CLARITY Act failure could send crypto valuations lower: Bernstein

cointelegraphPublished on 2026-08-03Last updated on 2026-08-03

Abstract

Wealth manager Bernstein warns that the declining odds of the U.S. CLARITY Act's passage could send cryptocurrency valuations lower. With the Senate's summer recess approaching, prediction markets now place only a 31% chance of the bill becoming law by end-2026. Bernstein anticipates a negative market reaction if the legislation fails but suggests it could prompt more proactive regulatory action from the SEC and CFTC under "Project Crypto." This initiative aims to create a temporary framework for digital assets. The bill faces opposition from banking groups over stablecoin yield provisions, and analysts predict the crypto market may bottom in late Q3 or early Q4.

The odds of the Digital Asset Market Clarity Act’s (CLARITY) passage are dwindling as the US Senate is scheduled to begin summer recess at the end of this week, threatening another leg down for cryptocurrency valuations, according to wealth manager Bernstein.

Bernstein said that the Senate’s failure to pass the legislation could trigger an immediate negative “industry knee-jerk reaction,” which may result in another leg down for Bitcoin and the broader crypto market.

“From a tactical standpoint, we expect the crypto market to bottom and start showing momentum towards late Q3 and early Q4 prior to the mid-terms,” Bernstein analysts wrote in a Monday report shared with Cointelegraph.

At the same time, however, the analysts said that Senate failure to pass the legislation may bring more proactive policy support from regulators, including the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), which may accelerate rulemaking initiatives under Project Crypto.

Project Crypto is a regulatory initiative first announced by SEC Chairman Paul Atkins in July 2025, which was later expanded into a joint staff initiative between the SEC and CFTC in September 2025. The initiative aims to create a workable regulatory framework for digital assets using existing agency authority while Congress finalizes crypto market legislation under the CLARITY Act.

Bernstein said that the two agencies could provide more interpretive releases tied to the taxonomy of tokens, clear rules around decentralized finance (DeFi) and accelerate the innovation exemption for issuing tokens that would be exempted from securities status during a finite period.

CLARITY Act odds decline to 31%

Bernstein’s skepticism is supported by prediction market traders who are betting against the passage of the CLARITY Act before the end of 2026.

Odds of the legislation’s passage before the end of the year are now at 31%, down 7% in the past week and down 9% in the past month, according to Polymarket, which shows about $3.7 million has been wagered on that prediction.

Prediction market odds of the CLARITY Act being signed into law by the end of 2026. Source: Polymarket

Meanwhile, White House officials are reportedly weighing a bipartisan ethics counterproposal received on Thursday, following weeks of negotiations between Republican Senator Thom Tillis and Arizona Democrat Ruben Gallego.

The proposal would enable state attorneys general to sue the Department of Justice if it fails to enforce ethics laws against federal officials, three sources familiar with the matter told crypto journalist Eleanor Terrett.

Related: ABA, state banking groups push back on CLARITY Act stablecoin yield provisions

The CLARITY Act aims to establish the first regulatory framework for digital assets in the US, but it has been met with pushback from the banking industry, which argued that the current draft would allow crypto firms to offer yields on stablecoins without facing the same requirements as traditional financial institutions.

On June 26, Galaxy Digital cut its odds of the CLARITY Act becoming law in 2026 to 50%, warning that the US Senate is running out of time to move the crypto market structure bill before its August recess.

Magazine: How the EU’s crypto tax rules are expected to work for users and platforms

Trending Cryptos

Related Questions

QAccording to Bernstein, what could be the immediate consequence if the US Senate fails to pass the CLARITY Act before its recess?

AAccording to Bernstein, the immediate consequence could be a negative "industry knee-jerk reaction," potentially leading to another leg down for Bitcoin and the broader cryptocurrency market.

QWhat is Project Crypto, and what is its main objective?

AProject Crypto is a joint staff regulatory initiative between the SEC and CFTC, announced in 2025. Its objective is to create a workable regulatory framework for digital assets using existing agency authority while Congress finalizes broader crypto market legislation like the CLARITY Act.

QWhat are the current odds, according to Polymarket prediction markets, of the CLARITY Act being signed into law by the end of 2026?

AAccording to Polymarket, the current odds of the CLARITY Act being signed into law by the end of 2026 are 31%.

QWhat specific regulatory actions does Bernstein suggest the SEC and CFTC might take if the CLARITY Act fails to pass?

ABernstein suggests the SEC and CFTC might provide more interpretive releases on token taxonomy, issue clear rules around decentralized finance (DeFi), and accelerate an innovation exemption for issuing tokens that would be temporarily exempted from securities status.

QWhat is one of the main criticisms from the banking industry regarding the current draft of the CLARITY Act?

AThe banking industry argues that the current draft of the CLARITY Act would allow crypto firms to offer yields on stablecoins without facing the same regulatory requirements as traditional financial institutions.

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