Clarity Act Faces Rewrite as Democrats Craft Rival Crypto Framework

The Clarity Act's path narrowed after Democrats won the midterms, but the drive for federal crypto market rules isn't over. House Democrats reportedly plan to expand Rep. Maxine Waters' Crypto Investor Consumer Bill of Rights — originally an amendment to the Clarity Act — into a wider market structure proposal, according to Decrypt, citing journalist Eleanor Terrett. The move would let Democrats write their own framework rather than abandon the effort.

That rewrite would redraw the SEC-CFTC divide at the heart of crypto regulation. Sources told Terrett the proposal would strengthen the SEC's supervisory role and limit the CFTC's. The Clarity Act stalled in the Senate earlier this year, and Democratic control of Congress gives its critics greater influence over the terms of any successor.

Carlos Guzman, vice president of research at crypto trading firm GSR, put it bluntly to Decrypt: “I wouldn't say it's game over for Clarity, but passing it has become tougher.” He said any agreement will likely require stronger provisions on consumer protection and conflicts of interest. Negotiations could also include tighter safeguards against officials profiting from the industry they oversee — Democrats have criticized President Donald Trump's crypto conflicts, and Sen. Elizabeth Warren, likely incoming chair of the Banking Committee, has pushed to bar officials and their families from profiting from the sector.

There are still signs that market structure legislation crosses party lines. Stand With Crypto, which represents firms including Coinbase and Gemini, endorsed 45 candidates in the midterms — nearly half of them Democrats. At the time of Decrypt's report, 27 endorsed candidates had won, 12 had lost and six races were uncalled. CoinShares head of research James Butterfill flagged Democratic winners Chris Pappas in New Hampshire and James Talarico in Texas, plus Wyoming Republican Harriet Hageman, as crypto-policy supporters, though he said turning that support into enacted law remains the challenge.

The industry also lost a key advocate. Butterfill called Wisconsin Republican Bryan Steil's defeat a “meaningful loss.” Steil chaired the House digital assets subcommittee and was closely involved in efforts to advance the Clarity Act.

Congressional talks will run alongside agency action. Guzman noted the election doesn't automatically change SEC or CFTC leadership or halt their rulemaking, though Democratic control could bring closer scrutiny of regulatory decisions and more sway over agency funding and future appointments. Butterfill said the industry is becoming less dependent on the Clarity Act as both agencies pursue their own rulemakings, and competing priorities like AI regulation could slow Congress further.