Two-Month Countdown: Democratic Takeover of Congress Forces Crypto Firms to Shift Strategy

Author: Murtuza Merchant, Forbes

With only two months until the January congressional transition, crypto companies have a limited window to adapt to a drastically different policy environment in Washington. As Democrats take control of Congress, key industry legislation on market structure is unlikely to advance during the lame-duck session. Crypto firms must shift their focus from lobbying for legislation to preparing for hearings and stricter regulatory scrutiny.

The Democrats gaining control of both chambers in the midterm elections is a major headwind for this already struggling cryptocurrency bill.

The Clarity Act aims to clarify the rules and regulatory jurisdiction for cryptocurrency token trading; it passed the House of Representatives in July 2025 with 294 votes in favor and 134 against, including 78 Democratic lawmakers voting yes. However, the bill has stalled in the Senate. A vote to advance it failed on September 15 of this year, with Senators Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis joining Democratic lawmakers in opposition, as disagreements centered on ethical provisions and other accompanying details.

The new Congress will officially take office on January 3 of the following year, leaving only a lame-duck session in between—during which almost no one expects the bill to make progress. Lee Reiners, a researcher at the Center for Financial Economics at Duke University, stated, “The Clarity Act is dead.” He noted that prediction markets assign only a single-digit probability to the bill being enacted before 2027.

Even within the industry, the same view is held. Ryan Myher, Co-founder and COO of the self-custody crypto exchange Genius, said the current version of the bill is effectively dead, with no political momentum expected in the coming weeks to push it through quickly. Tomer Sharoni, CEO of Addressable, believes the bill’s stagnation stems from ethical controversies rather than fundamental framework disagreements. He predicts a new market structure bill will be introduced in 2027, incorporating stricter anti-money laundering, DeFi, and conflict-of-interest provisions.

Cryptocurrency industry groups previously invested hundreds of millions of dollars in an effort to influence this year’s congressional elections, but many of the key seats they targeted ended up yielding results contrary to their expectations. Former Democratic chair of the Senate Banking Committee in Ohio, Sherrod Brown, defeated Republican candidate Jon Husted. Myher said: “Industry political action committees (PACs) collectively spent approximately $1.7 billion, mostly supporting Republicans and opposing Democrats, but ultimately failed to achieve the desired outcomes.”

However, the Democratic Party does not entirely reject the crypto industry, as evidenced by the 78 votes in the House in support of the Clarity Act. The current challenge is that the industry must change its messaging. Sharoni believes that large donations have led cryptocurrency to be labeled as a "partisan tool"; companies seeking to persuade the Democratic majority must rely on substantive arguments. "If I were to give the industry advice: bring evidence, not campaign funds; demonstrate to regulators that platforms are capable of self-regulating fraud and sanctions evasion."

Myher also agrees that the industry needs to change direction: “Moving forward, companies must learn to collaborate with a Democratic-controlled Congress rather than oppose it.” This means building bipartisan relationships in the House of Representatives, which has broader support, and reducing campaign spending aimed at attacking opponents.

Starting in January next year, the Democratic Party will take control of committee leadership and subpoena power, an impact on the crypto industry that could be greater than any single piece of legislation. Sharoni said: “I anticipate that hearings will occur well before any new bills are introduced.”

Myher noted that Democrats are primarily focused on consumer protection, illicit finance, and conflicts of interest, and now they control the agenda. Reiners said the hearing will likely examine the relationship between the government and the crypto industry, details of corporate collaboration during the legislative process, and the enforcement actions taken by regulatory agencies. Sharoni predicted that crypto projects linked to the president’s family will be the first target for Democrats using their subpoena power.

The new crypto legislation is unlikely to become a top priority for Democrats. Reiners cites polling showing that only 4% of U.S. voters say a candidate’s stance on crypto influences their voting decision, with Democrats prioritizing issues like cost of living. Even if crypto policy is discussed later, Democrats would likely rewrite the bill from scratch, as there is no consensus within the party. Reiners supports classifying crypto tokens as securities and having the SEC regulate spot markets, but it remains uncertain whether there is sufficient political will to implement this.

Regulators can tighten rules without needing new legislation from Congress. The Office of the Comptroller of the Currency (OCC) has already issued final guidance配套 the GENIUS Act stablecoin bill, set to take effect on January 18, 2027. The OCC and the Treasury will also jointly issue anti-money laundering and sanctions compliance guidelines for stablecoin issuers. Sharoni believes this will be the first area lawmakers focus on: “Anti-money laundering will be the first step, because both parties are aligned on this issue.” Platforms must explain how they identify sanctioned individuals and criminal users, even when a single person controls dozens of wallet addresses.

Stablecoin interest income is another major point of contention. The OCC’s new rules prohibit issuers from paying interest directly to token holders, and regulators have explicitly stated that indirectly distributing interest through third-party partners is also a violation. The regulatory document states: “Issuers cannot indirectly do what the regulation directly prohibits.”

Myher added that tokenized stocks and other RWA will also face intensified scrutiny by 2027: “Even without new legislation, enforcement and regulatory pressure will continue to tighten.” For companies already established in the stablecoin business, the core regulatory framework has been finalized. The GENIUS Act was signed into law in July 2025, and its provisions were implemented as scheduled in January, unaffected by changes in congressional control. Teymour Farman-Farmaian, Co-founder and CEO of the cross-border payments platform Higlobe, therefore believes the electoral impact on day-to-day operations is limited. He argues that the central challenge ahead is not overturning existing laws, but whether lawmakers can sustain their support for digital asset innovation.

More crucially, it is how regulators enforce existing rules and whether businesses can obtain a stable, predictable regulatory environment. The widespread adoption of stablecoins stems from genuine demand for faster, lower-cost cross-border payments—a demand that will not disappear due to shifts in the political landscape. Myher noted that the SEC and CFTC could achieve most of the regulatory goals originally intended by the Clarity Act using only their existing enforcement authorities.

Before January 3, the focus should be on preparedness, not lobbying. Myher advises: “Investors and businesses should treat the next two months as a planning period, not a legislative advocacy period.” Specific actions include: strengthening anti-money laundering controls and enhancing user disclosures; testing the compliance of tokenized products under stricter regulations; and not relying on the imminent passage of market structure legislation.

Sharoni advised companies to assess their risk screening capabilities to determine whether they can link wallet addresses to actual holders and trace fund flows back to criminal or sanctioned entities. He also recommended that companies proactively engage with Democratic offices before formal investigative committees are established, using data rather than vague promotional language: “My advice to businesses is to treat 2027 as the year to demonstrate compliance capabilities, not to seek regulatory exemptions.”

For investors, market volatility is likely to increase, but the long-term trend remains unchanged: cryptocurrencies will continue to be integrated into the mainstream financial system, albeit at a slower pace and under stricter regulatory standards.