The CLARITY Act faces a 25-day countdown as the Senate recess approaches

Original | Odaily Planet Daily (@OdailyChina)

Author | Qin Xiaofeng (@QinXiaofeng 888 )

The much-anticipated CLARITY Act, the Digital Asset Market Transparency Act, has unsurprisingly been delayed again. Senator Cynthia Lummis previously stated that negotiators expected to finalize a compromise text around July 4 (U.S. Independence Day) and “move forward in July,” but progress is now clearly behind schedule.

With the Senate’s August 10 recess approaching, the window is rapidly closing: the bill must reach the 60-vote threshold in the Senate (requiring at least seven Democratic defections), be reconciled with the text from the Senate Agriculture Committee, merged with the House bill, and signed by the President—all within the next 25 working days, leaving an extremely tight timeline.

Once the window before the August recess is missed, the probability of the CLARITY bill passing this year will decrease further. In fact, data from the prediction market Polymarket shows the probability of passage this year is only 40%; Galaxy Digital has also lowered its probability of passage by 2026 to 50%.

The CLARITY Act is landmark legislation championed by the U.S. Congress to define the regulatory boundaries between the SEC and CFTC, provide a non-security pathway for decentralized tokens, and require registration and anti-money laundering obligations for digital commodity intermediaries.

On July 17, 2025, the House of Representatives passed HR 3633, introduced by French Hill, with 294 votes in favor and 134 against, including over 70 votes from Democrats; on May 14, 2026, the Senate Banking Committee advanced and approved it by a vote of 15–9 (13 Republicans and 2 Democrats in support). On June 1, 2026, the CLARITY Act was officially placed on the Senate legislative calendar (Calendar No. 423), making it eligible for full consideration.

However, the progress of the CLARITY Act throughout June was not smooth. On June 9, negotiations over ethical provisions regarding the president’s crypto holdings broke down, directly causing some Democratic lawmakers to soften their stance or impose additional conditions, slowing the bill’s momentum toward floor debate. On June 10, following a meeting between the White House and law enforcement and prosecutor groups, enforcement disputes over Section 604 of the Blockchain Regulatory Certainty Act (developer protection clause) reached a deadlock; if unresolved, law enforcement groups may lobby against the bill, and Democratic lawmakers may vote no, citing insufficient consumer protection or crime prevention.

In simple terms, the former is a "political/ethical threshold," and the latter is an "enforcement/security red line," together forming the two final obstacles before the CLARITY Act can pass in the Senate. Without resolving them, it will be difficult to secure the 60 votes and finalize the text, making it impossible to complete legislation before the August 10 recess. These two negotiations are the key stumbling blocks that have directly blocked the CLARITY Act’s progress, causing the July 4 target to be missed and the overall timeline to stall. Negotiations are still underway to break the impasse, but time is now extremely tight.

Brian Gardner, Chief Washington Policy Strategist at Stifel, said that for the bill to pass by 2026, “it may need to pass the Senate by the end of July, ideally in June,” and warned that the prospects would significantly worsen if the Senate misses its recess.

However, the market has largely given up hope for the bill passing this year. On June 5, Alex Thorn, head of Galaxy Research, lowered the probability of the bill passing by 2026 from 75% to 60%, citing increasing pressure on the Senate’s agenda. Data from the prediction market Polymarket shows the probability of the bill passing this year is only 40%.

According to the analysis by CCN, if the CLARITY bill fails to pass before the August recess, the market’s most likely reaction will not be a crash, but rather a “slow bleed through premium products.” In fact, the underperformance of cryptocurrencies throughout June already indicates that the market has begun repricing for legislative uncertainty. (Odaily note: Here, “premium products” primarily refer to various spot ETFs.)

Data shows that throughout June, U.S. spot Bitcoin ETFs experienced a net outflow of approximately $4.5 billion, equivalent to about 77,000 BTC redeemed; this marks the largest single-month net outflow since the products' launch in January 2024, surpassing the previous record set in February 2025 (approximately $3.56 billion) and setting a new historical low for monthly performance.

In fact, XRP may be one of the assets most directly and significantly affected by the bill, as it would permanently classify it as a commodity, eliminating the risk of reversible regulatory interpretation. If there is prolonged delay or failure, XRP could lose part of its “regulatory tailwind premium.”

Scotiabank’s Global Digital Assets Research Head, Geoffrey Kendrick, expects a target price of $8 for XRP, assuming the Senate fully passes the relevant legislation and $4 billion to $8 billion flows into XRP ETFs. JPMorgan predicts, if the bill passes, XRP ETFs could see $4.3 billion to $8.4 billion in inflows during their first year. Data shows that since the launch of the XRP spot ETF in November 2025, cumulative net inflows have reached approximately $1.41 billion, with 84% coming from retail investors, while institutional inflows remain pending clearer regulatory signals.

For Bitcoin, it has already been classified as a commodity through the joint interpretation by the SEC and CFTC in March 2026; the primary purpose of the CLARITY Act is to permanently codify this reversible determination into federal law. Even if the bill fails or faces prolonged delays, Bitcoin’s narrative as “digital gold” remains relatively resilient and is less directly impacted.

The impact on ETH is similar to Bitcoin, as Ethereum has also been jointly classified as a commodity. The failure of the bill could lead to prolonged regulatory uncertainty for DeFi protocols, suppressing innovation and capital inflows. Standard Chartered’s Geoffrey Kendrick initially projected a target price of $7,500 for ETH by end-2026 (later revised down to $4,000), contingent on the bill’s passage.

Kristin Smith, Director of the Solana Policy Institute, said that many asset allocators are actively exploring investments in digital assets but are holding off on deploying capital due to unclear regulatory guidelines. The same applies to institutional DeFi, as DeFi projects are also on hold, awaiting the issuance of Section 604.

There is little time left for the CLARITY bill to pass, and the following scenarios may occur next:

• First, passage before the August recess: the biggest catalyst, potentially triggering a significant price rebound, especially for XRP and related ETFs;
• Second, delayed until 2027: the market’s least desired outcome, prolonging the “slow bleed” and causing institutional capital to remain on the sidelines;
• Third, failure and push to the next Congress: The CLARITY Bill is currently in the 119th Congress. If it fails to complete Senate floor votes, reconciliation, and final passage before the adjournment in August 2026, the entire process cannot be concluded within this Congress; once the next Congress (the 120th, 2027–2028) begins, the bill must be reintroduced and go through the full process again, including committee review and floor debate.

The CLARITY Act is currently at a critical juncture—technically on the Senate calendar, but political negotiations, timing, and bipartisan support remain the biggest hurdles.

However, as Vincent Chok, CEO of First Digital, stated: “The mere fact that the CLARITY Act has reached a Senate floor vote indicates that the United States is closer than ever to resolving regulatory ambiguity... A successful vote would accelerate this process, but a failure would not necessarily prevent it. In fact, delays in the U.S. framework would instead create urgency and extend the window for setting global standards, positioning the U.S. as the de facto global hub for digital assets.”