Bernstein says Clarity Act failure could accelerate SEC, CFTC crypto rulemaking

Back in May last year when House representatives French Hill and Glenn Thompson introduced the Clarity Act, supporters heralded the legislation as a long-awaited framework to clarify regulatory responsibilities between the Securities and Exchange Commission and the Commodity Futures Trading Commission.

More than a year later, the bill's prospects have dimmed. After Galaxy Research cut its estimated odds of passage in 2026 to 30% last month, analysts at Bernstein said Monday the Senate now has just the coming week before recess to pass what they described as "the most consequential crypto market structure bill in U.S. history."

In a note to clients, the analysts led by Gautam Chhugani said that while failure of the bill to pass would trigger a negative knee-jerk reaction across digital asset markets, policy support from the SEC and CFTC would accelerate under Project Crypto rather than stall.

“Project Crypto could continue to provide strong interpretative releases - Clear taxonomy on tokens, clear rules around DeFi and self-custody. Agencies could also accelerate the ‘innovation exemption’ for issuing tokens which would be exempted from being ‘securities' during a finite period,” the analysts wrote.

CFTC Chair Michael Selig made similar remarks in a Fox Business interview last month, warning that regulators would end up "writing all the rules" for crypto if Congress fails to act. Selig described the current framework as a "patchwork of state laws and regulations" that is "really bad for business" and called federal standards "absolutely critical" for certainty, clarity, and consumer protection.

Meanwhile, Bernstein also said it expects continued regulatory support for tokenization initiatives, including tokenized real-world assets, perpetual futures tied to those assets, and prediction markets, even if the legislation stalls. 

The brokerage nevertheless called it "disappointing" if the bill fails to secure bipartisan backing, arguing the legislation would provide lasting regulatory clarity and encourage banks, broker-dealers, and exchanges to invest in the digital asset industry. 

Negotiations on the bill are ongoing. Last week, bipartisan Senators Thom Tillis and Ruben Gallego submitted a revised ethics compromise to the White House as lawmakers raced to secure enough support for the legislation before the Senate's Aug. 7 recess.