Key facts
- Democrats are pushing for a vertical integration provision in the CLARITY Act.
- Republicans and the crypto industry oppose the provision.
- The CLARITY Act faces a Senate cloture vote on September 15.
- Treasury Secretary Scott Bessent urged senators to pass the bill.
- Coinbase CEO Brian Armstrong believes regulatory clarity will be achieved regardless of the bill's passage.
The CLARITY Act faces a significant hurdle as Democrats and Republicans clash over the inclusion of a vertical integration provision, with a crucial Senate cloture vote scheduled for September 15. Democrats advocate for the provision, arguing it would direct regulators to establish new standards for vertically integrated crypto companies to prevent conflicts of interest. Republicans, however, express concerns that such a provision could be weaponized by a future Democratic administration, and the crypto industry has also voiced opposition.
Vertical integration, exemplified by FTX's control over both its exchange and market-making operations through Alameda Research, is a key point of contention. Negotiations are ongoing, with Senator Cory Booker (D-N.J.) and Senators Cynthia Lummis (R-Wyo.) and John Boozman (R-Ark.) reportedly discussing the language. Booker indicated shared values but stressed that he would not support the bill without consumer protections against the potential downsides of Web 3.0.
Amid these challenges, Treasury Secretary Scott Bessent has urged senators to pass the CLARITY Act to maintain U.S. leadership in cryptocurrency. Despite these efforts, the crypto industry is preparing for the possibility that the cloture vote may fail. Coinbase CEO Brian Armstrong stated that regulatory clarity will eventually be achieved, regardless of the bill's passage. The House's cancellation of late-September sessions and early recess further complicates the timeline, potentially delaying a final vote until after the midterm elections, even if the cloture vote succeeds. Data from Polymarket suggests only a 17% chance of President Trump signing the bill into law this year.