stalled CLARITY Act, with stronger consumer protections, tougher scrutiny of political conflicts and a shift in regulatory power likely to be part of the next negotiations.

What the data shows

Cointelegraph cited Public Citizen's analysis of federal filings in reporting that crypto companies contributed $233 million to political committees during the 2026 midterm cycle. It also reported that crypto-backed political action committees spent $64 million trying to defeat Ohio Democrat Sherrod Brown, who nonetheless defeated Republican Senator Jon Husted. Separately, Unchained reported that lawmakers were already dealing with the fallout from the Binance hack, described as the largest in crypto history, with more than $6.3 billion stolen on Oct. 29. On stablecoin rules, Katz said the OCC is the only agency to have finalized its rules; the OCC's final rule was issued Oct. 21 and takes effect Jan. 18, 2027, the same day as the GENIUS Act, while the FDIC, Federal Reserve and NCUA have only proposed rules, according to Mayer Brown as cited by Unchained.

Background

Democrats won both chambers of Congress in the midterms and will take control in January. Cointelegraph reported that Senator Elizabeth Warren, a prominent crypto critic and the most senior Democrat on the Senate Banking Committee, is expected to chair the panel. The Senate failed to advance CLARITY in September, with disagreements over ethics provisions contributing to the impasse. Representative Shri Thanedar, a Democrat, has said he remains hopeful CLARITY can still pass but that any legislation must include stronger ethics requirements.

Cointelegraph also reported that Democrats are already discussing how to reshape the market structure debate, including the possibility of expanding Waters' proposals into a broader bill with stronger consumer protections, a greater SEC role and new ethics restrictions on public officials' crypto activities. The report said such a bill could separate the industry's push for clearer rules from controversies over Trump's personal crypto ventures. Incoming House Oversight Committee Chair Robert Garcia has signaled plans to investigate corporate corruption, according to the report.

What is still unclear

It is not yet clear what the House Financial Services Committee draft would ultimately contain, and Slaughter cautioned that his outline was preliminary. The leadership contest among House Financial Services Democrats, the Senate's willingness to take up a House bill and the possibility of a presidential veto are all unresolved. Paul Brody, founder and CEO of Nightfall Networks and a former global blockchain lead at EY, said crypto may also be a low priority compared with investigations of corruption, budget fights and war, according to Cointelegraph.

What to watch

The next signals will come from House Financial Services Committee staffing and drafting, the contest over the committee's Democratic leadership, and any Senate moves on market structure legislation. Also worth watching are SEC and CFTC rulemaking, implementation of the GENIUS Act by the OCC and other agencies, and how Democrats handle DeFi and ethics provisions. Cointelegraph reported that industry figures such as Blockchain Association chief policy officer Lindsay Fraser argue consumer protection and innovation should not be treated as competing goals, while Brody expects banks to push crypto companies toward similar consumer protection and security standards.

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