CLARITY Act Gets Held Up Before Senate Recess; Prediction Markets Reduce Probability
Senate leaders did not meet the procedural deadline for passing the CLARITY Act before the summer recess, causing prediction markets to sour on odds for the bill. Bipartisan talks have gotten an added boost in pressure from gambling interests, DeFi crackdown fears, and ethics language at odds with lawmaker assurances that provisions will be resolved.
Senate Misses Window to Vote on CLARITY Act Before Recess
On Kalshi, one of the leading prediction markets, the probability the CLARITY Act will be enacted before July 1, 2027 decreased by 8 percentage points to 41%. The odds that it will be enacted before January 2028 increased to 65%.
Senate Majority Leader John Thune declined to issue a cloture motion on Tuesday, ending the narrow timeframe to hold a floor vote before the summer recess in accordance with Senate Rule XXII.
Conflict with brick-and-mortar casino interests, law enforcement concerns over the decentralized finance (DeFi) safe harbors, and lingering disagreements over ethics provisions are complicating bipartisan efforts.
Bitwise CIO Matt Hougan told investors that “Crypto will be fine” if lawmakers fail to pass the bill, noting SEC rulemaking and current levels of institutional adoption could serve as catalysts for growth outside of CLARITY.
Legislation Faces Timeline Pressure on Senate Floor, Bipartisan Challenges Grow in Congress
Introduced to the House earlier this session and passed in July 2025, then cleared through the Senate Banking Committee via bipartisan 15-9 vote in mid-May, the clock is ticking on the CLARITY Act. With filibuster rules in place requiring 60+ votes to overcome, the bill will need buy-in from at least seven Senate Democrats to overcome Republican opposition (current Senate seat count 53).
The bill isn’t moving smoothly over on Capitol Hill, even with the intense momentum from over 200 crypto companies who signed a letter, led by Stand With Crypto, with big names like Coinbase, Ripple, Circle, Kraken and Binance.US calling for an immediate vote.
Progress on reaching a floor vote has been slowed by the following policy conflicts:
- Dispute Over DeFi Regulations: Regulators and legislators remain at odds over AML compliance and safe harbor language for DeFi platforms. Crypto proponents have called for a “safe harbor” legal protection where crypto software creators aren’t considered to be financial institutions if they do not custody customer funds. Meanwhile, law enforcement officials have pushed back stating such carve-outs allow criminals to easily operate in underground finance. For this reason, talks have been at a standstill regarding encryption protections for users and software creators versus investigating money laundering.
- Pushback From Gaming Industry: Casino and gaming industry groups AGA, IGA, and AGEM urged Senate leadership to exempt sports and casino-style prediction markets from the legislation through a letter, claiming such markets would circumvent state licensing laws. The group says these companies evade state and tribal licensing regulations, local tax laws and consumer protection requirements by masking sports betting as investment contracts regulated by the federal government. Per the lobbying effort, if event contracts are placed under the purview of the CFTC, it would amount to an illegal nationalization of online gambling.
- Tribal Law: At a Senate Indian Affairs Committee roundtable discussion, IGA Vice Chairman Tehassi Hill pushed back against allowing the CFTC sole jurisdiction over prediction markets, stating that they should be regulated by state and tribal laws.
Rulemaking by Agencies and Adoption by Markets Provide Alternative Routes
Missing the opportunity to set a statutory line in the sand between the SEC and CFTC this session doesn’t stop the crypto markets from continuing to grow, industry executives say. In an investor note, Bitwise CIO Matt Hougan stated that “Crypto will be fine” because agency rulemaking by the SEC can continue to provide clarity while adoption continues via the growth of digital asset businesses at traditional banks.
Should the Senate allow the clock to run out before lawmakers depart Washington, US-based crypto companies will continue operating under current administrative guidance and interpretations for longer. Nonetheless, Kalshi trading volume of $5.42 million signals that participants are expecting the legislation to drag into 2027, but see approval as postponed, not denied.
Conclusion: A Change in Timeline, Not Destination
The Senate’s timeline signals tough odds for the omnibus digital asset package before the election. Despite efforts from a group of more than 200 Web3 decision-makers advocating for swift congressional movement, several debated policy issues including DeFi regulation, prediction markets oversight, and crypto gambling legislation have delayed hopes until 2027. For now, DAOs will continue to look to agency action and organic adoption.
