Midterms could stall CLARITY Act, test crypto's political clout says TD Cowen

Analyst Jaret Seiberg detailed in a new policy note that Washington's crypto agenda heavily relies on the upcoming elections. He cautioned that the probable election results could impede Congress's ability to pass the CLARITY Act over the next two years.

This legislation is set to establish federal rules for bitcoin and various other digital assets. The industry has invested $176 million across more than 100 races to influence the outcome.

The most likely outcome, a Democratic sweep, presents the most challenging scenario for crypto. Prediction markets suggest Democrats have a 90% chance of winning the House and a 62% chance in the Senate. Under this forecast, Sen. Elizabeth Warren would chair the Senate Banking Committee.

Seiberg noted that Warren is a crypto skeptic who has opposed the CLARITY Act and anticipates she will conduct rigorous oversight of federal regulators. However, Warren cannot prevent regulators from adopting pro-industry policies.

A split Congress, with Republicans controlling the Senate but Democrats in the House, is viewed as a better outcome for bitcoin. Rep. Maxine Waters might trade support for market structure bill components in exchange for investor protections and attention to her other priorities, preventing adverse legislation from reaching the president.

The least probable but most favorable path for crypto policy is a Republican sweep, which Kalshi assigns a 10% chance for the House and a 35% chance for the Senate.

However, the margin matters significantly for the CLARITY Act's advancement. A wider Senate majority increases the chances of leaders advancing the bill in 2027 or 2028, potentially during the lame-duck session. Conversely, a narrow majority could leave the bill stalled due to Democratic insistence on ethics provisions opposed by the president.

The House passed its version of the CLARITY Act in July 2025 with a 294-134 vote, and the Senate Banking Committee approved its version in May 2026 by a 15-9 vote, with two Democrats joining Republicans. Progress stalled when a cloture vote failed 49-50 on September 15.

Why it matters

The outcome of next week's midterms will heavily influence the passage of the CLARITY Act, which aims to create federal rules for the crypto sector. This political uncertainty is critical for market sentiment as the industry has invested $176 million in races to shape this outcome.