CLARITY Act remains unsettled, involving U.S. bipartisan political games

Original: Odaily ( @OdailyChina )

Author: Golem ( @web3_golem )

On May 14, the U.S. Senate Banking Committee approved the CLARITY Act after hours of deliberation, advancing the bill to a full Senate vote.

The committee's approval is significant for the CLARITY Act, as the bill had been stalled in the review phase for over four months since January this year, due to disagreements between the banking and crypto industries over stablecoin interest regulations. In the latest version of the bill, this core disagreement has been resolved. Stablecoins are still prohibited from paying rewards similar to bank deposit interest, but they are now allowed to offer rewards based on real activities or transactions, providing a survival buffer for stablecoin enterprises.

However, clearing this major hurdle does not guarantee a smooth path for the CLARITY Act. Beyond the conflicting interests of the two industries (banking and crypto), the bill has also become entangled in the political tug-of-war between the two U.S. political parties (Republicans and Democrats). The outcome of this power struggle will determine whether the CLARITY Act can secure enough votes in the full Senate.

The CLARITY Act Forges Ahead

The Senate Banking Committee ultimately passed the CLARITY Act with a vote of 15 to 9. Based on the voting results and support rate, the bill can be seen as having pushed through by force.

The current Senate Banking Committee has 24 members, including 13 Republicans and 11 Democrats. With Republicans holding a majority on the committee, they could theoretically force the bill through with a 13-11 party-line vote, even if all Democrats opposed it. However, this would be the worst-case scenario, as it would essentially mean no bipartisan consensus on the CLARITY Act. Even if the bill reached a full Senate vote, it would almost certainly fail to garner the necessary votes for passage.

Therefore, more important than the bill's passage in committee is the number of Democratic votes it received. This serves as a strong signal, reflecting the bill's bipartisan support and the difficulty of passing it in the full Senate.

The final committee vote of 15-9 on May 14 is barely more optimistic than the worst-case scenario of 13-11. The voting was clearly divided along party lines: all 13 Republican members voted in favor, only 2 Democratic members defected to support it, while the remaining 9 Democrats voted against. The two supporting Democrats were Ruben Gallego from Arizona and Angela Alsobrooks from Maryland.

Before the committee vote on the CLARITY Act, the market considered the votes of five swing Democratic members crucial. How many of these votes the Republicans could secure would influence the bill's future progress. These members were:

• Mark Warner (Virginia): A member of the Securities Subcommittee and the Digital Assets Subcommittee. He voted in favor of the GENIUS Act and SAB 121.
• Angela Alsobrooks (Maryland): Co-led the compromise on stablecoin yields with Thom Tillis. She has been the most active Democratic representative in negotiating the bill's text.
• Ruben Gallego (Arizona): The lead Democrat on the Digital Assets Subcommittee. He voted in favor of the GENIUS Act.
• Catherine Cortez Masto (Nevada): A member of the Financial Institutions and Consumer Protection Subcommittee. She had reservations about certain law enforcement-related provisions in the Blockchain Regulatory Certainty Act (BRCA) and urged amendments to address these concerns.
• Raphael Warnock (Georgia): A member of the Senate Economic Policy Subcommittee. He has been a strong advocate for strengthening anti-money laundering (AML) and combating illicit finance, and he voted in favor of the GENIUS Act.

Ultimately, only 2 of these 5 Democratic members voted in favor, and these two votes were considered "hostage votes." Alsobrooks explicitly stated after the vote that her support was intended to keep the dialogue going in the full Senate. She and Gallego could potentially change their votes during the full chamber vote if the underlying issues are not resolved.

The U.S. Senate currently has 100 members: 53 Republicans, 45 Democrats, and 2 Independents. Given that the two Independents (Bernie Sanders and Angus King) have historically voted with the Democrats, the effective party split in the Senate is 53:47, with Republicans holding the majority.

Although the Republicans used their majority to force the bill through the committee, they will need at least 7 Democratic senators to vote in favor in the full Senate vote to reach the 60-vote threshold, assuming no Republicans defect.

Based on the committee vote results, winning over at least 7 Democratic senators will be challenging for the Republicans, as they failed to secure the full support of any single Democratic committee member. Before the committee vote, Galaxy stated that if the CLARITY Act passed on a purely party-line or near-party-line vote, its chances of reaching 60 votes in the full Senate would significantly diminish, further darkening its prospects for passage in 2026.

The Bipartisan Political Tug-of-War over the CLARITY Act

During the committee's consideration of the CLARITY Act, the two parties clashed fiercely over numerous amendments. The Senate submitted over 100 amendments to the committee, with Democratic Senator and committee member Elizabeth Warren alone submitting over 40. However, many Democratic-proposed amendments were rejected by the Republican majority. This failure to address many of the Democrats' demands ultimately led to the bill's forced passage with a 15-9 vote.

Among these, an ethics amendment became a core battleground for Democrats. Democrats had long sought to include this provision in the bill. During the hearing, Democratic Senator Chris Van Hollen again proposed an amendment to prohibit senior government officials, including the President and Vice President, from having commercial interests in the crypto industry and to strengthen transparency requirements. In his remarks, he specifically mentioned President Trump and his family's ties to World Liberty Financial.

However, Republican Senator Bernie Moreno opposed the amendment, arguing it was "outside the jurisdiction of the Banking Committee." The amendment was ultimately rejected in a party-line vote of 11 in favor and 13 against. The Democrats' insistence on pushing this ethics amendment was not solely about integrity. Fundamentally, they view the crypto industry as a new capital alliance for the Republican Party and believe the current CLARITY Act would pave the way for a new financial alliance favorable to the Trump camp.

While crypto lobbying groups (like the Fairshake Super PAC and its affiliates) have recently shifted their funding strategies away from solely supporting one party and toward specifically backing pro-crypto lawmakers, a significant portion of their political contributions still goes to Republicans. Democrats are well aware that if the CLARITY Act passes without ethical constraints, Republican leaders could legally amass substantial wealth by holding and promoting crypto assets.

Increasing compliance hurdles for officials holding crypto is, in essence, also a strategy to reduce the penetration rate of cryptocurrency as a "compliant safe-haven asset" among the elite. Beyond traditional banks, unions and America's middle-class base are also core Democratic constituencies. Therefore, aggressively pushing the ethics amendment is also a way for Democrats to use the moral high ground of "anti-corruption" for political mobilization, aiming to win over traditional middle-class voters uneasy about crypto volatility.

Of course, Democrats also recognize that outright opposition to the crypto industry could alienate a portion of the younger electorate. This is why, alongside the progressive faction led by Elizabeth Warren that actively opposes and obstructs crypto, there are also moderate, swing Democratic lawmakers who are more open to crypto.

Beyond the ethics amendment, Democrats also had different demands regarding anti-money laundering (AML) rules and the Blockchain Regulatory Certainty Act (BRCA). However, these amendments were similarly rejected by the Republican majority. Thus, the committee's approval of the CLARITY Act did not resolve the issues between the two parties; it was merely the result of Republicans forcing the bill forward. All the unresolved problems are now piled up for the full Senate vote.

This means that the AML and ethics amendments rejected in committee today will inevitably be used as key political leverage by Democrats during the full Senate vote. Without substantial concessions or reciprocal trade-offs, this bill, crucial for the crypto industry, faces a very high probability of fierce opposition.

The Future Prospects of the CLARITY Act

The motivation for Republicans to push the CLARITY Act through committee so urgently is clear. Republican Senator Cynthia Lummis has repeatedly stated that if the bill fails to pass this year, it might be delayed until 2030 or later.

This is because the balance of power in the 120th Congress (which convenes in January 2027) could shift. A new committee makeup and new political motivations would impact the legislative process for the CLARITY Act. If Democrats secure a majority in either the House or Senate and “hostile” figures like Elizabeth Warren or Sherrod Brown become chairs of the Senate Banking Committee, the probability of the CLARITY Act passing would become even lower.

Therefore, Republicans must pass the CLARITY Act in the Senate before the political environment becomes more complicated. Considering the Senate's August recess and the subsequent midterm election season, Republicans need to schedule a full floor vote before July. The White House's ideal target is for the President to sign the bill into law by July 4th (the 250th anniversary of the Declaration of Independence).

However, given the final committee vote on May 14 and the Democrats' tough stance, getting the CLARITY Act smoothly through the full Senate may require extraordinary "political skill" and coordination from the Republicans.

As of May 15, Polymarket showed a 68% probability that the CLARITY Act would be signed into law in 2026. The real probability might be much lower...