'This one stings': Clarity Act fails procedural Senate vote — is crypto's biggest regulatory push dead?

A procedural vote to advance landmark digital asset legislation failed spectacularly on Tuesday, with both Republicans and Democrats voting against it, leaving the cryptocurrency industry crushed.

On Tuesday, the Senate voted 49-50 against the Clarity Act, which would regulate the digital asset industry comprehensively for the first time at the federal level.

"This one stings," said Ripple CEO Brad Garlinghouse in a post on X following the vote.

"A post mortem needs to be done on why this failed (more from me on that in the days ahead)," Garlinghouse said. "The politics of the democrats (the anti-crypto army) was elevated over good policy."

Over the past year, the Senate has been trying to pass the bill but has hit roadblock after roadblock, including a battle between banks and crypto over stablecoin rewards, how to approach software developers and prosecution, and President Donald Trump's ethics concerns.

White House crypto advisor Patrick Witt called Tuesday's vote a "major disappointment."

"The full cost of today’s result may not be known for years to come, but this much is clear: it increases the risk that the standards that global financial markets adhere to in the future will be those of Brussels or Beijing, rather than Washington and New York," Witt said in a post on X.

What happened

Key Democratic negotiators said they voted against the bill largely because of ethics concerns. Trump's vast crypto wealth has grown to hundreds of millions of dollars linked to World Liberty Financial, run by his sons, and his memecoin — sparking concerns from lawmakers over how much influence Trump has as his administration works on rules and how the Clarity Act would direct his agencies to regulate the industry he has profited from.

Republicans, Democrats and the White House have gone back and forth on ethics language over the past few months, but as of Tuesday, key issues still remain over whether or not states could charge public officials and whether the provision should cover family members.

Sen. Angela Alsobrooks, D-Md., who had previously voted to advance the Clarity Act out of the Senate Banking Committee earlier this year on the condition that the bill includes ethics provisions, said Tuesday that lawmakers were "ready to strike a deal," ahead of the vote.

However, she and other Democrats said Republican leadership shut down discussions at the last minute ahead of the vote.

"I am proud of the progress we made, and I am determined to keep fighting to regulate this technology, protect the millions of Americans who own crypto, and ensure that communities across Maryland can harness the benefits of digital assets safely," Alsobrooks said in a statement to The Block.

Sen. Catherine Cortez Masto, D-Nev., said she voted against the bill in part because she said it would have undermined law enforcement's ability to go after bad actors, would have allowed prediction markets to continue to stay in business as is, and did not do enough to address ethics concerns.

"I’ve been clear from the beginning about my position, and I’m disappointed that Republican leadership refuses to accept such commonsense solutions," she said.

Sen. Ruben Gallego, D-Ariz., said he would not support legislation that enables Trump.

"This legislation failed squarely because Republicans refuse to say no to the president," Gallego said in a statement. "It takes 60 votes to pass a bill, and instead of spending their time twisting themselves into knots to appease President Trump, Republicans should have worked more closely with Senate Democrats to craft a bill that could pass with strong ethics provisions."

Notably, Sen. Kirsten Gillibrand also voted no on the bill, despite privately pressing fellow Democrats to vote in support of it on Monday, according to Politico. Her team did not respond to a request for comment.

One of the lead architects of the Clarity Act, Republican Sen. Cynthia Lummis, pushed back against Democrats hard following the vote.

"This afternoon, Senate Democrats proved they were never truly serious about protecting consumers and preserving American leadership," Lummis said. "I sat at the table with Senate Democrats working in good faith to get this done while they played games."

"The once-proud Democratic party is anti-consumer and pro-illicit finance, anti-ethics, anti-free enterprise, anti-worker, anti-livable wage jobs, and pro-socialism," Lummis added. "The Democrats are now anti-American. Sad!"

Is Clarity dead? 

Republican Sen. Thom Tillis doesn't think the fight for the Clarity Act is over.

Tillis, who had been a part of both discussions on the treatment of stablecoin rewards and ethics provisions, initially voted yes on Tuesday, but later changed his vote to no. He then asked to enter a motion to reconsider the vote, leaving room for the Senate to vote at a later date.

"This is not the end for the Clarity Act," Tillis said in a post on X. "We've made substantial bipartisan progress in large part because of the White House. This procedural motion allows us to continue working towards a positive outcome."

However, one Republican Senate aide told The Block that they think the bill is dead.

If a bill passes the Senate, it would still have to go through the House, which won't be possible until after the November elections.

Anchorage Head of Digital Policy Kevin Wysocki pointed to a failed procedural vote last year when the Senate was trying to pass stablecoin legislation, which ultimately later became law.

"I would like to think that though the cloture failed, a lot of Senators that voted 'no' were close to a 'yes,' if given a little more time to work on some finer points in the bill," Wysocki said in a post on X.

Crypto Council for Innovation CEO Ji Hun Kim said Tillis' motion allows for another cloture vote within the next two days.

"Today's vote on the Clarity Act is disappointing, but it is not the end on multiple fronts," he said.

Crypto advocacy group backed by Coinbase, Stand With Crypto, said crypto-owning voters are paying attention to lawmakers ahead of elections in November. SWC and the broader crypto industry played a significant role in the 2024 elections, spending millions of dollars through super political action committees to influence political outcomes.

"The results of today’s vote make it clear which officials are with our community, and which are against us — and we’ll make sure our advocates are ready to cast their ballots accordingly in this and future elections," said Mason Lynaugh, executive director of Stand With Crypto, in a statement.

Others say regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission can fill in regulatory gaps.

"The SEC and CFTC have kept moving on crypto policy for the last year and a half, and nothing about today's vote changes that," said Solana Policy Institute President Kristin Smith.

Meanwhile, Blockchain Association CEO Summer Mersinger said the group will continue talks with Democrats and Republicans.

"We won't rest until our industry has clarity in the United States," Mersinger said.