Democratic Congress win raises new test for CLARITY Act crypto bill

Democrats take control of Congress after midterms

Democrats won both chambers of Congress in the 2026 US midterm elections and will take control in January. That gives them a chance to reshape the stalled CLARITY Act, a bill to set federal rules for crypto markets.

The Senate failed to advance the bill in September. Disagreements over ethics provisions contributed to the impasse, according to the source report.

Key numbers from the election cycle

• Crypto companies contributed $233 million to political committees during the 2026 midterm cycle, according to Public Citizen's analysis of federal filings.
• Crypto-backed political action committees spent $64 million in Ohio to defeat Sherrod Brown. Brown still won against Republican Sen. Jon Husted.
• Elizabeth Warren, a vocal critic of crypto in Washington, is expected to chair the Senate Banking Committee in the next Congress.

What a new Democratic-led debate could include

House Democrats are reportedly discussing a broader market structure bill. The report says they are considering expanding proposals from Representative Maxine Waters.

That bill could include stronger consumer protections. It could also give the Securities and Exchange Commission a greater role. It could add new ethics restrictions on public officials' crypto activities.

Democrat Congressman Shri Thanedar said he remains hopeful the CLARITY Act can pass. He said any legislation must include stronger ethics requirements.

Hadley Stern, head of institutions at Silence Laboratories and founder of Fidelity Digital Assets, said the industry should want stronger ethics rules. He pointed to concerns over a sitting president's family launching memecoins and a stablecoin. A stablecoin is a crypto token designed to keep a stable value.

Possible concessions the industry may face

Paul Brody, founder and CEO of Nightfall Networks and former global blockchain lead at EY, said banks may push for crypto companies to meet the same consumer protection and security standards as banks. He said the industry has opposed this, but suggested accepting similar conditions could help it win lasting legislation.

Lindsay Fraser, chief policy officer at Blockchain Association, said consumer protection and innovation should not be treated as competing goals. She said the aim should be policy that earns public trust and gives builders a future in the United States.

Brody also raised the possibility of a presidential veto. He said crypto could be a low priority compared with investigations, budget battles and war.

How the Binance hack is shaping the debate

The midterm results came as lawmakers were dealing with the fallout from the Binance hack. The report describes it as the largest hack in crypto history, with over $6.3 billion stolen on Oct. 29. An exchange is a platform where users trade crypto.

Thanedar said the bill would not solve every problem, but would provide certainty and security guardrails. He said the hack is a clear example of the danger of not passing appropriate legislation.

Maylea Ma, deputy general counsel at 1inch, took a different view. She said the hack involved a centralized exchange's hot wallet and signing failure. A hot wallet is a wallet connected to the internet. She said the current draft has no insurer, no loss payee and no hot wallet cap that would have reduced the loss or set security standards to prevent it.

Amanda Fischer, policy director at Better Markets, said the episode highlighted how unfit the crypto ecosystem is for mainstream finance. She said exchanges should not act as custodians, meaning they should not hold customers' assets, because that creates a honeypot risk.

Ma said the incident is likely to affect the next vote on the CLARITY Act. She said it could make lawmakers less willing to pass legislation the industry wants unless it includes stronger consumer protections.

What is still unclear

The report does not say whether a revised bill will pass. It also does not provide a final text for a Democratic proposal.

It is unclear how far lawmakers will go on ethics rules, consumer protections or the role of the Securities and Exchange Commission. Those issues were part of the earlier impasse.

Source for this report

• Cointelegraph