Midterms could stall CLARITY Act, TD Cowen warns

What happened

TD Cowen says next week's midterm elections will shape Washington's crypto agenda, and the policy note shared with Bitcoin Magazine warns that the likely results could make it hard for Congress to pass the CLARITY Act during the next two years. Analyst Jaret Seiberg wrote the note. The bill would establish federal rules for bitcoin and other digital assets, and crypto-linked groups have spent $176 million on more than 100 races to influence the election.

Prediction markets cited in the report put Democrats at a 90% chance of winning the House and 62% of the Senate, which TD Cowen views as the worst outcome for bitcoin and the wider crypto sector. Under that result, Sen. Elizabeth Warren would chair the Senate Banking Committee. Seiberg calls Warren a crypto skeptic who has led opposition to CLARITY and expects aggressive oversight of federal regulators. The report says she could not stop regulators from adopting industry-friendly policies. It also expects President Trump to stay supportive of crypto and veto any bill limiting his regulators' authority, with Democrats short of an override. Policy changes would then focus on tokenization, perpetual futures and stablecoins.

A second scenario has Democrats winning the House while key Senate races stay close enough for Republicans to prevail, leaving Sen. Tim Scott as Banking Committee chair. TD Cowen sees that as better for bitcoin because Rep. Maxine Waters could trade support for parts of the market structure bill for investor protections and action on her other priorities, while adverse legislation would be blocked. Kalshi gives Republicans a 10% chance to keep the House and 35% to keep the Senate. TD Cowen calls this the best path for crypto policy but says margins matter: a wider Senate majority would improve the odds for CLARITY in 2027 or 2028 or a lame-duck revival, while a narrow majority would leave the bill stalled over ethics provisions the president opposes.

Why it matters

The election matters beyond seats because it could decide committee leadership and whether the Senate has a workable path to a crypto market structure law. The CLARITY Act's last Senate test was a 49-50 vote on whether to begin debate on September 15, eleven votes short of the usual threshold, according to Crypto.news. The Senate did not vote on final passage. Crypto.news notes that campaign spending can elect lawmakers sympathetic to digital assets, but a campaign dollar buys an advertisement, not a senator's vote. An ally may support one version of the bill and reject a later compromise on banking, ethics or regulator power. When the Senate blocked the bill, bitcoin-related stocks tumbled, Bitcoin Magazine reported.

What the data shows

Reuters reviewed campaign-finance filings through October 20 and counted roughly $176 million in crypto-linked spending across more than 100 midterm races. Fairshake and its affiliates account for about $150.8 million, with other crypto groups supplying around $25 million. FEC summaries show Fairshake reported $169.51 million in total disbursements from January 1, 2025 through October 14, 2026: $139 million in transfers to affiliates, $19.41 million in independent expenditures and about $11.10 million in operating expenditures. Defend American Jobs reported $90.06 million, including $88.32 million in independent expenditures, and Protect Progress reported $31.25 million, including $29.20 million in independent expenditures. Adding those totals would double count the $139 million moved to affiliates. Subtracting the transfer yields about $151.82 million in nonduplicated disbursements on the FEC snapshots, though Crypto.news says this is not Reuters' $150.8 million measure because dates, committees and categories differ. Fairshake also reported about $32.98 million in cash on hand at its October 14 reporting date.

Background

The CLARITY Act is intended to create federal rules for digital assets. The House passed its version in July 2025 by 294-134. The Senate Banking Committee approved its own version in May 2026 by 15-9, with two Democrats joining Republicans. On the Senate floor, a cloture vote failed 49-50 on September 15. Democrats want ethics language that would bar senior officials, including the president, from profiting from crypto ventures; Republicans and industry groups oppose those limits. Stablecoin yield is another sticking point. Each side says the other is blocking progress, and the bill remains stuck.

What is still unclear

The reports leave open how much the spending will change the Senate's arithmetic. Fairshake says 53 of 58 candidates it backed in primaries or special elections won, and its House slate includes 32 incumbents who supported CLARITY, split between 19 Republicans and 13 Democrats. Primary victories do not supply Senate votes, and the November 3 general election is a different test. Crypto.news notes that the $176 million figure cannot by itself show how many new lawmakers, in which chamber, will back a text that can clear a procedural vote. Reuters also found that the ads often focus on taxes or immigration rather than crypto, making the link between spending and the legislative goal a strategy described by the groups and their backers rather than a voter mandate for CLARITY by name.

What to watch

The next signals will come after November 3, when the size of any Senate majority and the composition of the new Congress become clearer. TD Cowen says a wider Republican Senate majority would improve the chances for CLARITY in 2027 or 2028 and could prompt a lame-duck revival attempt, while a narrow majority would likely leave the bill stalled. The committee gavels held by Warren or Scott, the fate of ethics and stablecoin-yield provisions, and the number of new lawmakers willing to support a version that can clear a procedural vote are the key tests.

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