Washington is trying to write crypto rules while half the industry, a sitting president, banks, betting companies, and state regulators all pull in different directions. The CLARITY Act is supposed to bring structure to U.S. digital asset markets, but right now it looks more like a traffic jam with dragons in it.
- CLARITY is caught between ethics, timing, and turf wars
- Trump’s crypto ties are a political poison pill
- DeFi, stablecoins, and prediction markets are all fighting for legal cover
- Crypto money is still flooding Washington
The broad idea behind CLARITY is simple enough: define how digital assets are regulated, draw a line between commodities and securities, and give builders and exchanges something clearer than the current “ask three lawyers, get five answers” setup. The problem is that every serious crypto rule in Washington now runs straight into politics, money, and old-fashioned institutional self-defense.
One of the biggest brakes on the bill is ethics language. Lawmakers are fighting over whether public officials, including President Donald Trump and family members, should be blocked or limited from profiting from crypto ventures while Congress writes the rules. That is not some abstract good-government hobby horse. It goes straight to whether the public can trust the process.
The issue got hotter after the Office of Government Ethics released Trump’s latest financial disclosure on Tuesday. The figures cited in reporting on that disclosure say Trump’s crypto-related income in 2025 reached $1.2 billion, including $635 million in “royalties” from the sale of so-called “Celebration Coins, ” $515 million from token sales issued by World Liberty Financial, and $65.6 million from WLF equity sales. Bloomberg reported that the royalties flowed from CIC Digital LLC, which is tied to the $TRUMP memecoin, and the disclosure itself is available in the presidential financial filing.
Trump’s crypto holdings were also reported to include over $50 million worth of BTC, between $5 million and $25 million each of ETH and USDC, between $100, 000 and $250, 000 in “virtual USD, ” plus smaller amounts of other tokens. He also controls 15.75 billion WLFI, with WLFI reportedly trading around $0.057 apiece and sitting about 80% below its 2025 peak.
That is exactly why the ethics fight matters. This is not a theoretical conflict-of-interest debate. It is the president’s own financial exposure hanging over a bill that could shape the rules for the whole sector. Washington can tolerate a lot, but it hates a paper trail that makes the self-dealing look too obvious.
There is also a deeper political problem. Even if Congress genuinely needs a market-structure bill, it becomes harder to sell as neutral when the most powerful man in the country appears to have a very direct financial stake in the same industry. Critics are not inventing that concern out of thin air. Crypto fans may roll their eyes, but optics matter because legitimacy matters.
Another fight inside CLARITY is DeFi liability. The dispute centers on whether noncustodial decentralized finance developers should face legal exposure when bad actors use their platforms for illicit finance. Noncustodial means users keep control of their own assets instead of handing them to a platform. That is one of DeFi’s defining features, and also one reason regulators get nervous when the system is used for laundering, sanctions evasion, or other criminal activity.
The real policy question is hard, not silly. If developers write software that others misuse, how much responsibility should they bear? Hit them too hard and you scare off builders. Let them off the hook completely and you create a legal shrug so big that every scammer with a laptop suddenly becomes a “protocol founder.”
According to CoinDesk, law enforcement groups were invited to a White House meeting on June 29, and White House crypto adviser Patrick Witt had already tried and failed to reach consensus on the issue at a similar meeting in June. Senate Banking Chair Tim Scott has said he hopes the full Senate votes on CLARITY in July, while Majority Leader John Thune said he is open to letting negotiations on “legit” CLARITY issues continue, but not forever. Thune also suggested the bill could go to the floor after the Senate reconvenes on July 13.
The calendar is brutal. The Senate will have no floor action for the next two weeks because of the upcoming 250th birthday recess, and lawmakers only have about 20 sitting days before the August 8 summer break. That is not a lot of room to squeeze in a major market-structure bill, a few ethics fights, and enough political hand-wringing to fill a cable news calendar.
The vote math is rough, too. CLARITY needs 60 votes to pass, which means full Republican support plus at least seven Democrats. That is a heavy lift in a calmer environment. With ethics disputes, DeFi liability concerns, and a tight schedule, the bill is less on a road than it is on a narrow bridge with someone lighting matches nearby.
Market watchers are split on whether the Senate can move in time. On June 26, Galaxy Digital research head Alex Thorn cut the odds of passage to a coin flip from 60%, saying the downgrade was “primarily related to the calendar, not the substance of the bill.” TD Cowen analyst Jaret Seiberg expects the bill will get floor time soon after the Senate reconvenes, possibly that week or the next. Jefferies warned that if CLARITY misses the August 8 window, it could slip to next year, or later if Democrats flip the Senate in November.
Stablecoins are another fight entirely. Banking groups are still pushing back even after a bipartisan compromise removed passive rewards for simply holding stablecoins. The Independent Community Bankers of America put it bluntly in a video: “crypto insiders are pushing for less accountability and more risk … When crypto gets a free pass, communities pay the price.”
The concern is straightforward. If stablecoin platforms or issuers offer yield-like rewards, users may move money out of banks and into crypto products that look safer or more attractive than they really are. Troy Richards, president of Guaranty Bank & Trust, said the outflow he was seeing was “relatively small, ” but warned that rewards could accelerate deposit flight. He added: “I don’t think any of the issuers of stablecoins are going to be looking to have their reserves at Guaranty Bank in northeast Louisiana. So that’s not going to happen for us.”
That is not a revolutionary insight. It is just banking 101 with a crypto wrapper: deposits matter, reserves matter, and if you build a product that behaves too much like a bank without bank-level safeguards, regulators and community bankers are going to notice.
JPMorgan Chase’s analysts took a more balanced view on June 29. In a post titled Getting the framework right for digital assets in the United States, they said the U.S. “has a genuine opportunity to lead in digital finance” and praised tokenization and “programmable money.” Tokenization means putting real-world assets or rights on a blockchain as tokens. Programmable money means digital money with rules built in, such as automatic transfers or conditional payments.
But JPMorgan also warned against “shadow banking, offering yield-like incentives or balance-holding arrangements without the capital, liquidity, consumer protection, and supervision standards that accompany traditional deposit products.” The bank’s point is not anti-innovation. It is that innovation stops being clever when it becomes a regulatory loophole with a marketing budget.
Prediction markets are now the loudest legal brawl in the room. Kalshi and Polymarket are pushing into states where sportsbooks already hold licenses, arguing that their products are swaps or event contracts under federal Commodity Futures Trading Commission oversight, not bets that require state gambling licenses. That sounds tidy in theory. In practice, state regulators hear “sports betting with extra nouns.”
The fight is already getting real on the ground. The Legal Battles Over Prediction Markets Heat Up in Michigan as the Ingham County Circuit Court in Michigan granted a temporary restraining order against Kalshi, requiring the platform to use geofencing technology to block Michigan customers and setting a penalty of $120, 000 for every day it violates the order. The TRO expires on July 13. Michigan Gaming Control Board executive director Henry Williams said Kalshi was “targeting Michigan’s most vulnerable residents with sports betting dressed up as investing.”
Kalshi says prediction markets fall under “exclusive federal jurisdiction” and says it won’t be “bullied by interests that care more about protecting their monopolies than their consumers.” That is sharp language, but the underlying legal fight is real. Prediction markets sit in a gray zone between derivatives and gambling, which is why both federal and state authorities keep grabbing for the same steering wheel.
The CFTC is caught in the middle. The agency has sued nine states, Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin, in the broader fight over whether online prediction markets can operate over state gambling objections. On June 24, 17 Democratic senators sent a joint letter seeking to block CFTC funding that would be used to stop states and tribes from enforcing gambling laws against online prediction markets.
A second letter, dated June 25 and signed by John Curtis and Adam Schiff, asked the CFTC to investigate a Wall Street Journal report about Polymarket and alleged fake wagers totaling $1.9 million. That matters because prediction markets only work if participants believe the data is real. If fake volume can be gamed into existence, the whole “truth machine” pitch starts looking like marketing with a spreadsheet.
The regulatory setup is especially awkward because the CFTC is reportedly running with only one commissioner, Michael Selig, while the other four seats have been empty for nearly a year. That is not exactly the kind of staffing profile that screams “fully equipped referee” for a high-stakes fight over derivatives, gambling, and federal preemption.
Politics makes it stranger still. Trump has voiced support for prediction market expansion. Don Jr. made a “double-digit millions” investment in Polymarket last year through 1789 Capital, and he is an adviser to both Polymarket and Kalshi. Trump Media & Technology Group also has a prediction market called Trump Predict in development. So the same political orbit that is already central to the crypto ethics fight is also hovering around the prediction market fight. Subtlety remains in short supply.
The money flowing into Washington is just as revealing. On June 30, Public Citizen said corporate super PACs had spent $294 million so far in the 2026 U.S. midterm cycle, equal to 57% of the $517.5 million in total corporate outlay. Of that, $189 million, or 37% of the total, came from crypto businesses. Public Citizen’s numbers do not include state-level corporate spending or dark money groups, which means the real total is probably larger than the public can easily see.
Fairshake remains the dominant crypto PAC. Its biggest contributors are Coinbase and Ripple Labs, and crypto firms have given $82.6 million to Fairshake in the current cycle. Ripple led crypto contributions with $49.6 million, Coinbase gave $35.2 million, and Foris Dax, the parent of Crypto.com, gave $38.6 million and also sent $35 million to MAGA Inc. Gemini and the Winklevoss Capital Fund have collectively pledged $25.7 million, while Cantor Fitzgerald contributed $10 million through funding of the Fellowship PAC tied to Tether.
That is not just “participation in democracy.” It is an industry building a parallel influence machine and calling it civic engagement. Bernie Sanders called the spending “legalized bribery” and renewed his demand to end Citizens United. The Supreme Court’s Tuesday ruling on campaign finance laws makes that kind of reform look unlikely, which is another way of saying the money spigot is still open.
The betting industry is doing its own version of this. Nearly all of the $46 million in corporate contributions in that sector went to Win for America, which represents DraftKings, FanDuel, Fanatics, and Bet365. The overlap between betting money and crypto money is not subtle: both sectors are trying to shape the same regulatory boundaries before someone else does it for them.
Crypto tax legislation is also floating around, though some of it looks more performative than transformative. A coalition of consumer and tax advocates, labor unions, and other groups opposed the proposed Tax Clarity for Mining and Staking Act on June 26. The bill would let stakers and block reward miners defer tax consequences until tokens are sold. The coalition argued that would create preferential treatment and “waste billions now and in the future.”
There is a legitimate policy debate here. Supporters say taxing token rewards before they are actually sold can create absurd accounting problems. Critics say deferral would amount to a giveaway to wealthy crypto holders and firms, with no solid mechanism ensuring the assets are eventually taxed properly. Both can be true: tax law can be dumb and lobbyists can be worse.
Illinois is testing the same tension from another angle. The state is set to impose a 0.2% tax on crypto transactions starting next January, with an expected $60 million in revenue from crypto operators acting as intermediaries for Illinois residents. On June 22, Republican State Rep. John Cabello filed House Bill 5798 to repeal the Digital Asset Privilege Tax Act section. That is what happens when lawmakers decide crypto can be both a revenue source and a political target. Eventually someone asks for a receipt.
Key questions and takeaways
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Why is CLARITY stuck?
Because the bill is trapped between ethics concerns, DeFi liability disputes, and a Senate calendar that leaves very little room before the August recess. -
Why do Trump’s crypto ties matter so much?
If a sitting president is financially exposed to the industry Congress is regulating, even a clean bill will look compromised. That is a political problem whether or not any law has been broken. -
What is the stablecoin rewards fight about?
It is about whether crypto products can mimic bank deposits and pay yield-like rewards without bank-level capital, liquidity, consumer protection, and supervision. -
Are prediction markets just gambling with better branding?
Sometimes that is exactly how state regulators see them. The legal fight is over whether they belong under federal commodities law or state gambling rules. -
How much political power does crypto have right now?
A lot. Public Citizen says crypto businesses account for $189 million of corporate spending in the 2026 cycle so far, with Fairshake as the main vehicle for pushing influence. -
Can Congress actually move this year?
Maybe, but the window is tight. If the Senate misses its current window before the August break, passage this year gets much less likely. -
What does CLARITY mean for builders and users?
In plain English, it is supposed to give crypto firms clearer rules on registration, disclosure, and which regulator has the lead. That could reduce uncertainty if lawmakers can stop fighting long enough to finish the job.
The bigger picture is pretty clear. Crypto is no longer fighting for legitimacy in the abstract. It is fighting over ethics rules, banking privileges, derivatives law, gambling jurisdiction, tax treatment, and political influence all at once. That can be the beginning of a real market framework, or just the best-funded policy cage match in Washington.
Further reading
A couple of useful follow-ups for the policy weeds and the odds-watchers.
