Bernstein: Failed CLARITY Act could pressure crypto valuations down

The US Senate’s schedule is becoming a key variable for the crypto industry as lawmakers prepare to enter summer recess at the end of this week, according to Bernstein, a wealth manager. Bernstein says that the odds of the Digital Asset Market Clarity Act (CLARITY) advancing are falling, raising the risk of another short-term downturn in crypto valuations—particularly for Bitcoin.

In a Monday report shared with Cointelegraph, Bernstein also warned that a missed legislative push could spark a “knee-jerk” reaction from market participants. Still, the firm points to a counterbalance: if Congress stalls, regulators may intensify efforts already underway under existing authorities, including the SEC and CFTC’s Project Crypto.

Key takeaways

• Bernstein says CLARITY momentum is weakening as the Senate approaches its summer recess, increasing the risk of additional downside for the market.
• The firm expects the crypto market to bottom and regain momentum toward late Q3 or early Q4 ahead of the mid-term period, if timing pressures persist.
• Prediction market activity on Polymarket puts CLARITY passage before the end of 2026 at 31%, down from 38% week-to-date.
• Bernstein argues that legislative delays could lead to more proactive SEC and CFTC policy releases tied to token classification and DeFi rules under Project Crypto.

Recess risk and the “knee-jerk” market reaction

Bernstein’s central concern is timing. With the Senate preparing to start summer recess, the window for passing CLARITY appears to narrow. The wealth manager said that if the legislation does not advance, the market could interpret the outcome as a near-term delay in US crypto market structure reform.

In Bernstein’s view, that could trigger an immediate negative “industry knee-jerk reaction,” potentially translating into another leg down for Bitcoin and the broader crypto market. The firm’s outlook is not purely bearish, however: it also anticipates that—tactically—the market could find a bottom and begin building momentum toward late Q3 and early Q4 before the mid-terms.

What Project Crypto could do if CLARITY stalls

Bernstein’s report highlights an important asymmetry. While markets may react negatively to legislative delays, the same outcome could push regulators to move faster within their current legal frameworks.

Project Crypto is a joint initiative intended to use existing agency authority to develop a workable regulatory approach for digital assets while Congress finalizes broader legislation under CLARITY. The SEC first announced Project Crypto under Chairman Paul Atkins in July 2025, and it was later expanded into a joint staff effort between the SEC and the CFTC in September 2025. (SEC announcement: https://www.sec.gov/about/sec-launches-project-crypto; CFTC/SEC expansion referenced by Cointelegraph: https://www.cftc.gov/LawRegulation/FederalRegister/finalrules/2026-05635.html.)

According to Bernstein, the SEC and CFTC could respond to Congress’s slowdown with additional interpretive releases and clearer guidance. The firm specifically points to potential developments involving:

• Token “taxonomy” and interpretive guidance tied to how different types of tokens should be treated.
• Clearer rules related to decentralized finance (DeFi).
• Acceleration of an “innovation exemption” concept for issuing tokens that would be exempted from securities status during a finite period.

For investors and builders, the practical takeaway is that regulatory clarity might not arrive only through CLARITY. If Congress can’t deliver in the near term, markets may increasingly price regulatory outputs—such as guidance, interpretive releases, and rulemaking momentum—emanating from the SEC and CFTC.

Polymarket odds slip to 31% for passage by end-2026

Bernstein’s concern about dwindling prospects for CLARITY is echoed by market-implied probabilities. Polymarket data shows the odds of the act being signed into law before the end of 2026 at 31%, down 7% over the past week and down 9% over the past month. The market reports roughly $3.7 million has been wagered on the outcome. (Source: Polymarket.)

The drop matters because prediction markets often reflect shifting expectations around legislative scheduling and political willingness—especially when credible procedural deadlines approach. In this case, the timing implied by summer recess is a direct catalyst for priceable uncertainty.

Earlier coverage also indicates that expectations have moved in recent months: on June 26, Galaxy Digital cut its odds of CLARITY becoming law in 2026 to 50%, warning that the US Senate was running out of time to pass the market-structure bill before its August recess (as noted in Cointelegraph’s reporting: https://cointelegraph.com/news/galaxy-cuts-2026-clarity-act-odds-50).

Political and industry friction around the bill

Beyond Senate calendar risk, CLARITY is navigating political and institutional scrutiny. Cointelegraph reported that White House officials are reportedly weighing a bipartisan ethics counterproposal received on Thursday after weeks of negotiations between Republican Senator Thom Tillis and Arizona Democrat Ruben Gallego.

Per sources familiar with the matter who spoke to crypto journalist Eleanor Terrett, the proposal would allow state attorneys general to sue the Department of Justice if it fails to enforce ethics laws against federal officials. (As reported by: https://www.cryptoinamerica.com/p/president-trump-weighs-bipartisan.) The relevance for crypto stakeholders is indirect, but it underscores how broader political processes can consume attention and time that might otherwise be directed toward stalled legislation.

CLARITY’s substance has also faced resistance. The banking industry has pushed back, arguing that the draft could let crypto firms offer yields on stablecoins without meeting requirements they say apply to traditional financial institutions. Cointelegraph also flagged that the act’s stablecoin yield provisions have drawn concern from banking groups (related link referenced in the source material: https://cointelegraph.com/news/aba-banking-associations-clarity-act-yield).

As those tensions persist, the bill’s path becomes less predictable—one reason prediction market odds and institutional forecasts can move quickly as legislators approach procedural inflection points like recess.

With the Senate headed into recess, traders and long-term participants should watch two things in parallel: whether CLARITY gains any late-stage momentum before lawmakers leave, and whether the SEC and CFTC accelerate practical guidance under Project Crypto—especially around token classification and DeFi—if Congress fails to deliver the legislative clarity the market is pricing.