Clarity Act Faces Uphill Senate Battle Despite Committee Win, Jefferies Warns

Investment bank Jefferies is cautioning that the crypto industry’s most anticipated regulatory bill still faces significant obstacles in the Senate, despite clearing the Banking Committee earlier this year. The firm warned that political uncertainty and a shrinking legislative calendar could fuel volatility across crypto markets in the coming weeks as lawmakers race to advance the Clarity Act before the August recess.

The Clarity Act passed the Senate Banking Committee in a bipartisan 15-9 vote, but Jefferies analysts led by Andrew Moss said tougher challenges lie ahead. Polymarket now puts the odds of passage by the end of 2026 at 48%, down from 70% in mid-May as concerns over ethics provisions, illicit finance and limited Senate floor time weigh on its prospects.

Lawmakers have roughly 20 legislative days before the August recess to merge competing Senate versions, clear procedural votes, reconcile the measure with the House bill and send it to President Donald Trump. Failure to meet this deadline could push the bill into next year or beyond, particularly if Democrats flip the Senate in November, according to Jefferies’ analysis.

The Clarity Act is widely viewed as the crypto industry’s most important market structure bill because it would establish clear rules for when digital assets are regulated as securities by the Securities and Exchange Commission, or commodities by the Commodity Futures Trading Commission. This follows a pattern seen in related coverage of over 200 crypto firms urging the Senate to vote on the Clarity Act before midterms, underscoring industry urgency around the legislation.

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Supporters argue that legal clarity would make it easier for banks, asset managers and other institutions to launch tokenized products, custody services and blockchain-based financial offerings. Such regulatory certainty could potentially unlock broader institutional adoption and investment in the sector, a key goal for the crypto industry.

According to Jefferies, passage would provide the durable regulatory framework that banks, asset managers and exchanges need to expand tokenization, custody, staking, lending and other blockchain-based services. The bank also expects it to accelerate tokenized securities, broaden crypto exchange-traded fund offerings beyond bitcoin and ether, and revive the pipeline for crypto infrastructure IPOs.

A delay, however, would extend regulatory uncertainty. While recent guidance from the SEC, CFTC and Office of the Comptroller of the Currency has improved the outlook, agency actions can be reversed by future administrations. This could prompt regulated financial institutions to slow blockchain initiatives while reassessing legal and compliance risks, Jefferies noted.

The bank’s analysts expect the legislative process to drive volatility in crypto-linked equities including Circle, Coinbase and Bullish, as well as select crypto tokens. For Circle specifically, the current bill would reportedly close a loophole allowing third parties such as Coinbase to offer rewards on USDC holdings, potentially slowing USDC growth. At the same time, a delay would give Circle more time to expand its payments network and diversify revenue beyond stablecoin reserve income.

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Longer term, Circle’s biggest risk is intensifying competition rather than legislation, as banks, fintechs and payments firms launch rival stablecoins with larger distribution networks, according to Jefferies. This competitive pressure mirrors dynamics seen in broader market sentiment discussions around institutional versus retail participation in digital assets.

JPMorgan echoed similar concerns earlier this month, saying the proposed U.S. crypto market structure bill may have only a limited window for passage this year as the congressional calendar tightens ahead of midterm elections and debate over stablecoin yield remains unresolved. Data from CoinGecko shows crypto markets have already experienced heightened volatility amid regulatory uncertainty.

The stakes are high for the crypto industry. Passage would signal that Washington is ready to provide the regulatory clarity that institutional investors have long demanded. Failure would likely extend the current period of regulatory ambiguity, potentially delaying mainstream adoption of blockchain technology and digital asset services by traditional financial institutions.