The CLARITY Act's prospects in the Senate have darkened further following the Democratic victory in the midterm elections, which delivered the party control of both chambers of Congress. The political shift has emerged as an even more serious concern for the US crypto sector, and it is likely to complicate efforts by Republican legislators to gather the votes needed to advance the crypto market structure bill. With the party set to hold both the House and the Senate, the window for advancing the measure has narrowed considerably.

The legislation was already struggling in the upper chamber. A procedural vote in September failed to move the bill forward, with 49 senators backing the measure and 50 opposing it — short of the 60 votes required to proceed, according to a Forbes report. The 60-vote requirement stems from the Senate's cloture rule, which must be satisfied to end debate and allow most legislation to move to a final vote.

With the new dynamics taking shape in Washington, the CLARITY Act now has less room to advance. Republican legislators have little time left to strike deals with Democrats before the current Congress expires.

January 2027 Deadline Adds Pressure

The CLARITY Act must pass through both houses of Congress before January 3, 2027, when the current session of Congress comes to an end. If the act is not passed by then, the bill will die and have to be reintroduced in the next session of Congress. Each Congress runs for two years, and unfinished bills do not carry over automatically.

That deadline places additional pressure on Republicans, particularly with Democrats now in control of both the House and the Senate. Moving the bill forward will require greater effort from the two parties, and support from Democrats could prove critical to the legislation's future.

The CLARITY Act is designed to provide clear guidelines for the digital asset market in the United States. Negotiations, however, have been made difficult by the lack of agreement on regulatory authority and on a broader framework for crypto regulation. As market structure legislation, the bill's core task is jurisdictional: deciding which regulators would oversee which segments of the digital asset market.

The Senate delay may also shape the legislative process in the next Congress. Should the bill fail to win sufficient backing in the lame-duck session — the working period between the elections and the seating of the new Congress — lawmakers will have to rethink elements of the legislation before attempting another vote. Any renewed effort would unfold in a Congress with a different political makeup.

For the crypto industry, the impasse creates added uncertainty about the timeline for establishing a broader US regulatory framework for cryptocurrencies.

SEC Advances Crypto Custody Proposal Independently

Despite the stalled legislation, the Securities and Exchange Commission (SEC) is continuing to push forward its own crypto-related regulatory agenda — a sign that regulators are not waiting on Congress to resolve the market structure debate. On October 1, the SEC introduced amendments to the custody rule for registered investment advisers and regulated investment funds, according to an agency press release. The changes are at the proposal stage, meaning they would follow the SEC's standard rulemaking process — including public comment — before any final adoption.

The amendments include clauses that would enable certain crypto assets to be held in self-custody arrangements, provided that specific conditions are met. The proposal also seeks to broaden the list of eligible custodians by allowing state-chartered trust companies to act as custodians, subject to the proposed amendments.

The development carries weight because custody still plays a major role in the regulatory debate over digital assets. Greater regulatory clarity would give investment advisers and regulated funds more flexibility when managing and securing their crypto assets.

The SEC proposal and the CLARITY Act, however, relate to different aspects of regulation. The SEC measure concerns custody requirements, while the CLARITY Act aims to establish rules for the digital asset market as a whole. The parallel efforts show that the work of regulating crypto is ongoing even as legislators remain unable to agree on broader legislation. The Senate delay does not mean all regulatory action has stopped, since federal agencies retain the authority to address specific issues.

What Comes Next

The winding-down of the current congressional session could prove critical for the CLARITY Act. Republicans now face the challenge of securing enough Democratic backing to pass the act after its earlier procedural defeat in the Senate. Should no deal be reached, the legislation would have to begin anew through the next legislative process.

In the meantime, the delay stands as evidence of the widening divide between the need for clearer crypto regulatory guidelines and the politics surrounding their passage. While the SEC continues its work on rules for various sectors of the crypto space, the broader market structure framework will continue to hinge on congressional cooperation.