JPMorgan: Clarity Act 'not fully dead' but passage window 'extremely narrow'
Clarity Act fails key Senate vote, but JPMorgan sees slim path back
The Clarity Act, a major U.S. crypto market structure bill, failed to advance in a procedural vote in the Senate on Tuesday, ending 49-50, short of the 60 votes needed. But JPMorgan analysts said the bill is "not fully dead" and could still return for another vote before Congress adjourns at the end of the year.
The analysts, led by Kenneth Worthington, described the remaining passage window as "extremely narrow and only getting narrower," noting that there are roughly two-and-a-half weeks of Senate time left before the midterm elections and a lame-duck session afterward.
What procedural step keeps the bill alive
Sen. Thom Tillis, one of several Democrats involved in drafting and negotiating the bill, changed his vote to "no" at the last moment and filed a motion to reconsider. JPMorgan said this step allows Senate Republicans to bring the bill back to the floor. The analysts also pointed to the GENIUS Act, which failed its first cloture vote before ultimately being signed into law, as a precedent for crypto bills bouncing back after early setbacks.
The JPMorgan analysts added that key supporters of the Clarity Act have expressed frustration over the negotiations, and may be less willing to keep debating amendments or push for more Senate time.
Attention shifts to SEC and CFTC
With the bill's prospects weakening, JPMorgan expects investors and crypto companies to focus more on the Securities and Exchange Commission and the Commodity Futures Trading Commission. These agencies could issue rules that bring some clarity to crypto businesses and attract more capital to the sector.
However, the analysts warned that agency rules are less durable than laws passed by Congress. Future administrations can change them, and courts can challenge them, whereas repealing a statute would require another act of Congress.
SEC Chair Paul Atkins and CFTC Chair Michael Selig released separate statements on Wednesday saying they plan to continue developing rules for the crypto industry. JPMorgan noted that the industry is particularly watching for a possible SEC "innovation exemption" that could cover crypto projects including tokenized equities (blockchain-based representations of stocks or other traditional assets). Reports have suggested the SEC was waiting to see whether the Clarity Act passed before moving ahead with its own proposal.
Reactions from other firms and figures
Galaxy founder and CEO Mike Novogratz blamed both parties for the failed vote, saying disagreements over government ethics provisions prevented a broader compromise. He said he remains confident that the SEC and CFTC will continue setting crypto rules, which Congress could later turn into law.
Mizuho Securities also said attention could shift back to the SEC and CFTC, with regulators moving through rulemaking and guidance instead of waiting for Congress. The firm said declines in Circle and Coinbase shares were understandable because of continued uncertainty around stablecoin yield (the interest or rewards that holders of stablecoins, which are cryptocurrencies pegged to assets like the U.S. dollar, can earn). Mizuho added that Robinhood, Figure and Strategy were being "unduly punished," noting that 80% to 90% of Robinhood's revenue does not come from crypto, while Figure mainly runs a home equity line of credit marketplace.
TD Cowen's Lance Vitanza said near-term passage of the Clarity Act now looks increasingly unlikely, but regulatory changes are still moving forward through SEC rulemaking. He expects the digital asset industry to keep developing, but "likely at an uneven pace."
