Key Takeaways
- TD Cowen projects the legislation is more likely to advance through Congress in 2027, with final regulatory implementation potentially occurring in 2029.
- Democratic senators could employ procedural tactics to stall the bill until after midterms election results are announced, the report suggests.
In a major development that could have wider ramifications for the digital asset sector, Investment bank TD Cowen has cautioned that political calculations surrounding the 2026 midterm elections could significantly postpone passage of CLARITY Act– a key crypto legislation under consideration in Congress—potentially pushing implementation into the next US presidential administration.
The firm’s Washington Research Group, directed by managing director Jaret Seiberg, issued a note reportedly on Monday suggesting that Democratic lawmakers may withhold support for digital asset market structure legislation if they perceive opportunities to reclaim House control through November’s elections. This strategic positioning could delay a bill that has already consumed years of legislative negotiation.
The legislation in question passed the House of Representatives in July under the name CLARITY Act but exists in the Senate as the Responsible Financial Innovation Act. Despite bipartisan support in principle, TD Cowen projects the legislation is more likely to advance through Congress in 2027, with final regulatory implementation potentially occurring in 2029.
Current congressional dynamics favor Republicans, who control both chambers. Democratic senators could employ procedural tactics to stall the bill until after midterms election results reveal whether political winds have shifted in their favor in the polls.
Central to the legislative impasse are conflict-of-interest provisions that Democrats have insisted must accompany any crypto regulatory framework. These safeguards would prohibit executive branch officials and their family members from holding digital assets or maintaining financial interests in crypto businesses while serving in government positions.
The provisions directly target concerns about US President Donald Trump’s extensive crypto entanglements. Trump and his family maintain involvement in World Liberty Financial, a crypto platform; have connections to American Bitcoin, a mining operation; and have promoted various digital asset projects. Additionally, Trump’s December pardon of former Binance CEO Changpeng Zhao intensified Democratic concerns about potential regulatory favoritism toward companies or individuals with Trump family connections.
A bipartisan Senate Agriculture Committee draft released in November explicitly incorporated conflict-of-interest safeguards designed to prevent government officials from personally profiting from crypto industry developments they might influence through regulatory decisions. Democratic legislators view these provisions as essential integrity measures, while Republican counterparts characterise them as politically motivated obstacles targeting a specific administration.
In the report, a potential compromise mechanism to break the stalemate was proposed: delaying enforcement of conflict provisions by approximately three years. Under this framework, Congress could enact the broader market structure legislation immediately while postponing ethics restrictions until after Trump’s term concludes.
“Time favors enactment as the problems disappear if the bill passes in 2027 and takes effect in 2029,” the analysis stated, noting that such timing would allow conflict provisions to take effect under a different administration. “Crypto would need to accept that the presidential election could impact the final rules, and Democrats would need to accept that the conflict provision will not apply to Trump.”
CLARITY Act would establish clear divisions of authority between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission(CFTC), defining which digital assets constitute securities subject to SEC oversight versus commodities falling under CFTC jurisdiction.
“Election outcomes are always uncertain, which is why Democrats may cut a deal,” TD Cowen observed, acknowledging that midterm results cannot be reliably predicted and that minority party members might choose compromise over gambling on electoral shifts that may not materialise.
