CLARITY Act Faces New Hurdle Ahead of Senate Vote

The CLARITY Act is facing another obstacle in the Senate as Democrats and Republicans negotiate over proposed rules for vertically integrated crypto companies. The dispute comes ahead of a key cloture vote next week that could determine whether the cryptocurrency market structure bill advances.

According to Politico, Democratic senators want the CLARITY Act to direct regulators to establish standards aimed at preventing conflicts of interest at vertically integrated crypto firms. Such companies may control several parts of the same business ecosystem, potentially creating risks similar to those exposed by FTX, which operated a crypto exchange while affiliated Alameda Research functioned as a market maker.

Democrats argue that the proposed language resembles provisions Republicans previously supported. GOP lawmakers generally back stronger conflict-of-interest protections but are concerned that broad vertical integration rules could be used aggressively by a future Democratic administration. Crypto industry participants have also opposed the proposal.

The disagreement adds to several unresolved issues threatening bipartisan support for the CLARITY Act. Lawmakers have yet to reach consensus on ethics provisions, while banking groups continue to challenge proposals related to stablecoin yields.

Democratic Senator Cory Booker is negotiating the vertical integration language with Republican Senators Cynthia Lummis and Senate Agriculture Committee Chair John Boozman. Booker told Politico that lawmakers have “shared values” on the issue, suggesting there is room for compromise. However, he warned that he would not support legislation that fails to protect consumers from the potential risks of Web3.

The uncertainty comes before the Senate’s Sept. 15 cloture vote. Treasury Secretary Scott Bessent has urged lawmakers to advance the CLARITY Act, arguing that failure could undermine U.S. leadership in digital assets.

Even if cloture succeeds, final passage could be delayed until the lame-duck session following the midterm elections because the House canceled its late-September sessions and is heading into an early recess.

Coinbase CEO Brian Armstrong has said the crypto industry can still achieve regulatory clarity if the legislation fails. Prediction market Polymarket currently puts the probability of President Donald Trump signing the CLARITY Act into law this year at just 17%.