A failure to advance the CLARITY Act this week would leave the landmark crypto market structure bill in a "walking dead" state — stalled, but not permanently defeated — yet it would not halt the cryptocurrency industry's continued momentum, according to Bitwise chief investment officer Matt Hougan.

The CLARITY Act, formally the Financial Innovation and Technology for the 21st Century Act, is designed to resolve a long-standing jurisdictional dispute by establishing a clear framework for when digital assets fall under SEC oversight as securities versus CFTC oversight as commodities. That ambiguity has been cited by market participants as a key obstacle to broader institutional adoption.

In a blog post on Wednesday, Hougan acknowledged that many observers, including himself, had described this as the "make or break" week for the CLARITY Act. However, he argued that the crypto sector has made too much progress to "go back in the bottle."

"The reality is that Washington is always late to major technology shifts, and it has rarely mattered as much as people feared," Hougan wrote.

His remarks come as the Senate confronts an Aug. 5 deadline to advance the market structure bill ahead of its summer recess. Concerns are growing that a failure to pass the legislation this week could push consideration into next year, as lawmakers shift focus toward the November midterm elections.

Diminishing Prospects for CLARITY Act Passage

Market observers have grown increasingly pessimistic about the bill's chances in 2026. In July, Galaxy Research lowered its estimated probability of the CLARITY Act passing this year to 30%. Meanwhile, Polymarket currently shows just a 23% likelihood of the bill being signed into law in 2026, down sharply from 82% in February.

On July 24, NYDIG global head of research Greg Cipolaro noted in a research report that the latest draft was more complete than prior versions but still lacked sufficient bipartisan support.

"The central investor takeaway is that Republicans have produced a substantially more complete bill, but not yet one with a credible path to 60 votes," Cipolaro wrote.

The 60-vote threshold refers to the Senate's cloture rule, which is required to end debate and advance most legislation to a final vote. According to sources who spoke with Punchbowl News, Senate Democrats will deny cloture for the crypto bill unless the White House shows progress on a bipartisan ethics deal as well as movement on illicit finance and stablecoin yield provisions.

Hougan said that if the bill is not passed, there remains some hope it could advance in September, or even in December, when Congress returns for a lame duck session — the period after November's elections when outgoing lawmakers still vote before the new Congress convenes.

"Congress often bundles multiple bills into a year-end 'omnibus' package, forcing legislators to vote on a single bill that includes things they like and things they hate. Maybe the Clarity Act can pass that way," Hougan wrote.

Regulators Prepared to Act Without Legislation

Should the CLARITY Act fail to pass this year, Hougan said the industry would fall back on the joint interpretation issued by the SEC and CFTC in March, which classifies Bitcoin and other assets as digital commodities and replaces the SEC's 2019 staff guidance.

SEC Chair Paul Atkins reinforced this stance last week, stating that his agency is "ready, willing, and able to come out with rules that address the same issues as CLARITY and other aspects of the crypto market."

However, regulatory rules are not as durable as legislation and could face legal challenges or be reversed by a future administration. Atkins himself acknowledged this limitation in March, when the two agencies released their joint interpretation.

"Only Congress can ensure that regulation in this area is future-proofed through comprehensive market structure legislation," Atkins said. His remarks were shared on X by Senator Cynthia Lummis.

WisdomTree chief legal officer Ryan Louvar argued at a July congressional hearing that the absence of formal legislation would continue to hinder the market, regardless of regulators' efforts.

"A market cannot function well when its participants cannot tell in advance which agency's rules apply to them," Louvar said.

Crypto's Momentum Independent of Washington

Despite these concerns, Hougan maintained that "crypto will be fine." He noted that even without legislation, the industry would have roughly two and a half years to continue accelerating before a new administration could potentially appoint new SEC leadership.

The CLARITY Act is one piece of a broader congressional crypto agenda that has advanced in fits and starts, alongside separate stablecoin legislation that has also faced delays despite bipartisan interest.

"Washington is dysfunctional. It seems crazy to me that we can't get our act together to pass legislation that would improve investor protections and spark new innovation," Hougan wrote.

"But it's not a referendum on crypto's validity as a pillar of the global financial infrastructure. That ship has long since sailed. At this point, crypto has enough momentum that it will reshape finance for decades, regardless of what happens in the next few days."