Bernstein analysts led by Gautam Chhugani reported that crypto markets are underestimating progress on the Clarity Act ahead of a Senate procedural vote. The firm noted that any positive surprise is "definitely not priced in" following Republican revisions to the bill. These changes include new roles for state attorneys general in enforcing ethics restrictions and protections for community-bank deposits against stablecoin rewards.
The latest draft incorporates 126 changes requested by Democrats, addressing disputes over officials’ crypto holdings and stablecoin incentives. Senator Cynthia Lummis urged Democratic support, stating Republicans had addressed their demands. However, skepticism remains among other analysts; TD Cowen’s Jaret Seiberg maintained a 25% probability of enactment this year, while Beacon Policy Advisors raised its estimate to 30%-40%. If legislation fails, CFTC Chair Michael S. Selig plans to pursue rules using existing powers.
This development highlights a divergence between market sentiment and legislative reality. While Bernstein suggests the market has discounted potential regulatory clarity, other firms maintain low probabilities for passage, indicating significant uncertainty about whether the revised ethics provisions will secure enough Democratic votes. The inclusion of state attorney general enforcement and Treasury authority over stablecoin rewards represents a structural compromise aimed at resolving specific political and banking sector objections.
From a Market Structure perspective, the focus shifts to whether these concessions are sufficient to overcome partisan hurdles. The CFTC’s contingency plan to use existing authorities underscores the urgency for federal rules, yet legislative action provides more durable protection against future administrative reversals. Investors should watch the Tuesday procedural vote closely, as it serves as the immediate test for whether the bipartisan negotiations have truly yielded a viable path forward or if the "surprise" remains unpriced due to genuine doubts about final enactment.
