The Two Senate Signals That Could Decide the CLARITY Act

Crypto’s biggest legislative push may now come down to two signals from the Senate — and neither is another vague promise that lawmakers are “making progress.”

With just a few days left before a looming August recess for the Senate, the margin for error to pass the CLARITY Act is as small as its ever been. Odds on Polymarket that the bill would be signed into law this year hit new lows on Wednesday, but according to Solana Policy Institute President Kristin Smith, there is still a window for hope if key wins shape up.

The first is whether Senate Majority Leader John Thune formally starts the voting process. The second is whether Democrats publicly identify the exact changes that would earn their support. Until one of those things happens, the CLARITY Act could remain stuck in the most dangerous place in Washington: Close enough to inspire optimism, but not close enough to count the votes.

“There’s two big things to be looking for,” Smith told Coinage. “One is, does [Majority Leader] Thune go ahead and schedule, move, file the motion to proceed, so that they can kick off the process?”

The distinction matters because the Senate’s remaining calendar is disappearing quickly. The House passed its version of the market structure legislation last year, but the Senate has since made substantial changes. That means senators must pass their bill, send the revised language back to the House for another vote and then get it to the president’s desk. And Congress does not exactly have time to spare.

The Senate has a narrow work period before its August recess and is scheduled to return for only three weeks in September. October is largely consumed by campaigning ahead of the November elections. After that, lawmakers may return for a productive lame-duck session, or decide they are done legislating for the year.

Sen. Thune recently said the Senate would “probably” vote on the CLARITY Act, while acknowledging Republicans would need Democrats to supply enough support to advance it. But “probably” is not the same thing as putting the bill on the floor.

“If Thune files that, that is what is going to force the negotiation with the Democrats,” Smith said. “So I think that would be a very telling thing.”

For the process to begin, Thune would need to file a motion to proceed. That would set up a cloture vote requiring 60 senators to end debate and move forward. Republicans cannot reach that threshold alone, making Democratic support essential throughout the process.

The second signal would come from Democrats themselves.

So far, the negotiations have revolved around several familiar disputes: ethics restrictions on federal officials, protections for software developers and rules governing crypto exchanges. But the Senate has not yet seen the kind of public commitment that turns legislative language into votes.

“What we haven’t seen yet is specifically the language that would bring votes,” Smith said.

The most important outstanding dispute appears to be ethics. The White House-backed language currently under consideration would prohibit federal officials and employees from issuing or sponsoring meme coins. Officials who already hold such assets would be required to divest or place them in a blind trust, with the Justice Department empowered to pursue civil penalties for violations.

But some Democrats want stronger restrictions, particularly amid scrutiny of the profits President Trump and his family have generated through crypto ventures.

Smith said those concerns are justified — even as the fight threatens to delay a bill intended to close longstanding gaps in federal crypto regulation.

“The industry doesn’t really have a seat at the table when it comes to the ethics issue,” she said. “This is largely an issue that is between the White House and Democratic senators and how to regulate their own behavior and conduct.”

That has left the crypto industry watching a negotiation it cannot directly control. The legislation was originally designed to clarify which digital assets fall under the Securities and Exchange Commission, which belong under the Commodity Futures Trading Commission and how exchanges can legally serve American customers. Now, its fate may depend on whether lawmakers can agree on rules governing their own financial conduct.

“To have this not directly related to how to regulate crypto issue be the one that is holding it back is, I think, a little bit frustrating,” Smith said. “But listen, it’s understandable.”

The banking lobby has also attempted to reopen a separate fight over stablecoin yield. Smith argued that those concerns were already debated and largely resolved during months of talks between lawmakers, the White House, banks and the crypto industry.

“What we’re seeing with the banks right now is they seem to be moving the goalposts,” she said.

Smith went further, questioning whether banks were still seeking workable changes, or trying to stop the legislation altogether. But for now, she does not believe the Senate has much appetite to re-litigate that issue. The more immediate challenge is assembling the Democratic votes needed to begin and complete the floor process.

Getting something started in August would be enormously helpful. Finishing the entire bill this month may already be difficult, but losing the current window would push the fight into an unusually crowded September.

Congress must fund the government before Sept. 30 or face a shutdown. Russia sanctions and other major legislation are also competing for floor time. Holidays further reduce the number of days senators can vote. Smith stopped short of calling the current moment “August or bust.” But not by much.

“I’m not going to sugarcoat it,” she said. “It certainly hurts us.” If the bill slips, September would become “very, very, very tight.”

There is still a regulatory Plan B. Smith argued that the SEC could establish a safe harbor for token fundraising and use innovation exemptions to accelerate securities tokenization. The CFTC could also advance rules covering crypto derivatives.

Those measures would not solve every problem that legislation could address. But Smith rejected the idea that regulations adopted during the Trump administration would automatically disappear under the next hostile SEC chair, especially once traditional financial institutions begin relying on them.

“Maybe not a perfect Plan B, but I think there’s a really strong path,” she said.

Still, Plan B is not the focus yet. The industry continues to push for a durable law that cannot be reversed as easily as agency policy.

“Things fall apart many times before they eventually come together,” Smith said. “I’m optimistic we can still get this done.”

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