CLARITY Act gains police backing, Senate crypto odds slip to 30%
The U.S. CLARITY Act has gained endorsement from major police groups, but major policy disputes still threaten Senate passage before the August recess.
The Major Cities Chiefs Association (MCCA) backed the latest draft in a letter to Senate Banking Committee Chair Tim Scott and ranking member Elizabeth Warren. It said revisions improved enforceability, adding law-enforcement provisions and involving state/local agencies in key sections. MCCA’s move removes one source of institutional resistance to the federal crypto market-structure bill.
However, the bill’s odds remain low. Polymarket traders price the chance of the CLARITY Act becoming law in 2026 at 30%, with ethics and technical disputes still unresolved.
Key remaining friction points:
- DeFi developer protections: Democrats led by Sen. Catherine Cortez Masto and some prosecutors want narrower or removed protections that could shield certain crypto service providers, especially around non-custodial development and related services.
- Stablecoin restrictions: A banking coalition (134 officials/executives) supports federal rules but argues Section 10404 must be tightened. Banks want limits on stablecoin reward structures that they say could function like interest tied to balances, potentially shifting deposits away from regulated banks.
- Ethics requirements: Democrats seek restrictions on financial interests held by elected officials and their families. Republican Sen. Thom Tillis has indicated he will not support the CLARITY Act without an acceptable ethics clause. The White House/President approval process is cited as a gating item.
Crypto-trader takeaway: CLARITY Act momentum is improving on enforcement support, but trading sentiment may stay range-bound until a bipartisan ethics compromise and stablecoin/DeFi wording are finalized.
Neutral
Police backing is an incremental positive for the CLARITY Act, but it does not remove the two most market-relevant uncertainties: (1) how DeFi developer protections will be narrowed/defined, and (2) how stablecoin rewards/interest-like mechanisms will be regulated. Those wording outcomes can directly affect exchange/DeFi business models and stablecoin liquidity expectations.
The 30% passage probability (from Polymarket) suggests traders do not yet price a high likelihood of near-term enactment. Historically, when U.S. crypto legislation advances through supportive stakeholders but remains stuck on bipartisan ethics or specific stablecoin/DeFi language, price reaction often stays mixed: momentum may appear on headlines, but realized follow-through is limited until a clear “vote/compromise” catalyst.
Short-term: expect headline-driven volatility rather than a trend—police endorsement may slightly boost sentiment, while ethics and drafting disputes cap upside.
Long-term: if Congress eventually compromises on ethics plus stablecoin/DeFi terms, it would likely be constructive for regulatory clarity. For now, the uncertainty around the final CLARITY Act text keeps the market near neutral.