Democrats secured victories in both chambers of Congress following the US midterm elections, positioning the stalled CLARITY Act to face a shift in congressional control while federal regulators proceed with developing their own cryptocurrency regulations. This new Democratic majority will officially assume power when the next session commences on Jan. 3, 2027.
The legislative effort known as CLARITY previously encountered an obstacle in September when its procedural vote failed by 11 votes, missing the Senate's required 60-vote threshold to advance. Republican lawmakers opposed the measure citing concerns that stablecoins could divert deposits from community banks and credit unions, whereas the SEC and CFTC are advancing separate initiatives covering crypto fundraising, custody, and trading under their existing legal authority.
Senate Vote Falls Short on CLARITY Procedural Motion
Associated Press accounts verify that Democrats secured majorities in both the House and Senate following the Nov. 3 elections, bringing an end to two years of unified Republican leadership in Washington while Donald Trump continues his term as president until the new body meets in January. Throughout the remaining lame-duck session, Republicans hold their existing congressional majorities, and legislators must address government funding talks before the calendar year concludes alongside internal leadership contests that follow the Republican loss.
Senate logs dated Sept. 15 indicate that a motion to move CLARITY forward garnered 49 affirmative votes and 50 negative ones, with one senator missing from the chamber. To clear the procedural obstacle and start formal review, proponents required 60 votes.
Following a Senate procedural vote on September 15 where proponents secured 49 affirmative votes against 50 negative ones with one senator absent, the motion to advance the CLARITY Act failed because supporters required 60 votes to overcome the hurdle. Although Republican Sen. Thom Tillis entered a motion to reconsider after the rejection, negotiations remained unresolved as the report previously reported. Seven Democratic senators stated the following day that they remained committed to bipartisan crypto legislation despite the outcome.
The CLARITY legislative proposal allocates duties between the Securities and Exchange Commission and the Commodity Futures Trading Commission, encompassing a registration system for digital commodity intermediaries. Although the House approved its iteration in July 2025, later Senate discussions altered the wording prior to this procedural collapse. Resistance came from more than just Democrats; Republican Senators Susan Collins, Josh Hawley, and Jerry Moran sided with Tillis in rejecting the procedural motion.
On September 16, Senator Susan Collins characterized the CLARITY Act as a moving target that required further examination of its more than 600 pages. She expressed concern that specific provisions might incentivize depositors to withdraw funds from community banks and credit unions, thereby diminishing capital available for mortgage financing and small-business lending.
Prior to the legislative setback in the Senate, the Securities and Exchange Commission initiated proposals regarding crypto assets on August 18 under Chairman Paul Atkins. The outlined Regulation Crypto Assets included a startup exemption for offerings totaling up to $5 million over four years and a separate fundraising exemption permitting up to $75 million annually, with both categories subject to disclosure requirements.
Chairman Paul Atkins characterized the proposed legislation as indispensable for establishing durable rules, specifically noting that the plan includes a safe harbor mechanism to determine when an investment contract tied to a crypto asset ceases to exist. This legislative effort remains distinct from the Securities and Exchange Commission's separate initiative regarding custody, which was detailed in a proposal released on Oct. 1. That specific framework outlines requirements for registered investment advisers, registered investment companies, and business development companies within the proposed crypto custody structure.
Under the separate custody initiative, advisers might hold client crypto assets themselves under limited circumstances if they determine that no permitted custodian is available for the specific asset. Commissioner Hester Peirce clarified that advisers would be required to repeat this assessment of custodian availability on a quarterly basis. For state trust company custody arrangements, advisers and funds must assess state authorization alongside written safeguards against theft, loss, misuse, and misappropriation, with these checks recurring annually. These regulatory changes were issued for public comment rather than being adopted as final rules.
Regulators Advance Separate Crypto Frameworks Despite Legislative Gridlock
Following a White House review submission dated Sept. 17, the CFTC advanced its efforts toward a public consultation unveiled on Oct. 5. During this period, the agency requested input regarding a framework governing retail crypto commodity transactions that fall under Section 2(c)(2)(D) of the Commodity Exchange Act.
Chairman Michael Selig indicated that the proposed initiative would leverage current statutory powers to curb abusive behaviors and create a distinct registration category for designated contract markets specific to crypto assets. The consultation seeks guidance on preventing misconduct, clarifying compliance standards, and defining this new market classification, with responses required within 60 days of the notice appearing in the Federal Register.