Sen. Gallego and Sen. Tillis are drafting an alternative that would give state attorneys general enforcement roles, a change the White House-backed version excluded. The CLARITY Act's path to 60 votes hangs on the outcome.
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A bipartisan group of U.S. senators is drafting revised ethics language for the Digital Asset Market CLARITY Act after Democrats rejected a White House-backed proposal they said would concentrate enforcement power in the Justice Department.
The CLARITY Act aims to establish a federal regulatory framework for digital assets. The ethics dispute has become the central hurdle to its passage. Democrats on the Senate Banking Committee and a broader group of roughly seven senators have said the current draft falls short on safeguards for public officials, consumer protections and illicit finance measures.
The White House-backed version, released Wednesday, would prohibit the president, vice president, members of Congress, federal judges and their spouses from issuing or sponsoring digital assets while in office. Enforcement authority would rest solely with the Department of Justice. The restrictions would expire in early 2029.
Sen. Cynthia Lummis of Wyoming, a Republican who helped negotiate the language, described the rules as the strongest ever applied to the presidency. She said the president agreed to standards that exceed current legal requirements.
Democrats saw it differently. Sen. Ruben Gallego of Arizona, one of only two Democrats who supported the bill during committee consideration, called the text inadequate. He said it did not reflect months of bipartisan negotiations. Talks with Lummis, Sen. Bernie Moreno of Ohio and White House officials had stalled specifically over the question of granting enforcement roles to state attorneys general, Gallego said.
Gallego is now working with Republican Sen. Thom Tillis of North Carolina and other unnamed Republican colleagues on a counterproposal. The alternative will be presented to negotiators in an effort to bridge the gap.
Tillis described the White House-backed version as a constructive baseline but acknowledged that further adjustments would probably be needed to secure the 60 votes required for Senate passage. He said additional discussions with the White House are necessary to assess whether modifications acceptable to Democrats would also gain presidential approval.
The enforcement mechanism is the core dispute. The White House proposal leaves the Justice Department as the sole enforcer, a structure Democrats said creates a conflict of interest when the president or executive branch officials are the subjects of potential violations. Gallego and Tillis are exploring a framework that would give state attorneys general parallel enforcement authority, a change that would broaden the oversight net without creating a new federal agency.
Senate Majority Leader John Thune has tempered expectations. The legislation is unlikely to pass before the August recess, Thune said, though he hopes to initiate debate prior to adjournment. That leaves a tighter window for potential action later in the year amid competing priorities.
Industry professionals tracking the bill say resolving the ethics dispute remains critical to the CLARITY Act's prospects in the current congressional session. The bill has drawn support from major crypto firms including Coinbase and Circle, whose policy teams have been lobbying for passage. A failure to advance this session would reset negotiations in a new Congress with uncertain committee leadership.
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