Investment bank Jefferies issued a stark warning on Monday, flagging that the CLARITY Act—the defining crypto regulation bill of the current Congress—faces rapidly deteriorating odds of passage. Analyst Andrew Moss and his team noted that Polymarket prediction market odds for the bill becoming law by the end of 2026 have fallen from 70% in mid-May to just 48% as of late June. The bank is now warning that this narrowing window creates elevated near-term volatility for both digital assets and blockchain-related equities, as the legislative outcome sharpens into a binary event.
The drop in prediction-market odds reflects three converging pressures that have made the CLARITY Act's Senate path increasingly treacherous. First, unresolved ethics provisions attached during committee markup have not found consensus among lawmakers. Some members are pushing to strip these provisions entirely, while others treat them as non-negotiable, creating a political standoff that slows momentum. Second, outstanding disputes over illicit finance language remain unresolved, with law enforcement agencies raising objections to specific DeFi exemption language that could allow unregulated protocols to bypass anti-money-laundering requirements. Third, the Senate floor calendar offers roughly 20 legislative days before the August recess—a timeline that makes it nearly impossible to navigate the complex procedural gauntlet the bill must survive.
The procedural math is daunting. Before any full Senate floor vote, lawmakers must reconcile two separate committee-passed versions: the Senate Banking Committee's bill and the Senate Agriculture Committee's Digital Commodity Intermediaries Act. These two bills contain substantively different approaches to CFTC jurisdiction over digital commodities, and no merged text has been published as of late June. Following reconciliation, the merged text must then be aligned with the House-passed H.R. 3633, which cleared the lower chamber in July 2025 with a 294-134 vote. Finally, the bill must clear a 60-vote cloture threshold to overcome a filibuster—a high bar in the currently divided Senate.
Miss that 20-day window, and the market structure bill does not simply get rescheduled; it gets repriced entirely. "Failure to pass Clarity before the August recess could push the bill out to next year, or even later, if Democrats flip the Senate in November," Moss and his colleagues warned. The November midterm elections could radically alter the legislative landscape. If Democrats gain seats, the 60-vote calculus could shift against the bill entirely, making passage all but impossible in the next Congress. Even if Republicans retain control, the compressed calendar after the recess—with midterm campaigning already underway—leaves little room for major financial legislation.
Jefferies specifically flagged three crypto-linked equities as most exposed to legislative-driven swings: Coinbase (COIN), Circle (CRCL), and Bullish (BLSH). For Coinbase, the exposure is direct. The exchange's product suite—staking, lending, and rewards on USDC holdings—operates in the regulatory gray zones that the CLARITY Act would either sanction or constrain. A delay preserves the current ambiguity but also preserves enforcement risk, particularly with an SEC that has shown willingness to act on custody and yield products. For Circle, the situation is more mixed. The current bill text would reportedly close the loophole enabling third parties like Coinbase to offer rewards on USDC, which could suppress USDC growth metrics. However, a delay gives Circle more runway to diversify revenue beyond stablecoin reserve income before that provision lands. Bullish, the operator of a regulated crypto exchange, faces similar uncertainties around the treatment of its own token and trading activities.
The implications extend beyond equities. Polymarket odds, which have become a widely followed barometer of legislative probability in Washington, show a 22-point collapse since mid-May. Galaxy Digital's Alex Thorn had already cut his firm's passage probability from 60% to 50% on June 26, citing calendar compression rather than policy disputes as the primary driver. Jefferies' note now lands below that level, suggesting Wall Street is converging on sub-50% as the base case. The prediction market is effectively pricing in a coin-flip outcome, with the downside skewed by the approaching August deadline.
One of the most critical details that many market participants overlook is the asymmetry in the delay scenario. Recent guidance from the SEC, CFTC, and OCC has improved the near-term operating environment for institutional crypto participants, leading some to believe that regulation is progressing without legislation. But Jefferies is explicit that agency guidance is reversible. A future administration can undo every no-action letter and staff bulletin without legislation. The CLARITY Act, by contrast, would create durable statutory clarity that agencies cannot unwind unilaterally. That distinction is what makes the bill material beyond a single news cycle. Without it, the crypto industry remains at the mercy of shifting regulatory winds, with each new administration potentially reversing the progress of its predecessor.
The broader context of the stablecoin yield debate adds another layer of complexity. Standard Chartered has estimated that permissive stablecoin regulation could redirect up to $500 billion in deposits from traditional banks into digital dollar instruments. The CLARITY Act does not directly address stablecoin yields, but the underlying bill text could influence how and where those yields are earned. If the bill slips past August, it re-enters a Senate environment potentially reshaped by November elections, at which point Democratic gains could shift the 60-vote calculus against it entirely. That would likely push any comprehensive crypto regulation into 2027 or beyond, leaving the industry in regulatory limbo for at least another year.
JPMorgan made a similar call earlier in June, warning that the crypto market structure bill may have only a limited window for passage this year as the congressional calendar tightens ahead of midterm elections. The alignment of multiple major investment banks on this bearish timeline underscores the seriousness of the legislative bottleneck. While the CLARITY Act cleared the Senate Banking Committee on May 14 in a 15-9 bipartisan vote—drawing all Republican members and two Democrats—that momentum has clearly stalled. The procedural realities of a divided Congress, combined with unresolved policy disputes, have turned what looked like a fast-track bill into a precarious legislative gamble.
For the crypto industry, the stakes could not be higher. The CLARITY Act represents the most ambitious attempt to establish a federal regulatory framework for digital assets, defining when tokens are securities versus commodities, establishing clear rules for crypto exchanges, and creating consumer protections. Its failure—or indefinite delay—would leave the industry operating under the patchwork of state regulations and inconsistent federal guidance that has characterized the last several years. That uncertainty has already driven innovation offshore, with many crypto firms relocating to jurisdictions like Singapore, Dubai, and the European Union, where regulatory frameworks are more defined.
As the clock ticks toward August, the crypto market is bracing for what Jefferies calls "elevated near-term volatility." The binary nature of the legislative outcome means that any news about the bill's progress—or lack thereof—could trigger sharp price movements in both tokens and related equities. Investors who have been waiting for regulatory clarity to enter the market may remain on the sidelines, while those already exposed to crypto assets may hedge their positions. The next 20 legislative days will determine not just the fate of the CLARITY Act, but the trajectory of the entire digital asset ecosystem in the United States for years to come.
Source: Cryptonews News