Sept 16: The CLARITY Act Failed. Trump Gave Democrats the Political Opening They Needed.

Good morning everybody.

It’s your Daily Crypto News for Wednesday, September 16th, 2026.

The CLARITY Act failed yesterday.

The Senate’s procedural vote to advance the bill fell short of the 60 votes required for cloture. The official tally was 49 yes, 50 no, with one senator not voting. Three Republicans, Susan Collins, Josh Hawley and Jerry Moran, opposed advancing the legislation on substantive grounds. Republican Thom Tillis initially supported cloture but switched to no for the procedural purpose of preserving a motion to reconsider. Every Democrat and independent who voted opposed cloture.

This wasn’t final passage. The Senate was deciding whether to move forward with debate.

It couldn’t even get there.

And after watching this fight for months, reading the reactions and arguing about it with people, I think Dennis Porter basically nailed the central political problem.

“Trump coin, World Liberty, USD1, and Melania coin are why CLARITY failed.”

That was Porter’s reaction after the vote.

Trump gave Democrats an enormous political opening, and they took it.

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Why CLARITY Failed

Republicans have a legitimate complaint here.

The final Republican text incorporated 126 substantive changes requested by Democrats after more than a year of negotiations. Those changes included ethics provisions based substantially on the Tillis-Gallego proposal, a role for state attorneys general in enforcing conflict-of-interest rules, protections aimed at community banks and stronger safe harbors for developers.

And Democrats still voted no.

Cynthia Lummis, who has probably done more than anybody in the Senate to push digital-asset legislation, argued that Democrats kept moving the goalposts. Her position is essentially that Republicans spent a year negotiating, accepted more than 120 requested changes, and Democrats still wouldn’t take yes for an answer.

I understand that frustration.

But I also understand exactly why Democrats did what they did.

The remaining dispute was heavily centered on ethics, particularly whether the bill did enough to address President Trump’s personal and family financial interests in crypto. Democrats wanted stronger provisions, including divestment requirements under certain circumstances, rather than merely allowing assets to be placed in a blind trust.

Ruben Gallego, who had spent months negotiating with Republicans, put the blame directly on them after the vote, saying the bill failed because Republicans wouldn’t go further on presidential ethics. Gallego’s full statement

Cory Booker also opposed moving forward without stronger ethics restrictions, while Elizabeth Warren continued arguing that the legislation remained too favorable to the industry and inadequate on conflicts of interest and consumer protections.

Here’s where I land.

Democrats had a political slam dunk.

Trump has World Liberty Financial, USD1, the Trump meme coin and family involvement throughout the crypto industry. Democrats can now go into the midterms saying that the president had personal financial interests tied to an industry his administration was regulating, Republicans acknowledged there was enough of an ethics issue to negotiate new restrictions, and Democrats refused to approve legislation they considered inadequate.

You can disagree with their decision on the underlying crypto policy and still understand why they made the political decision.

If I were a Democratic senator looking at this purely through the politics of November, I understand that vote.

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Even Crypto-Friendly Democrats Voted No

One of the most striking votes was Kirsten Gillibrand.

Gillibrand has historically been one of the Senate Democrats most engaged in bipartisan crypto legislation, including years of work with Cynthia Lummis.

She still voted no.

The Block reported that Gillibrand had privately pushed other Democrats to support the legislation as recently as Monday, but ultimately joined them in voting against cloture. Other Democrats who had been viewed as possible votes, including Catherine Cortez Masto, Angela Alsobrooks, Cory Booker and Mark Warner, also voted no.

That tells you how completely negotiations fell apart.

But Democrats weren’t the only problem.

Susan Collins, Josh Hawley and Jerry Moran also voted no. Collins and Hawley had raised concerns about stablecoin rewards and their potential impact on community-bank deposits and lending.

And that’s where I see a possible silver lining.

I didn’t like everything that was being stuffed into this bill either.

Stablecoin Yield Should Not Be Sacrificed to Protect Banks

I’ve been complaining about this for days.

Traditional banks are worried that stablecoins could pull deposits out of the banking system.

Of course they could.

If I can hold dollars in a bank account paying almost nothing or hold a dollar-denominated stablecoin somewhere else and earn a competitive return, I’m going to look at the second option.

That’s called competition.

The final CLARITY text included a Treasury backstop intended to respond to damaging deposit flight tied to payment stablecoins, explicitly presented as protection for community banks and the farmers and small businesses that depend on them.

I understand the concern.

Community banks use deposits to make loans. Pull enough deposits from those institutions and you can affect credit availability.

But my answer can’t simply be that consumers therefore shouldn’t be allowed to earn competitive returns on their money.

Banks already have enormous advantages.

Some banks barely pay you anything for holding your money, then turn around and charge you fees if you don’t maintain a minimum balance.

Now a competing financial technology arrives and suddenly we’re worried about competition?

No.

If CLARITY comes back, I’d like another shot at this entire section.

And if we’re rewriting the ethics provisions, let’s go bigger there too. Don’t make this only about Trump. Apply meaningful financial conflict-of-interest rules to the president, vice president, Congress, federal judges and other public officials where appropriate.

I’ve spent years saying members of Congress shouldn’t be trading individual stocks while they’re writing the laws affecting those companies.

Let’s have that conversation too.

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Bitcoin Isn’t the Biggest Loser Here

The interesting thing about CLARITY failing is that Bitcoin probably needs the legislation less than almost everything else in crypto.

Bitcoin already has substantial regulatory treatment in place.

The CFTC has long treated Bitcoin as a commodity. The IRS has tax rules for it. The SEC has approved spot Bitcoin ETFs. FASB has established accounting standards covering crypto assets.

The unresolved questions become much more important when you move outward from Bitcoin.

What exactly makes a token a security versus a commodity?

Which spot markets fall under CFTC supervision?

What regulatory regime applies to exchanges and broker-dealers?

What protections exist for noncustodial developers?

How do you regulate genuinely decentralized DeFi?

What happens with tokenized securities?

What happens with stablecoin rewards?

Those are the questions CLARITY was supposed to answer.

Ripple CEO Brad Garlinghouse’s reaction was simple: “This one stings.” Ripple has obvious reasons to want Congress to resolve the SEC-versus-CFTC questions surrounding non-Bitcoin digital assets.

Without legislation, the SEC and CFTC can continue developing rules under their existing authority.

But there’s a weakness to relying entirely on regulators.

A future administration can appoint different commissioners and chairmen with different interpretations. Congressional statutes are considerably harder to reverse.

That’s why legislation still matters.

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Now Comes the $112 Million Political Question

This is where things get really interesting.

Fairshake had more than $112 million in cash on hand as of July 31, according to campaign-finance filings reported by Bloomberg Government, after raising more than $200 million during the 2024 election cycle.

That’s an enormous political war chest heading into the midterms.

But let’s make an important distinction.

Fairshake is not simply a Republican PAC.

The crypto political operation has supported and opposed candidates from both parties based largely on their positions toward digital assets.

So I’m not saying that yesterday’s vote means Fairshake is suddenly going to spend $112 million electing Republicans.

We don’t have evidence of that.

What we do have is an industry that spent huge amounts of money trying to get regulatory clarity and just watched its biggest legislative priority collapse.

Stand With Crypto called the vote a failure of leadership and said crypto voters would make themselves heard in November. The Blockchain Association says it intends to continue lobbying both parties and working with regulators.

Now we see what that means in practice.

Who gets funded?

Who gets cut off?

Does Fairshake target Democrats who voted no?

Does it target Republicans who opposed the bill?

Does it concentrate on open seats where it can elect explicitly pro-crypto candidates?

We don’t know yet.

But $112 million buys a lot of political advertising.

And after yesterday, every member of Congress knows that money is sitting there.

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Democrats Won This Fight. That Doesn’t Make Them the Pro-Tech Party.

This is where my position gets more complicated.

I think Democrats had an obvious political opportunity yesterday.

I also think Trump’s personal involvement in crypto created a completely unnecessary problem for the industry.

Both things can be true.

What I don’t accept is the leap from “Democrats had legitimate ethics objections to this bill” to “Democrats are now the party that will lead America into a crypto-friendly future.”

I’ve been in crypto for roughly a decade.

We’ve spent years without comprehensive market-structure legislation. The Biden administration’s approach was heavily centered on SEC enforcement. Gary Gensler became one of the industry’s primary antagonists. CLARITY was supposed to finally replace some of that uncertainty with legislation.

Now it’s stalled again.

And my broader concern isn’t limited to crypto. It’s technology generally.

We’ve watched political fights spill into Tesla, SpaceX, Starlink and now AI. Some of that criticism is legitimate. Elon Musk’s politics shouldn’t immunize his companies from scrutiny.

But his politics also shouldn’t determine whether the underlying technology is useful.

SpaceX dramatically changed launch economics and restored a major domestic U.S. launch capability. Starlink created another way of providing broadband to locations where running physical cable can be extremely expensive. Tesla helped force the global automobile industry to take EVs seriously.

You can dislike Musk and acknowledge those things simultaneously.

That’s what worries me when technology becomes just another partisan weapon.

If Republicans only like technology when the CEO supports Republicans, that’s stupid.

If Democrats only like technology when the CEO supports Democrats, that’s stupid too.

Policy should be about whether the technology works, whether the market is competitive, whether consumers are protected and whether America remains capable of building things.

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Crypto Prices

Bitcoin is sitting around $75,917, down approximately 1.6% over 24 hours.

Ethereum is around $2,400, down approximately 3.3%.

BNB is approximately $712, down around 1%.

XRP has taken a much larger hit, falling roughly 10% to $1.28.

Solana is approximately $97.46, down around 3.6%.

TRON is approximately $0.334, down around 1%.

Zcash is moving the other direction, up approximately 7.2% to $1,216.

Hyperliquid is around $48.63, down approximately 1.3%.

Total Crypto Market Cap: approximately $2.58 trillion, down around 1.8%.

Fear & Greed: 63, Greed.

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My Take

After thinking about this for the last 16 hours, I don’t think there has to be one good guy and one bad guy here.

Trump created a legitimate ethics problem by mixing the presidency with substantial personal and family crypto interests. Dennis Porter is right that those businesses gave Democrats an incredibly easy political argument against CLARITY.

Republicans also have a legitimate complaint that they incorporated 126 Democratic changes and still couldn’t get a single Democratic vote.

And I have problems with the bill itself, particularly if protecting bank deposits means restricting consumers’ ability to earn competitive returns on stablecoins.

If I were writing the next version, I’d strengthen the ethics provisions and broaden them beyond Trump. I’d protect genuine financial competition. I’d create durable rules for developers, exchanges, DeFi and token issuers. And I’d stop trying to write legislation primarily around whichever political party happens to control Washington at that particular moment.

But don’t confuse yesterday’s vote with the death of crypto.

Bitcoin existed before CLARITY.

Blockchain development existed before CLARITY.

DeFi, stablecoins, tokenization and the idea that financial infrastructure can be rebuilt on open networks existed before CLARITY.

The industry will keep moving.

The political fight just moves to November.

Happy HODLing