CLARITY Act faces new Congress after Democrats sweep midterms

What happened

Democrats have won majorities in both the House and Senate in the U.S. midterm elections, according to The Associated Press, ending two years of unified Republican control in Washington. The new Congress convenes on Jan. 3, 2027, with Donald Trump remaining president. Republicans keep their current majorities through the lame-duck session, during which lawmakers face government funding negotiations and internal leadership elections, the AP reported.

The shift in control leaves the CLARITY Act, the digital asset market-structure bill that stalled in the Senate, facing a changed legislature. On Sept. 15, a motion to advance the bill received 49 votes in favor and 50 against, with one senator absent, according to the Senate record. Supporters needed 60 votes to clear the procedural hurdle and begin consideration; the vote concerned whether to proceed, not final passage. Republican Sen. Thom Tillis subsequently entered a motion to reconsider.

Opposition was not confined to Democrats. Republican Sens. Susan Collins, Josh Hawley, Jerry Moran and Tillis voted against the procedural motion. In a Sept. 16 statement, Collins described the legislation as "a moving target" and said its more than 600 pages warranted further study, questioning whether its provisions could pull deposits away from community banks and credit unions and reduce funds for mortgages and small-business lending. Seven Democratic senators said the day after the vote that they remained committed to bipartisan crypto legislation.

The House passed its version of CLARITY in July 2025, and later Senate negotiations produced changes to the text. The bill would divide responsibilities between the SEC and the CFTC, including a registration framework for digital commodity intermediaries. Crypto.news and Bitcoinist both reported on the election outcome and its implications for the bill.

Why it matters

The election result introduces uncertainty for an industry that has sought clearer rules for digital assets. Under Trump, the U.S. has moved toward a lighter enforcement posture, a strategic Bitcoin reserve initiative and a federal stablecoin framework, Bitcoinist reported. Democratic control could make further deregulation harder, with lawmakers potentially placing more emphasis on consumer protection, illicit-finance safeguards and conflicts of interest involving public officials and crypto businesses.

At the same time, federal regulators are advancing their own crypto rules under existing legal authority, meaning the policy landscape is not solely dependent on the stalled bill. SEC Chairman Paul Atkins has said legislation remains "indispensable" to durable rules while reaffirming the commission's support for CLARITY. Bipartisan interest in crypto regulation persists, and clear rules could benefit exchanges, investors and institutions regardless of which party controls Congress, Bitcoinist noted.

Background

The SEC began proposing changes before the Senate setback. On Aug. 18, Atkins outlined Regulation Crypto Assets, describing exemptions for certain offerings involving crypto assets sold through investment contracts. His statement described a startup exemption permitting offerings of up to $5 million over four years and a fundraising exemption allowing up to $75 million annually, both with disclosure requirements, plus a safe harbor addressing when the investment contract associated with a crypto asset ceases to exist.

A separate SEC proposal issued Oct. 1 would cover registered investment advisers, registered investment companies and business development companies. Advisers could hold client crypto themselves in limited circumstances after determining no permitted custodian was available, an assessment Commissioner Hester Peirce said would have to be repeated quarterly. For state trust company custody, advisers and funds would assess state authorization and written safeguards against theft, loss, misuse and misappropriation, with checks recurring annually. The changes were issued for public comment, not adopted as final rules.

The CFTC's work progressed from a White House review submission on Sept. 17 to a public consultation announced Oct. 5. The agency sought feedback on a framework for retail crypto commodity transactions covered by Section 2(c)(2)(D) of the Commodity Exchange Act. Chairman Michael Selig said the initiative would use existing statutory authority. The consultation asks how the commission could prevent abusive practices, explain compliance expectations and establish a crypto-specific category of designated contract market registration; written comments are due within 60 days of Federal Register publication.

What to watch

Attention now turns to the lame-duck session and the incoming Congress. Whether lawmakers revive CLARITY, revise it to address stablecoin and community-bank concerns, or pursue narrower measures will shape the next phase of U.S. crypto policy. The SEC and CFTC comment processes also remain open, and any final rules could alter the practical framework before legislation advances. Bitcoinist noted that political developments alone are unlikely to determine market direction, citing security concerns after a major Binance-related hack, Bitcoin ETF outflows and higher borrowing costs as factors alongside regulation.

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