Bitwise: Crypto Has Moved On—Regulation Won’t Reverse Adoption

Bitwise chief investment officer Matt Hougan says the failure of the CLARITY Act to advance this week would leave the bill effectively stalled, but it would not derail the broader crypto industry’s momentum.

In a Wednesday blog post, Hougan argued that even if lawmakers miss the Senate’s immediate timetable, crypto regulation will still progress through existing frameworks and agency action—while Congress retains the option to package the bill into broader end-of-year legislation.

Key takeaways

• Hougan called the CLARITY Act “walking dead” if it misses the current push, not permanently defeated.
• The Senate faces an Aug. 5 deadline to advance the bill before the summer recess.
• Probabilities for CLARITY passing this year have fallen sharply in recent months, according to market-based forecasts.
• If CLARITY fails, Hougan expects reliance on the SEC-CFTC joint interpretation from March, which treats Bitcoin and other assets as digital commodities.
• Regulators’ interpretation is not as durable as legislation, which can be challenged in court or reversed under a future administration.

Aug. 5 deadline raises the odds of delay

Much of the current focus centers on the Senate’s Aug. 5 deadline to move the CLARITY Act before the chamber heads into its summer recess. Failure to advance the bill has led to fears that it could slip into next year—particularly as lawmakers shift attention toward November midterm elections.

Hougan framed the political reality more broadly, suggesting Washington often moves too late on major technology shifts, but that—so far—late action has not stopped markets from continuing to evolve.

He also suggested that timing could yet work in crypto’s favor later this year. Congress may return in September, or potentially during a lame duck session in December, where bills can be reconsidered.

Hougan further pointed to a common legislative mechanic: “omnibus” end-of-year packages. In that scenario, multiple measures are combined, and lawmakers can be forced into voting on provisions they may not support as standalone legislation.

Why investors see weaker chances for passage

While proponents have described this as a defining window, outside assessments have grown less optimistic about passage in 2024.

In July, Galaxy Research reportedly lowered its probability estimate for CLARITY passing in 2026 to 30%, according to a post shared by analyst accounts on X. Polymarket’s forecasts have also moved downward: the platform currently indicates a 23% chance that the bill is signed into law in 2026, down from 82% in February.

Other reporting adds to the picture of stalled momentum. On July 24, NYDIG global head of research Greg Cipolaro said the latest bill draft is more complete but still does not have enough bipartisan support. Cipolaro emphasized that Republicans have created a more complete version, but that it has not yet produced a credible path to the 60 votes required for advancement.

According to sources speaking to Punchbowl News, Democrats in the Senate would deny cloture unless there are signs of progress—particularly involving a bipartisan ethics deal, movement on illicit finance, and stablecoin yield.

Regulators’ March interpretation could become the fallback

If CLARITY does not move forward this year, Hougan said the industry would fall back on the SEC-CFTC joint interpretation released in March. That framework classifies Bitcoin and other assets as digital commodities and replaces earlier SEC staff guidance from 2019.

SEC Chair Paul Atkins reiterated in recent remarks that the agency is prepared to issue rules addressing many of the issues associated with CLARITY. According to Hougan’s analysis, this means the near-term regulatory environment may still provide a degree of clarity even without legislation.

However, the legal durability of an interpretation is limited compared with statutory rules. Hougan noted—and the broader regulatory context supports—that non-legislative guidance can be challenged in court or revisited by future administrations. Atkins acknowledged this limitation when the SEC and CFTC released the interpretation in March, underscoring the idea that only Congress can create a “future-proof” solution through comprehensive market-structure legislation.

This matters for market participants because regulatory uncertainty can affect product planning, compliance strategies, and how firms determine which regulator’s approach applies to specific activities. WisdomTree chief legal officer Ryan Louvar argued at a July congressional hearing that ongoing uncertainty would continue to impede market functioning, saying participants cannot reliably anticipate which agency’s rules govern them.

“Crypto will be fine,” but the legislative test remains

Hougan’s central message is that the absence of CLARITY would not be a referendum on crypto’s legitimacy as a financial infrastructure. He argued that the momentum the industry already has would likely persist and keep reshaping finance for years, even if lawmakers take a different route or delay action.

Still, he acknowledged the political and regulatory stakes. If the bill stalls, the industry would likely receive clarity through regulators’ actions rather than through comprehensive legislative authority, and that approach may not provide the same long-term certainty investors and builders want.

From Hougan’s perspective, the most practical implication of a CLARITY delay is time. He suggested that even in a worst-case scenario—where the bill does not move this year—crypto would have roughly the next two and a half years to push faster innovation before a potential new SEC leadership transition.

What to watch next is whether Senate leaders can demonstrate enough momentum to advance the CLARITY Act before the summer recess, and—if not—whether there are signs of progress on the deal components sources say Democrats require for cloture, such as ethics, illicit finance, and stablecoin yield.