II. Industry's Legislative Agenda

POLICY BACKGROUND

Cryptocurrencies have long been advocated as an alternative to traditional, regulated finance by individuals with libertarian leanings, and the crypto industry’s attitude towards transparency has reflected this laissez-faire approach. The crypto industry, critical of the SEC under the first Trump administration over its own regulatory approach, intensified its hostility towards SEC oversight under the Biden administration. During this period, SEC chair Gary Gensler affirmed that a majority of crypto tokens were subject to securities regulation, and in office Gensler took action to rein in both corruption and potential consumer harm in the crypto market. Coinciding with its lobbying efforts, crypto firms during the Biden administration would engage in so-called “revolving door” tactics, hiring former officials at the CFTC as it worked to build influence within the federal government.
 
In 2022, bipartisan coalitions in Congress worked to advance legislation that would undermine the SEC’s regulatory authority over crypto in favor of CFTC oversight. The Responsible Financial Innovation Act (S.4356), introduced by Sens. Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY), was an effort to empower the CFTC’s jurisdiction by dividing the two agencies’ jurisdiction by asset function. Later in the 117th Congress, the bipartisan Digital Commodities Consumer Protection Act, a proposal to give the CFTC exclusive oversight powers governing digital commodity spot markets, would advance through committee. Both bills faced skepticism among consumer advocacy groups, and would ultimately fail to become law; the collapse of FTX later that year and the subsequent controversy over CEO Sam Bankman-Fried’s political involvement would undermine the industry's legislative momentum. Nevertheless, the election of a pro-crypto president in 2024, alongside the inauguration of new SEC and CFTC chairs favorable to the industry, shows the crypto lobby was able to regroup and translate its political investment into a favorable regulatory environment. 

LEGISLATIVE DYNAMICS

In 2025, the crypto industry would secure a major legislative victory in the form of the GENIUS Act, which passed with support from eighteen Senate Democrats. The law created the first federal regulatory framework for stablecoins, helping crypto integrate into the broader financial system, while also letting stablecoins enjoy permissive reserve and licensing requirements. The bill was criticized by public interest groups over concerns it would enable both market manipulation as well as the use of cryptocurrencies for illicit activities. After being enacted, many observers expected that the crypto industry would secure its long-held goal of transferring oversight to the SEC via the passage of the Digital Asset Market Clarity (CLARITY) Act.

The legislation’s provisions are reminiscent of prior efforts in this area: under the bill, the CFTC would be given sole jurisdiction over digital commodity spot markets, with the SEC only given oversight concerning “investment contract assets.” Advocacy groups such as Better Markets have been staunchly critical of the CLARITY Act, arguing it stands to fundamentally undermine the long-term stability of the financial system and put consumers at risk of losing money in scams. Similarly, labor unions including the AFL-CIO have come out against the legislation over pension-related concerns. Criticizing the lack of involvement from labor unions in favor of crypto and finance industries, the AFL-CIO warned “Working people have not had a seat at the table. That’s because their pensions appear to be on the menu.”

CURRENT IMPASSE

In 2026, the crypto industry has continued to prove formidable as a political actor. As of July 15, just three crypto-affiliated Super PACs reportedly held $136 million in cash on hand; Fairshake, whose spending had a significant impact in the 2024 cycle, alone holds almost $126 million of that broader number. Additionally, supporters of the CLARITY Act have been able to win support from important actors in the finance industry, traditionally hostile to the legislation, with Goldman Sachs CEO David Solomon coming out in support. But while the crypto industry was able to help elect candidates of both parties favorable to its efforts in past cycles, the controversy over Trump’s personal financial entanglement with the industry has unexpectedly derailed the bill’s chances of passage.

Sen. Ruben Gallego (D-AZ), a recipient of some $10 million from the Protect Progress PAC, has come out in opposition to the current version of the bill over ethics-related concerns. Gallego, who last year voted in support of the GENIUS Act, had previously voted to advance the CLARITY Act in committee. In response, Senate Republicans produced a revised version of the legislation on July 22, which included ostensible ethics protections. These supposed safeguards have been poorly received, with opponents deriding them as purely cosmetic, with Gallego describing it as “not a serious effort”. Enforcement of proposed rules that prohibit federal officials from issuing or sponsoring digital assets would be entirely at the discretion of the Trump administration’s Department of Justice.

Moreover, these provisions would sunset on January 20, 2029, meaning that the DOJ under a future administration would be unable to prosecute violations that occurred during Trump's term.  Concerns that the CLARITY Act would disempower the ability of state attorneys general to police cryptocurrency-related financial crimes has been expressed by individuals including New York Attorney General Letitia James. With Congress poised to take its August recess beginning on August 8, the window for passage this session appears to be shrinking.  

III. Conclusion

The crypto industry has proven itself to wield significant political power. Should the CLARITY Act fail to make it into law, the industry still stands to make gains through the rulemaking process: SEC chair Paul Atkins, a firm proponent of the CLARITY Act, has stated the commission is 'ready, willing, and able' to initiate the rulemaking process on crypto if the bill fails to pass. Nonetheless, despite making inroads in Washington through significant spending on lobbying and campaign donations, ethics concerns surrounding Trump’s crypto ventures stand to deny the industry's ideal legislative outcome this session. At a time when Americans are concerned about corruption, the crypto industry's alignment with a president personally profiting from the sector has made its deregulatory agenda a liability. Gillibrand, whose longtime support for crypto legislation has faced significant scrutiny, has recently been criticized for her role in brokering the compromise bill.​

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Following Kamala Harris’ defeat in 2024, crypto industry proponents including Mark Cuban argued that her insufficient support for the sector led her to lose important voting blocs. However, evidence continues to mount that for candidates, receiving support from the crypto industry is increasingly an electoral liability. A poll by Americans for Financial Reform and the Center for Responsible Lending released on July 1 found that 62 percent of voters would be less likely to support a candidate who takes significant crypto industry money. Earlier this year, a survey by the Progressive Policy Institute and GBAO found that voters viewed crypto unfavorably by a 57 to 17 percent margin, with similar reception for crypto companies themselves (55 to 19 percent). Crucially, the latter poll found that 71 percent of respondents, including 67 percent of Republicans, support prohibiting federal officials from issuing, promoting, or otherwise profiting off of crypto. As such, though the revised bill’s ostensible ethics safeguards are cosmetic, it’s clear that broad support does exist for preventing politicians from profiting off of cryptocurrencies. 

Aidan Smith
Founder, Labyrinth Insights