Bitcoin (BTC) and the broader crypto market fell sharply after the Senate failed to pass the CLARITY Act. Senators voted 49-50 on a key procedural vote, short of the 60 votes required for the legislation to pass.
The market reacted quickly, with BTC dropping over 3% to a low of $74,887 on Tuesday before ultimately closing at $75,584. Ethereum (ETH) recorded a bigger decline, falling nearly 5% to a low of $2,356 before closing at $2,396. Ripple (XRP) fell over 8% in 24 hours and currently trades around $1.30. Other tokens registered similar declines, with the overall crypto market cap down 2.31%.
Clarity Act Fails to Advance
The Senateโs failure to pass the crucial legislation to a cloture vote keeps the market structure bill in limbo. The CLARITY Act would have laid out a clear regulatory framework by dividing oversight between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Several Senators across party lines withheld support for the legislation in its current form. Democratic Senators Angela Alsobrooks, Ruben Gallego, and Kirsten Gillibrand voted โNo,โ with several Republican Senators, including Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis, also voting against passing the legislation.
Tillis, who has previously worked on disagreements over stablecoin rewards and ethics, voted โNoโ and moved to recommit. This leaves the door open for another attempt to secure bipartisan support for the legislation.
Late Democratic Counteroffer
Democratic lawmakers introduced an amended version of the CLARITY Act hours before the scheduled vote. The counter addressed several ethics provisions and other provisions, and was submitted after discussions with Senate Minority Leader Chuck Schumerโs office. However, the counter was rejected by Republican lawmakers, who argued that the current version already included 126 changes requested by Democratic lawmakers.
Ethics Rules Remain Major Roadblock
Ethics concerns and disagreements remain the biggest hindrance to the bill despite President Trump accepting an amended version. The revised language put several restrictions on crypto interests and holdings held by the President, Vice President, members of Congress, federal judges, and relatives of government officials. It also allowed state Attorney Generals to pursue civil enforcement actions.
However, Democratic lawmakers argued the restrictions did not address crypto ventures linked to President Trump and his immediate family. The Democratsโ revised bill wanted to extend the rules to the children of federal officials as well. Senator Gallego accused President Trump of seeking โtime to crimeโ and ruled out supporting the legislation in its current form.
Other provisions lawmakers failed to agree upon are stablecoin rewards, protection for developers, and event contracts that could conflict with existing state or tribal gambling rules. The banking industry has pushed back against stablecoin rewards, flagging concerns it could impact deposits in traditional financial institutions.
According to Lacie Zhang, research analyst at BitGet Wallet, markets had only partially priced in the Senate passing the CLARITY Act.
โThe CLARITY Act appears to be only partially priced in. Prediction markets still imply a relatively low probability of enactment in 2026, suggesting the market is not positioned for certain passage.โ
Zhang added that BTC faces far less regulatory uncertainty thanks to spot Bitcoin ETFs, which give investors regulated exposure to the asset. BTCโs custody and institutional trading systems are also more established.
โBitcoin would likely benefit the least on a relative basis because its regulatory status, ETF access and institutional infrastructure are already comparatively clear.โ
According to Zhang, Ethereum stood to benefit most if the regulation passed, given the network supports stablecoins, decentralized finance (DeFi), and tokenized assets, and faced substantial regulatory complications.
Institutions to Keep Building Under Existing Rules
Meanwhile, crypto companies and financial institutions in the industry are expected to continue building products despite the setback. However, the absence of a clear regulatory framework and legislation could hinder firms expanding their services. Jessica Martinez, policy director at Fireblocks, stated to crypto.news,
โThe good news is that the market will keep moving whether Clarity passes or not. So the question becomes which entities are prepared to move with it.โ
Major players in the cryptocurrency industry are already operating under current rules, while more cautious players are content with waiting things out.
Bitcoin and Crypto Take Hit
The failure to pass the CLARITY Act has had a tangible impact on the market. Data from CoinGlass revealed $668 million in total liquidations over the past 24 hours, of which $570 million were long positions, a clear sell-side tilt. Meanwhile, CoinMarketCapโs Fear & Greed Index slipped to 63, a notable decline from 71 recorded the week prior. The total crypto market cap has also slipped over 2% to $2.58 trillion.
BTC also retreated following the vote, dropping over 3% to $75,584 on Tuesday. The flagship cryptocurrency is currently trading around $75,669, maintaining a constructive bias. The price is also above the 50-day EMA around $73,566, and the 200-day EMA around $73,052, reinforcing the bullish bias. However, the Relative Strength Index (RSI) has slipped back into neutral territory, while the MACD suggests waning positive momentum.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
