Sign In Get Started

Senate Hours to Advance CLARITY; Bitwise Says Collapse Could Be Bullish

Crypto▲ Bullish

Senate Hours to Advance CLARITY; Bitwise Says Collapse Could Be Bullish

2026-08-05 12:27 UTCBy AlphaScala Research DeskSource reporting: CryptoSlateEditorial standards

Senate Hours to Advance CLARITY; Bitwise Says Collapse Could Be Bullish

Click a ticker for a live chart

Bitwise CIO Matt Hougan says a clean failure of the CLARITY Act could remove the uncertainty keeping professional investors on the sidelines, setting up a crypto rally.

Continue with

Dartmouth crypto ETF value falls 15% to $12.4M; shares unchanged

What is Bitcoin and how does it work?

The US Senate is down to hours to advance the CLARITY Act before lawmakers leave Washington for the August recess. Bitwise Chief Investment Officer Matt Hougan says a clean failure of the bill could remove the uncertainty that has kept professional investors on the sidelines.

Senate leaders must file for cloture on Wednesday to keep a vote alive before the recess. The Senate's floor schedule for Wednesday was focused on government funding legislation. The CLARITY Act was not listed. Lawmakers are expected to leave Friday and return Sept. 14.

Polymarket data shows traders placed the probability of the bill's enactment in 2026 at just 14%. That is down from more than 80% in February. The odds have fallen after previous delays, including a setback earlier this year.

Hougan said passage remains the best outcome for the industry and could start a new crypto bull market. He argued that a decisive defeat could prove better for prices than months of unresolved negotiations. "The best thing that can happen if Clarity doesn't pass this week is that the Polymarket odds break solidly lower," Hougan wrote in a Tuesday memo. A drop into the teens, he said, would allow markets to put the uncertainty behind them.

Crypto prices could briefly wobble before conditions emerge for a rally in the fall, Hougan said. Professional investors are holding back capital while the bill's fate remains unresolved, he said. A steep decline in passage expectations would allow them to stop waiting for Congress and begin assessing the industry under the regulatory structure already taking shape.

Failure would not automatically be bullish, Hougan said. The potential catalyst comes from removing uncertainty after investors fully price in the setback.

Hougan expects the bill to enter what he called a "walking dead" state if senators miss this week's deadline. Supporters could continue discussing possible votes in September, during a post-election session or through a year-end legislative package. That prolonged campaign, he said, could keep the same political risk hanging over the market for months.

The CLARITY Act would establish a federal framework for digital commodities and divide oversight responsibilities between the Securities and Exchange Commission and the Commodity Futures Trading Commission. The House passed the measure 294-134 in July 2025. The Senate Banking Committee approved an amended version 15-9 in May.

Supporters say the legislation would replace fragmented oversight with clearer rules for determining when digital assets fall under securities or commodities laws. An updated version released in July sought to resolve one of the largest political obstacles to passage by barring certain officials, including the president, vice president and some members of Congress, from issuing or sponsoring digital assets until January 2029. The restriction was intended to address Democratic concerns that President Donald Trump and other officials could profit from crypto ventures while influencing the rules governing the industry.

Critics say the provision would leave officials free to retain existing assets, trade tokens they did not issue and continue receiving some income through affiliated companies or licensing arrangements. Enforcement would be left to the Justice Department. State attorneys general would be expressly prevented from bringing cases. Sen. Elizabeth Warren, the committee's ranking Democrat, said the new language contained "massive loopholes" and would not prevent Trump from continuing to profit from existing or newly structured crypto ventures. She also argued that the broader bill would weaken investor protections, create risks for the financial system and leave gaps that criminals could exploit through decentralized finance platforms.

Republicans reject those claims. They argue that the bill preserves the SEC's antifraud powers, subjects major crypto intermediaries to Bank Secrecy Act requirements and establishes disclosure and resale restrictions for digital assets. With Democrats still demanding stronger ethics, investor-protection and national-security provisions, the July revision has not produced the votes required to bring the legislation across the Senate's 60-vote threshold.

Hougan said a congressional delay would not stop regulatory changes because the SEC could address many of the same questions through agency rules. He cited SEC Chair Paul Atkins, who recently said the commission was prepared to develop rules covering issues included in CLARITY. Hougan said those measures could initially be more favorable to crypto companies than a bipartisan law shaped by negotiations in Congress.

Agency rules would be less permanent because a future administration could appoint an SEC chair who seeks to reverse them. Legislation would provide a more durable division of regulatory authority. Hougan nevertheless argued that adoption by major financial companies would make a broad reversal increasingly difficult. He pointed to the expansion of spot crypto exchange-traded funds, tokenization projects, stablecoin payment systems and blockchain initiatives by established financial firms.

He compared the potential delay with the failed US telecommunications overhaul of 1994. At the time, the Senate did not approve the legislation. Internet companies and websites continued expanding before Congress passed a broader telecommunications law in 1996.

Hougan's argument leaves the market with two potentially bullish outcomes and one difficult middle ground. An immediate passage could produce a repricing based on durable federal rules. A decisive defeat could clear away a risk that has kept investors waiting. A narrow miss followed by months of speculation would preserve the uncertainty that Hougan believes has become the greater short-term burden.