Minority staff of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, led by the committee's ranking member, U.S. Senator Elizabeth Warren (D-Mass.), reviewed the text of the "Digital Asset Market Clarity Act," published on July 22. The result of this work was an analysis published on August 5, which identified five major loopholes in the CLARITY Act.
The CLARITY Act (H.R. 3633) is digital asset market structure legislation that draws jurisdictional boundaries between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Staff identified five provisions they believe must be included in cryptocurrency legislation: protecting retirement savings from securities law gaps, cracking down on illicit finance, protecting taxpayers from financial bailouts, preventing presidential self-enrichment, and preserving consumer protections. According to the analysis, the bill fails to address any of these five provisions.
Majority staff on the Senate Banking Committee argue that the bill strengthens investor protections, establishes federal oversight, and aims to combat fraud and money laundering.
Pensions, Fraud, and Right to Sue
Staff assert that the two-tier system would allow assets offered on blockchain to evade SEC oversight. Cryptocurrency-issuing companies would be able to self-certify their exemption from requirements applicable to securities. Staff state this would deprive the SEC and state regulators of the disclosure and oversight tools needed to protect investors.
This staff memo names six organizations expressing concerns about pension issues, including Healthy Markets—an investor advocacy group whose members include pension funds and financial companies. Also mentioned are five labor union organizations: the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), the American Federation of State, County and Municipal Employees (AFSCME), the Service Employees International Union (SEIU), the National Education Association (NEA), and the American Federation of Teachers (AFT).
Legal recourse would be sharply curtailed under the fifth standard, which governs actions after an investor has been defrauded. Staff argue that exempting assets from securities laws would weaken the SEC's ability to combat fraud. State and tribal authorities could also be stripped of their power to enforce their own securities laws, consumer protections, and gambling regulations. Staff further assert that the bill does not establish an enforceable private right of action and does not regulate the use of forced arbitration in cryptocurrency-related disputes.
Cartels, Sanctions, and Bank Deposits
According to the minority staff memo on the CLARITY Act, companies associated with Decentralized Finance (DeFi) platforms would be exempt from illicit financing responsibilities even if they earn millions from transactions on the platforms. The minority staff document cites a 2023 Treasury Department warning linking DeFi services to ransomware operators, thieves, and drug traffickers. Some cryptocurrency mixers would also remain outside the scope of U.S. sanctions thanks to the so-called "Tornado Cash loophole"—a legislative gap that, by court decision, only Congress can fix.
The yield on stablecoins raises the third objection. The Independent Community Bankers of America (ICBA) and the Conference of State Bank Supervisors (CSBS) warn that paying interest would lead to an outflow of deposits from local banks, tightening credit conditions for small businesses. At the same time, banks would be granted leeway to issue loans backed by cryptocurrency collateral, hold cryptocurrency directly, and trade derivatives using customer deposits and the federal financial safety net. The Systemic Risk Council—a non-partisan body composed of former regulators—has identified these activities as a potential risk for requiring financial bailouts.
Trump Family Profits and Uncertain Vote Outcome
According to the minority staff of the Senate Banking Committee, President Trump earned over $1.4 billion from cryptocurrency projects in 2025 alone, accounting for nearly two-thirds of his total income. Enforcement of the law would rest solely with his Attorney General, while state Attorneys General would face an outright ban on filing lawsuits. These obligations would also expire once Trump leaves office. Warren and U.S. Senator Richard Blumenthal (D-Conn.) separately demanded the Securities and Exchange Commission (SEC) investigate Trump's "memecoin," citing investor losses of $3.8 billion.
Industry leaders state that this bill would bring cryptocurrency activities under U.S. oversight rather than push them offshore. The CEO of cryptocurrency exchange Coinbase (Nasdaq: COIN), Brian Armstrong, described the bill as a result of bipartisan work and urged the Senate to pass the CLARITY Act. The bill is now slated for a Senate vote on September 15 on a cloture motion to end debate and proceed to a vote. Majority Leader John Thune (R-S.D.) filed this motion just before the Senate's August recess, and 60 votes are still required to advance the bill.
