Bernstein warns a Senate failure to pass the CLARITY Act before the Aug. 7 recess could push crypto prices lower, with Polymarket odds of passage falling to 31%.
Crypto Regulation News
The US Senate is scheduled to begin its summer recess around Aug. 7, and Wall Street broker Bernstein said time is effectively running out for the Digital Asset Market Clarity (CLARITY) Act to pass this year. In a note to clients published Aug. 3, analysts led by Gautam Chhugani described the bill as the most consequential crypto market structure legislation in US history. They warned that a failure to pass it would likely trigger an immediate sell-off across Bitcoin (BTC) and the broader digital asset market.
Prediction market platform Polymarket put the odds of the CLARITY Act being signed into law before the end of 2026 at 31% as of Aug. 3. That figure is down seven percentage points from the prior week and nine points from a month earlier. About $3.7 million has been wagered on that outcome.
What a Senate Failure Would Mean for Crypto Markets
Bernstein said any negative market reaction to a failure would likely be short-lived. The analysts expect the crypto market to find a floor and begin recovering toward late Q3 or early Q4 2026, partly supported by political attention ahead of the US midterm elections. They described the bill's potential failure as "disappointing," arguing that formal legislation would deliver permanent regulatory clarity and give banks, broker-dealers, and exchanges greater confidence to build in the digital asset space.
JPMorgan also flagged last week that fading prospects for the CLARITY Act represent a setback for the crypto industry. The bank said further delays could weaken one of the sector's most significant regulatory catalysts. Bipartisan negotiations on the bill continued as of Aug. 3, with Republican Senator Thom Tillis and Arizona Democrat Ruben Gallego having submitted a revised ethics compromise to the White House the prior week.
SEC and CFTC Expected To Accelerate Rulemaking
Bernstein said a Senate failure would not halt regulatory progress. The analysts expect the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to move faster on rulemaking through Project Crypto. That initiative was first announced by SEC Chairman Paul Atkins in July 2025 and was expanded as a joint staff effort with the CFTC in September 2025. It uses existing regulatory authority to develop digital asset rules while Congress works toward formal legislation.
Related Article: Bitcoin, Ethereum Soar as CLARITY Act Edges Closer, but Will a Fed Hike End the Rally?
Bernstein said regulators could accelerate work on token classification, decentralized finance (DeFi) guidance, self-custody rules, and an innovation exemption allowing token issuers to offer coins outside of securities classification for a defined period. CFTC Chair Michael Selig made similar remarks in a Fox Business interview last month, warning that regulators would end up writing all the rules themselves if Congress fails to act. Selig described the current patchwork of state regulations as harmful to business and called federal standards crucial for certainty and consumer protection.
For stablecoin issuers, a failure would preserve the existing regulatory status quo. Coinbase (COIN) would continue offering yield on idle stablecoin balances under current rules. Circle (CRCL) would remain unable to offer yield directly as a stablecoin issuer but could keep sharing distribution economics with partners. Bernstein said a recovery in USDC supply growth is the primary catalyst for renewed momentum in both stocks.
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