CLARITY Act stalls as Senate talks hit snag over enforcement provision

State attorneys general have taken an active role in crypto enforcement. New York's attorney general has brought cases against several exchanges. The provision would have given them a formal role in federal ethics enforcement. The source said the reversal weakens that state-level influence.

The CLARITY Act aims to establish ethics rules for government employees involved in crypto markets. The bill has drawn bipartisan support in principle. Disagreements over enforcement mechanisms have slowed progress. The provision allowing state AG lawsuits was one of the most contentious elements.

The White House had earlier signaled support for the measure. The source said the administration now appears to side with GOP concerns about federalism. The CLARITY Act is one of several crypto bills moving through Congress. The House passed the FIT21 Act earlier this year. Senate action has been slower. Industry groups have called for clear ethics guidelines to avoid conflicts of interest among regulators. The enforcement provision was seen as a way to ensure those guidelines are followed.

The source said the provision's collapse could delay the entire bill, potentially preventing it from advancing this year. A committee markup has not been scheduled. The source said the provision's fate is uncertain. Talks are expected to continue. The momentum behind the bill has stalled.