CLARITY Act's Two-Step: Ethics Deal Face-Plants, Feds Line Up Next 🤼

The CLARITY Act's march toward a Senate floor vote hit two fresh obstacles this week, as a closed-door ethics agreement collapsed on Tuesday and the White House prepared to host law enforcement groups on Wednesday to address concerns that the bill could hamper illicit-finance investigations. White House Crypto Council Executive Director Patrick Witt framed the stakes bluntly, writing, "Big week ahead for Clarity. The work has continued in earnest behind the scenes since the Banking markup. The issue set has narrowed, and good faith offers are being put forward to close the gap. But time is of the essence."

The ethics breakdown, first reported by Eleanor Terrett, came at a bipartisan meeting attended by Senators Kirsten Gillibrand, Ruben Gallego, Bernie Moreno, and Cynthia Lummis, alongside Witt. Democrats said Republicans and the White House reversed course on a prior deal that would have allowed state attorneys general to sue the Department of Justice for failing to enforce ethics rules linked to President Donald Trump's crypto ventures, an estimated $2.3 billion in family earnings that has drawn sustained Democratic scrutiny. Republicans proposed narrowing enforcement authority to the Attorney General and floated impeachment as a remedy; Democrats rejected both ideas. Senator Angela Alsobrooks of Maryland and Gallego have indicated that their continued support depends on strong ethics guardrails addressing Trump's crypto business interests, with the group expected to reconvene Thursday.

On the enforcement side, the White House Crypto Council on Wednesday met with representatives from the National Sheriffs' Association, the Fraternal Order of Police, and the National District Attorneys' Association, joined by officials from the DOJ, Treasury, and FinCEN. The discussion is centered on Section 604 of the bill, the Blockchain Regulatory Certainty Act, which provides legal relief for developers of non-custodial platforms so they are not classified as money transmitters. Some law enforcement groups argue the provision could make it harder to pursue bad actors operating onchain, and the talks are among the "major sticking points" cited by sources. Senators Mark Warner and Catherine Cortez Masto have tied their support to law enforcement's sign-off.

The bill's backers are pressing ahead. A June 7 joint letter signed by more than 200 crypto organizations, including Stand With Crypto, the Blockchain Association, the Crypto Council for Innovation, and The Digital Chamber, called on Senate leaders John Thune and Chuck Schumer to schedule the legislation for full Senate consideration, stating, "The Senate should now build on that momentum and give members the opportunity to advance durable market structure legislation," and warning, "The question before Congress is whether that future will be built in the United States — under U.S. law, U.S. oversight, and American values — or continue moving to offshore jurisdictions." Lummis, one of the bill's most vocal advocates, wrote on social media, "The CLARITY Act passed committee. The floor is next."

Industry pressure has been reinforced by separate letters, including a Tuesday missive from more than 60 firms such as Hyperliquid, Solana, MultiCoin Capital, and the DeFi Education Fund urging the Senate to safeguard developers' rights, with MultiCoin co-founder Tushar Jain saying, "Defending developers is defending America's edge in the technologies that matter most." Marcos Viriato, CEO and co-founder of Parfin, told AMBCrypto that "regulatory uncertainty is more costly than regulation itself," adding that "regulatory clarity gives institutions the confidence to move from experimentation to implementation."

The political friction is now showing up in market pricing, with Polymarket traders putting the bill's 2026 passage odds near 48%, down from 74% a month ago, even as over 160 law enforcement officials recently backed the legislation. The Senate has 31 session days left before the August recess and the bill needs 60 votes to advance.