CLARITY punted to September as parties, stakeholders far apart

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America’s crypto market structure legislation debate got punted to September as politicians and stakeholders remain far apart on multiple unresolved issues.

• CLARITY cloture vote in September, but Trump silent on new ethics text
• Banking stablecoin fight winning over some senators, pissing off others
• Prosecutors not giving up on toughening illicit finance language
• Crypto PACs win some, lose some primary races
• Trump Media scrapping plans, shrinking stacks, losing millions

On Friday, August 7, Senate Majority Leader John Thune (R-SD) confirmed that there would be no cloture vote on the chamber’s digital asset market structure legislation (the CLARITY Act) before the Senate’s month-long summer break. Thune said Democrats “are insistent” that there be no vote on CLARITY while several key issues remain unresolved.

But at 4:52 a.m. Saturday, Thune filed cloture on the motion to proceed with CLARITY, setting up a vote on Tuesday, September 15, the day after the Senate returns from its holiday. The vote, which will require 60 votes for passage, represents only the formal starting gun before any actual debate on the Senate floor to resolve CLARITY’s lingering issues.

Assuming that the 60-vote threshold can be reached, there are only three sitting weeks on the calendar before the Senate breaks again ahead of November’s midterm elections. So if CLARITY’s outstanding issues aren’t resolved swiftly, its prospects for passage prior to the midterms—or even this year—are slim.

Chief among those issues is ‘ethics,’ aka Democrats’ desire to rein in crypto profiteering by public officials, including President Donald Trump. All eyes were on the White House last week for Trump’s reaction to the latest ethics text negotiated between Senators Thom Tillis (R-NC) and Ruben Gallego (D-AZ).

The original ethics proposal that the White House agreed to would have left all decisions on whether to charge public officials who violate the ethics rules up to the Attorney General. Dems howled with outrage at this notion, given that current AG Todd Blanche, who was finally approved by the Senate last Friday, is Trump’s former personal attorney.

The proposed Gallego-Tillis revisions haven’t been made public, but Politico reported they would allow state attorneys-general to sue the Department of Justice if it fails to act in response to ethics violations. State AGs would also get to bring charges against digital asset exchanges that list tokens that violate the ethics proposal (including tokens issued by public officials).

Gallego revealed that the ethics proposal “ends Trump’s crypto grift by requiring him to divest and stops him from making one dollar more from his rug pulls. If these provisions were law before Trump got into office, they would have prevented the $1.4 billion in corrupt earnings he’s made this term.”

Bloomberg reported that the proposed forced divestment could “allow the president to defer paying any federal taxes on those gains potentially for years—if ever” should he steer the proceeds into new investments that he holds until death. (For the record, Trump is 80 years old.) Without a deferral, Trump could get hit with an immediate 20% tax on the capital gains made from his crypto investments.

On August 5, Tillis told reporters that the ethics negotiators had “people working with the White House right now … they’re going through some of the lines right now.” The next day, Tillis walked back that claim, saying the negotiators hadn’t heard anything from the White House regarding the latest proposal, but “hopefully we’ll hear back.”

In an interview with Punchbowl News’ Jake Sherman, released on August 7, Trump was asked how he felt about the ethics restrictions. Trump initially dodged, reciting his usual lines about how he’s only trying to ensure that China doesn’t “take over” crypto or artificial intelligence (AI).

But Trump eventually said the Dems “want to do a bill and in the bill they want me to be different than everybody else.” Sherman asked if Trump was “against that.” Trump said he didn’t mind “putting [his crypto ventures] in a blind trust. I don’t run my stuff anyway. I let my kids run it. I never talk to them about things.” (For more on the latest Trump crypto venture moves, see the bottom of this article.)

Tillis said Friday he thinks the likelihood of CLARITY passing “probably drops in half” now that the floor debate has been kicked to September. Gallego was slightly more optimistic, saying the delay “gives us more time,” but put the onus squarely on Trump. “We haven’t seen anything come back from the White House. They need to take that very seriously.”

White House crypto adviser Patrick Witt didn’t take the delay well, tweeting that Senate minority leader “Chuck Schumer and the ‘pro-crypto Democrats’ pulled out all the stops to block a mere procedural vote on the bill before recess, demanding yet another extension. If they can’t get there by September 15, they never will.”

On Monday, TD Cowen analysts put CLARITY’s chances of passing this fall at just 25%. Bettors on the Kalshi prediction market appear confident (87% in favor) that the Senate will vote on CLARITY before October 1. But the expected result of that vote is a lot less favorable, with just 34% believing that CLARITY will become law by July 1, 2027.

Bankers earn support from some senators, venom from others

Witt’s partisan anger regarding CLARITY’s delays was misplaced, given that last Thursday brought some public defections from the GOP camp over the bill’s stablecoin ‘rewards’ language.

The stablecoin-focused GENIUS Act, approved by Congress one year ago, prohibited stablecoin issuers from offering token holders any kind of yield or interest. CLARITY would allow non-issuing platforms to offer users ‘rewards’ for engaging in certain stablecoin-related activities, but the banking sector believes CLARITY’s list of said activities is ill-defined, and they want it tightened to ensure no passive yield is permitted.

The GOP defectors included Jerry Moran (R-KS), who told Politico he was “unable to support” CLARITY without “a different outcome” on stablecoins. Moran said the bill, as written, would have “consequences on the people who rely upon banks in small towns across Kansas.”

A similar message came from Josh Hawley (R-MO), who said he was officially ‘no’ absent changes to the stablecoin text. Hawley said he would “vote with my state on this … my state right now—agriculture folks, local community people—are very, very worried about the effect on community banks. They are blowing me up over it … Farmers and ranchers, in particular, are very, very concerned that deposit flight in small towns could absolutely kill their ability to get ag[riculture] loans. So that needs to be fixed.”

John Kennedy (R-LA), who supports CLARITY, acknowledged that “the pressure from banks … has given some people pause.” Kennedy suggested that CLARITY’s month-long pause means “the pressure’s just gonna continue” from the banking sector.

Punchbowl confirmed Monday that it was community bankers who made the GOP senators take notice. Brad Bolton, CEO of Alabama’s Community Spirit Bank, said “what really shifted the tone was when it wasn’t the big banks telling the story anymore. You needed unknown community bankers like me, out in the middle of nowhere, telling the senator, this is the real effect of it.”

The Independent Community Bankers of America (ICBA) circulated polling last week showing 86% of U.S. small business professionals believe “it is important for policymakers debating crypto policies to ensure digital assets policy avoids harming bank lending in local communities.” These same small business types agreed “by a two-to-one margin … that policymakers should prohibit crypto companies from offering interest-like rewards.”

On Monday, Reuters quoted ICBA CEO Rebeca Romero Rainey saying, “we are leaving no stone unturned so that lawmakers recognize the danger of deposit flight as [CLARITY] is written.”

But CLARITY’s delay brought swift and severe reaction from some of the Senate’s more vocal crypto advocates. Cynthia Lummis (R-WY) issued a statement saying “you can imagine how frustrated I am.” Somewhat cryptically, Lummis added that “there will be a time when I can say more,” but she contented herself by saying “this fight is far from over.” Lummis later added that if CLARITY “dies, it’s gonna be because the Democrats killed it.”

On Monday, Lummis pushed back against the ‘deposit flight’ message, tweeting that the banks had it “backwards,” as CLARITY’s stablecoin language is “actually tougher than current law, not looser.” Lummis claimed CLARITY’s demise “won’t help community banks. It just protects the status quo they say is broken.”

Bernie Moreno (R-OH), who owes his Senate seat in large measure to the $40 million that pro-crypto political action committees (PACs) spent to defeat his 2024 opponent Sherrod Brown, was even less enthused.

In response to an August 8th tweet by Crypto in America’s Eleanor Terrett regarding the “big kinks left to iron out” in CLARITY, Moreno tweeted: “There is absolutely nothing to ‘iron out.’ An agreement was reached weeks ago and ALL parties to that agreement will be expected to keep their commitments. Period.”

In an interesting bit of ‘hell hath no fury like pro-crypto GOP senators scorned,’ Friday saw both Lummis and Moreno sign on as co-sponsors of the Credit Card Competition Act (CCCA), a bill that would lower credit card swipe fees.

The banking sector is fiercely opposed to any plan to limit its credit card revenue, and keeping the CCCA on ice was considered crucial to ensuring bankers’ support for last year’s passage of the GENIUS Act. Attempts were made to add the CCCA to earlier versions of CLARITY, but these came to naught.

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Illicit finance issue still irking prosecutors and White House

Another CLARITY stumbling block is the ‘illicit finance’ issue, aka how much legal immunity developers of noncustodial decentralized finance (DeFi) platforms should enjoy when said platforms are used by criminals. Law enforcement agencies are split on whether CLARITY will negatively impact their capacity to investigate and prosecute crimes involving digital assets.

On July 28, Politico reported that the National Association of Assistant U.S. Attorneys and the National District Attorneys Association had—with the help of Sen. Catherine Cortez-Mastro (D-NV)—proposed adding text to CLARITY’s Blockchain Regulatory Certainty Act (BRCA) section clarifying that the DeFi references don’t “create, expand, or modify criminal liability under Federal law.”

The proposed revisions would eliminate a BRCA amendment inserted by Lummis and Sen. Chuck Grassley (R-IA) earlier this year. That amendment requires prosecutors to prove that noncustodial developers knowingly facilitated illicit transactions like money laundering before bringing charges.

In another potential tripwire, one of the sweeteners CLARITY employed to get police associations on side was a promise of $600 million in funding to help train cops on how to track digital assets. But Punchbowl News reported last Thursday that Senate Dems were telling these police groups that the funding might not actually be forthcoming.

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Crypto PACs’ reputation as campaign cutthroats takes a hit

The crypto sector had assumed Thune would hold a CLARITY cloture vote before the August recess in order to force individual senators on the record as to where they stood. Using that naughty/nice list as a guide, crypto-focused PACs could unleash the over $130 million they have on hand to reward crypto supporters and punish opponents ahead of the midterms.

But the lack of unity among the GOP caucus complicated that plan, with one analyst telling The Hill that a vote “wouldn’t have been overly helpful to Republicans because they didn’t have even enough Republican support to sort of paint that picture.”

Meanwhile, the Fairshake PAC that leans primarily on financial contributions from the Coinbase (NASDAQ: COIN) exchange and XRP-issuer Ripple Labs took another hit to both reputation and wallet last week in Michigan’s 13th District. Fairshake’s Democrat-focused offshoot Protect Progress spent $2 million backing two-term incumbent Rep. Shri Thanedar, but he failed to see off a primary challenge from state Rep. Donavan McKinney.

McKinney had made the crypto sector’s deep-pocketed support for Thanedar a focus of his attacks on the incumbent, saying the industry was looking to “pay Shri back for the votes he took allowing Trump to make over $1 billion off crypto.”

The $2 million down the drain is far less than the $10 million Fairshake and its affiliates spent this March in a losing cause in a Dem Senate primary in Illinois. But it’s further evidence that crypto PACs aren’t omnipotent.

Americans for Financial Reform’s senior policy director Mark Hays claims “the tides have shifted. There are more [Dems] saying ‘We don’t have to just accept the industry narrative here. We can talk about the very good reasons why these practices are anathema to politicians who are standing up to corruption.”

Fairshake’s GOP-focused offshoot Defend American Jobs (DAJ) fared a little better last week, as its $512,000 in support for Michigan incumbent Rep. Bill Huizenga helped him seal his GOP primary victory.

In Washington state, DAJ’s $510,000 support for GOP nominee Amanda McKinney helped her win her primary race in the state’s 4th District. Protect Progress doled out over $100,000 each to three Washington incumbent Dems (Suzan Delbene, Kim Schrier, and Marilyn Strickland), all of whom won their respective primaries.

Tuesday (11) will bring another test of crypto’s capacity to bring home a winner, as votes are cast for the Democratic primary for the open Senate seat in Minnesota. Lt. Gov. Peggy Flanagan has slammed her rival, Rep. Angie Craig, for voting “to let Trump make billions selling crypto coins.” Craig hasn’t yet received any crypto PAC cash, although execs from Coinbase have individually given a total of $63,000 while other crypto firms have added another $40,000+.

Elsewhere, DAJ has spent over $500,000 boosting Republican Nicholas Begich in Alaska’s 1st District ahead of his August 18 primary vote. DAJ spent similar sums backing Republican primary candidates Sydney Gruters in Florida’s 16th District and Harriet Hageman in the race to fill the Wyoming Senate seat currently occupied by the retiring Cynthia Lummis (both of those primaries also occur on August 18).

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Not all Trump ventures are rolling in it

Finally, Congress may have left town, but the controversy over Trump’s crypto ventures is going nowhere. At least, not as long as the New York Times continues to drop fresh reports like this one on Trump’s reliably scandalous token-issuing project World Liberty Financial (WLF).

In more mundane Trump crypto developments, blockchain sleuths thought they’d detected another major token sale last week by the Trump-controlled Trump Media & Technology Group (TMTG) (NASDAQ: DJT). But TMTG insisted that the transfer of $165 million worth of BTC to the Crypto.com exchange wasn’t a sale, just a transfer. TMTG offered a similar explanation for a similarly large transfer this spring.

Sale denials aside, something is definitely up, as last week saw TMTG announce its decision to scrap its digital asset treasury (DAT) strategy based around the Cronos network’s native CRO token (issued by Crypto.com). The two companies announced the DAT plan last August but have now agreed to “mutually terminate” this move, citing “prevailing market conditions, and shifting business and stakeholder priorities.”

(Interestingly, TMTG’s abandonment of its DAT plan came shortly after Donald Trump’s son Eric criticized DAT firms during the earnings call of the Trump-linked block reward mining firm American Bitcoin Corp (NASDAQ: ABTC). Eric said many DATs “are just kind of dead in the water … the cost of being public is eating them alive.”)

Also, toast is TMTG’s plan for Crypto.com to handle “certain of Yorkville America’s anticipated [exchange-traded fund] offerings.” TMTG, Crypto.com, and Yorkville announced these token-based ETF plans at the same time as the DAT plan. TMTG said last week that, “other than the discontinuation of this proposed, limited servicing partnership, Yorkville America’s business and plans for its existing and future ETF offerings remain unchanged.”

Still not done canceling things, TMTG also announced the demise of its plan to launch its own prediction market (Truth Predict) in partnership with Crypto.com. Originally announced last October, the two companies say the prediction plan will now “pivot to a marketing agreement under which Crypto.com’s prediction markets experiences will be marketed to the Truth Social user base.”

TMTG’s share price fell 8% on Monday as investors processed this raft of retrenchments. The shares are down nearly one-third since the year began and nearly 45% below where they traded 12 months ago.

TMTG spent nearly $1.4 billion to acquire 11,542 BTC tokens last year at an average price of $118,522, nearly twice BTC’s current value. After the market closed Monday, TMTG issued its Q2 report showing the company’s BTC stack currently stands at 9,477 tokens currently worth $557 million (cost of acquiring those BTC: over $1 billion).

Of those 9,477 BTC, nearly half (4,261) are pledged as collateral for TMTG’s debt notes that come due in May 2028. A further 2,077 tokens are tied up with TMTG’s option strategy aimed at minimizing fallout from the volatility in BTC’s fiat price.

Meanwhile, TMTG’s stack of over 756 million CRO tokens is unchanged from the end of 2025, although the tokens’ combined value has fallen 40% since New Year’s Eve to $40.6 million. The original cost of acquiring those CRO was ~$114 million.

TMTG reported revenue of just $1.7 million during the three months ending June 30, while issuing nearly 5x that sum in stock-based compensation. Coupled with other expenses, TMTG booked a net loss of over $238 million, bringing its H126 losses to $644 million.

Never fear, because help is on the way via the Truth API subscription service, which offers “fractionally faster” access to posts by President Trump and other “top accounts” on Truth Social. With monthly charges of between $60,000-$100,000, Truth API is aimed at investment bankers, hedge funds, and algorithmic trading firms looking to cash in on market-moving posts by getting them “milliseconds” ahead of non-subscribers. TMTG said Monday Truth API has signed “more than 10 customer agreements to date.”

Concerns over Trump’s ‘ethics’ issues are also likely to get a boost from Truth API, but at this point, honestly, who’ll notice?

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