Odds of the CLARITY Act becoming law this year dropped significantly on Monday, falling to 16% on prediction market Polymarket as Senate Democrats rejected Republicans' latest proposal for the crypto oversight legislation.
The bill would establish how the Securities and Exchange Commission and Commodity Futures Trading Commission divide oversight of the US crypto market. Republicans need 60 votes to advance the legislation.
Democrats cite insufficient ethics protections
Key Senate Democrats expressed reservations about ethics provisions in the revised bill. Senator Mark Warner said the updated ethics language was not "near enough," while Senator Raphael Warnock stated Democrats should not advance legislation that fails to address corruption opportunities occurring "in real time."
Senator Ruben Gallego said the latest ethics offer left "much to be desired" and indicated plans to work on a counterproposal. Staff for Senator Elizabeth Warren on the Senate Banking Committee circulated talking points arguing the proposed state attorney general enforcement mechanism could be overridden by White House ethics officials.
Democrats subsequently sent their counterproposal to Republican negotiators.
Not all Democrats oppose the bill. Senator Kirsten Gillibrand privately urged colleagues to support advancing the legislation procedurally.
Republican position and external opposition
Republican Senator Cynthia Lummis stated President Donald Trump had accepted two significant ethics provisions and that there was "nothing left to give" Democrats.
Opposition extends beyond Democrats. A coalition of 18 state attorneys general has challenged the bill. The Indian Gaming Association urged member tribes to press senators to vote against it, saying proposed decentralized finance changes did not address concerns about prediction markets and calling for explicit language affirming federal commodities law does not preempt tribal or state gaming laws.
Eight banking trade groups also opposed the revised text, stating it failed to close loopholes allowing stablecoin rewards functioning like deposit interest. The groups argued the proposed regulatory "circuit breaker" would activate only after substantial deposit flight from community banks had already occurred.
Industry support
Crypto industry groups have urged Senate passage. Blockchain Association CEO Summer Mersinger said the industry had made significant concessions and urged every senator to vote yes, arguing the bill would provide clear rules, protect consumers, deter illicit activity, and prevent crypto jobs and innovation from moving overseas.
