Senate defeats Trump's crypto Clarity Act despite $100M lobbying push

The Senate rejected the Clarity Act on Tuesday, delivering a sharp blow to Donald Trump's ambition to remake the United States as the world's leading cryptocurrency hub. The bill, which would have established the first comprehensive regulatory framework for crypto assets, fell short of the 60 votes required for passage, attracting only 49. Democrats and several Republicans voted against it, despite an extraordinary lobbying campaign: the crypto sector and the White House spent more than $140 million pushing the legislation through Congress.

The defeat came more than a year after the bill had sailed through the House along party lines, suggesting that the political calculus had shifted. Two distinct objections emerged as the primary obstacles. The first centered on Trump himself. Democrats sought amendments that would prevent sitting presidents and other federal officials from holding and trading cryptocurrency. Trump's personal crypto portfolio generated more than $1.4 billion in value last year—a fact that gave his push for the legislation an unmistakable appearance of self-interest. Senator Ruben Gallego, a Democrat, captured the sentiment bluntly after the vote: Trump wanted nothing more than "time to crime," and Republicans had simply refused to tell the president no.

The conflict-of-interest question proved thornier than it first appeared. Republicans had attempted their own amendments, seeking to bar federally elected officials and their spouses from issuing their own cryptocurrencies—a direct reference to the digital coins that Donald and Melania Trump had launched. They also proposed forcing divestment of crypto holdings. But Democrats remained skeptical that the language closed the loopholes. Trump's own view of such restrictions was revealing: he believed he could satisfy any divestment requirement by handing control of his assets to his sons, a position that suggested the amendments would not meaningfully constrain him.

The second obstacle involved the banking system. The previous year's Genius Act had regulated stablecoins—cryptocurrencies backed dollar-for-dollar by safe assets like Treasury securities—by preventing their issuers from paying interest to investors. The intent was to prevent crypto from directly competing with bank deposits. But the Clarity Act would have permitted stablecoin issuers to offer "rewards" to holders, a distinction that alarmed community banks and larger financial institutions alike. These banks feared that even this softer incentive structure would allow crypto companies to effectively offer yields on stablecoins, drawing deposits out of the regulated banking system and into the largely unregulated crypto universe. The consequences could ripple through the financial system: reduced liquidity for banks and a diminished capacity to lend.

The scale of what was at stake became clear when examining the crypto market itself. The sector now held $2.6 trillion in assets, down from nearly $4 trillion a year earlier but still enormous. Treasury Secretary Scott Bessent had predicted that stablecoins alone could reach $3 trillion by 2030. Without a legislative framework, the sector operated in a regulatory gray zone, with the Securities and Exchange Commission and the Commodity Futures Trading Commission locked in a turf battle over jurisdiction. The SEC, under the Biden administration, had treated crypto as the "Wild West," rife with fraud and abuse. The CFTC favored a lighter touch. The Clarity Act would have resolved this dispute by assigning primary responsibility to the CFTC—a smaller agency with fewer resources and little experience regulating retail-facing products.

Trump's own journey on crypto illustrated how thoroughly the sector had captured Republican politics. In his first term, he had dismissed cryptocurrency as a "scam." During his 2024 campaign, he reversed course entirely, becoming the sector's most ardent advocate. The transformation coincided with the crypto industry's massive financial support for his candidacy and his own lucrative entry into crypto markets. Upon returning to the White House, he declared his intention to make America the crypto capital of the world.

With midterm elections approaching, the crypto lobby faced a new anxiety. If Democrats gained control of the House or Senate, the window for passing crypto-friendly legislation might close for a generation. The regulatory agencies were already drafting rules that would give the sector much of what it wanted, but those rules could be dismantled by a less sympathetic administration. The Clarity Act's defeat suggested that even with Trump in the White House and Republicans controlling Congress, the political consensus required to reshape financial regulation around crypto remained elusive. The sector's $140 million lobbying push had proven insufficient against concerns about presidential self-dealing and the stability of the banking system.