CLARITY Act odds plunge as Republicans reject Democrats’ counter-proposal

The CLARITY Act’s chances of becoming law have taken another sharp hit as Senate Republicans and Democrats remain divided just hours before a key procedural vote.

The latest setback came after Republicans rejected a counter-proposal from Democrats, with negotiations appearing no closer to a compromise despite months of talks. Prediction markets quickly reflected the renewed uncertainty, reversing much of Monday’s optimism around the crypto market structure bill.

Sen. Cynthia Lummis (R-Wyo.), one of the bill’s leading Republican negotiators, said the Democratic proposal offered little movement from the position lawmakers held before the August recess.

“If Democrats are serious about reaching a deal, they need to actually start negotiating instead of resubmitting the same demands and calling it progress,” Lummis added.

Prediction markets lose confidence in CLARITY Act

The political deadlock quickly spilled into prediction markets.

Polymarket traders had briefly become more optimistic after Senate Republicans released a revised version of the bill over the weekend. The odds of the CLARITY Act becoming law in 2026 climbed to around 30% on Monday after Republicans said the new draft incorporated more than 120 substantive changes requested by Democrats.

That optimism did not last.

By Tuesday, Polymarket traders had sharply reduced their expectations, with the probability of the bill becoming law in 2026 falling to the mid-teens. The reversal highlights how quickly sentiment has shifted as lawmakers failed to reach a bipartisan agreement ahead of the Senate vote.

Kalshi is also showing a growing preference for a much longer timeline. Traders have pushed the probability of a crypto market structure bill becoming law before October 1, 2027, down to roughly the mid-30% range, while a later 2028 timeline has become increasingly plausible.

The sharp repricing follows a much stronger outlook just one day earlier, when prediction markets were betting that the latest Republican concessions could finally break the stalemate.

Republicans say they have already made major concessions

The latest Republican draft was presented as a final offer after months of negotiations.

Republican senators said the revised legislation incorporated more than 120 changes requested by Democrats. Among the most significant changes were new ethics provisions addressing concerns over public officials and their involvement with digital assets.

The proposal also includes changes affecting decentralized finance developers, affiliate trading, consumer protection and stablecoin rewards.

The ethics provisions have been particularly important to Democrats, who have raised concerns about potential conflicts of interest involving President Donald Trump and his family's crypto businesses.

The revised proposal would place restrictions on certain crypto-related activities by the president, vice president, members of Congress, federal judges and their spouses. It would also give state attorneys general a role in enforcing some of the restrictions.

Republicans argue that these changes represent substantial movement toward Democratic demands.

Democrats, however, say the latest proposal still does not go far enough.

Banking groups add another obstacle

The disagreement over ethics provisions is not the only problem facing the CLARITY Act.

Banking groups have also pushed back against provisions involving stablecoin rewards. Industry representatives argue that the latest proposal could still allow stablecoin products to offer rewards that effectively compete with interest-bearing bank deposits.

The concern is that customers could move deposits away from traditional banks and toward stablecoin products if those rewards remain available.

The revised Republican proposal includes a mechanism that would allow the Treasury secretary to intervene if stablecoin rewards contribute to significant deposit flight. Banking groups have argued that the mechanism would only activate after meaningful damage to bank deposits had already occurred.

A coalition of state attorneys general has also raised concerns that the legislation could limit states' ability to pursue crypto-related fraud and consumer protection cases.

These disagreements have made it increasingly difficult for negotiators to find the bipartisan support needed for the bill to advance.

The Senate needs 60 votes

The immediate test for the CLARITY Act is Tuesday's procedural vote.

The Senate is expected to vote on cloture on the motion to proceed, meaning the bill needs 60 votes just to advance to the next stage. Republicans currently hold 53 Senate seats, so at least seven Democrats or independents would need to support the measure if every Republican votes in favor.

That makes Democratic support essential.

The timing also adds pressure. The Senate has only a limited legislative window before the midterm election campaign intensifies, while the House has also shortened parts of its upcoming schedule. A failure to advance the bill now could therefore leave lawmakers with little time to revive the legislation this year.

This uncertainty is a continuation of the problems that have surrounded the legislation for months. Earlier, the Senate had already delayed consideration of the bill until after the August recess, leaving lawmakers with a narrow window to reach an agreement.

Related: CLARITY Act faces uncertain future as Senate runs out of time

Crypto markets are watching the vote

The sudden deterioration in the bill's prospects comes at a particularly sensitive time for the crypto market.

Bitcoin fell below $77,000 on Tuesday as optimism surrounding the legislation faded, while other crypto assets also came under pressure. The move followed a rally on Monday when traders initially responded positively to the Republican proposal and the possibility of a bipartisan breakthrough.

The CLARITY Act has become an important potential catalyst for the industry because it would establish a clearer framework for determining how digital assets are regulated and divide responsibilities between the SEC and CFTC.

A successful advance could therefore reduce regulatory uncertainty for exchanges, token issuers, developers and institutional investors.

A failed procedural vote, on the other hand, would not necessarily kill crypto regulation altogether, but it could significantly delay the broader market-structure framework lawmakers have spent more than a year negotiating.

That possibility is already being reflected in prediction markets.

Related: Bitcoin, Ethereum and XRP price outlook after the CLARITY Act vote delay

CLARITY Act faces a critical test

The latest breakdown shows just how fragile the progress around the CLARITY Act remains.

Republicans believe they have already made significant concessions, while Democrats continue to argue that key provisions, particularly those involving ethics, stablecoin rewards and enforcement, require further changes.

With the Senate vote requiring 60 votes, neither side can move the bill forward alone.

The prediction markets' rapid reversal from Monday's optimism to Tuesday's pessimism underscores the stakes. Unless Republicans and Democrats can bridge their differences before the vote, the CLARITY Act could face another major setback just as lawmakers reach the point where a deal appears possible.