The CLARITY Act is Dead (For Now).

The CLARITY Act is dead. Muerte. Finito. The second in a trio of bills that would have handed the Trump family the capacity to build a financial dynasty that would rival the House of Saud will not make it to the Senate floor for consideration. And it’s despite the best efforts until the bitter end by a Democrat.

The Digital Asset Market Clarity Act did not make it to the Senate floor in September after it only garnered 49 out of 60 votes required to advance it. This is the bill the crypto industry spent three years and millions of dollars lobbying for. Despite presumably universal support from Republicans after the Senate Finance Committee advanced a new version of it to address ethics concerns, it was nowhere close to what it needed. It had already passed the House in July by a wide margin.

The House version would split crypto oversight between the Securities and Exchange Commission (SEC) and the far weaker Commodity Futures Trading Commission (CFTC), which has a fraction of the SEC’s enforcement budget and has never regulated anything at this scale. Similar to how mortgage-backed securities were regulated, and you recall how that worked out.

The Senate vote wasn’t on the bill itself—it was cloture, the procedural motion to end debate and let the Senate take it up. Senate Majority Leader John Thune, filed it Aug. 8, before recess, betting Republicans would find 60 votes by September. Republicans hold 53 seats, meaning they needed seven Democrats minimum just to open debate, not even to pass anything.

They got zero.

Even the one Democrat who has been carrying water for this bill the entire time stopped fighting the tide and voted against advancing it. Senator Kirsten Gillibrand of New York has been the most crypto-friendly Democrat in the caucus for years—she co-wrote the original Lummis-Gillibrand framework back in 2022, and she and Republican Senator Cynthia Lummis have been running this play together a long time.

Politico reported the day before the vote that Gillibrand was privately lobbying her own colleagues to vote yes. She was pushing until the literal end. Apparently she was working the phones for yes right up until showtime, and couldn’t do it when it counted. Neither could Warner, Booker, Warnock, Gallego, Alsobrooks or Cortez Masto—the entire negotiating bloc Republicans thought they’d secured with a 630-page revision. Zero crossed over.

Here’s how the official narrative is shaping up before we get to what probably killed the bill. The Democrats had been railing against the loose ethics provisions in the bill, saying that it was too permissive when it came to the president and his family members. They said it was about all sitting elected officials, but the focal point was obviously the Trump family because of their extensive investments into crypto and stablecoins in particular. (I’ll come back to that in a minute.)

Sen. Lummis, who is most closely associated with the bill—along with Republican Senator Tim Scott, who chairs the committee—dug as deep as she could into the ethics provisions and made a big show of presenting a completely new version of the bill that incorporated over a hundred asks from Democrats. But it stopped short of what Democrats needed, which was to also ban existing digital assets that would have covered the Trump family stablecoin, USD1.

Democrats also wanted the ban to extend to dependent children since it’s really Don Jr. and Eric who control USD1’s parent company, World Liberty Financial. There was also a question of enforcement. Trump wanted everything to run through the attorney general, whereas Democrats wanted state AGs to have prosecutorial rights. This is apparently where talks broke down.

But I don’t think ethics is the whole story, and I’ve said this for months. Underneath the Trump-conflict fight was a quieter battle that might have mattered just as much: what this bill does to small banks. And the potential for crypto firms to act like banks themselves without the same protections for consumers.

Just a refresher on the difference in crypto assets because we’re not talking about memecoins like Dogecoin or even payment coins like bitcoin. We’re talking about crypto companies with wallets that look and act like retail banks, and most importantly, stablecoins. A stablecoin is essentially a digital dollar that has to be backed by a physical asset of equivalent value. That could be a dollar itself, purchased directly from the U.S. Treasury and held as collateral. It could be a basket of currencies with relatively stable value or even a physical commodity like gold, or some combination thereof.

The bottom line is that a stablecoin is a universally recognized digital asset that can be used to settle transactions, and it’s where the international financial system is headed. To be clear, nothing is going to slow this train.

Section 404 was supposed to ban stablecoin issuers from paying yield that functions like a bank deposit. So imagine that you bank at a small regional bank and you have a checking and a savings account paying you 3.5%. You notice that more and more places are taking digital payments, including Coinbase. If these places take debit cards or credit cards, you might not think about it. But what if suddenly Coinbase offered you an incentive to buy its stablecoin (USDC) to use for transactions, and gave you activity-based rewards? It’s not interest, per se, but more like the rewards you get from credit cards. Cash back on purchases, loyalty rewards, governance tokens and the like. But the banking industry saw this as a slippery slope toward interest on deposits.

The American Bankers Association, the Independent Community Bankers of America and dozens of state banking groups spent months warning that the loopholes would bleed deposits out of community banks—institutions under $10 billion in assets, the ones funding small-business loans in places nobody in Washington thinks about.

Republicans’ answer was something called a “regulatory circuit breaker.” Treasury gets 18 months to decide if deposit flight is happening before regulators can act. The banking coalition called that exactly what it is: A circuit breaker that only activates after the damage is done isn’t a safeguard at all. Even Josh Hawley, a Republican, voted against an earlier version specifically over community bank exposure. And we should be clear about the timing. This is just past the window of Scott Bessent’s tenure should he wind up out of a job after the next election. So he could have just sat on his hands. Everyone clearly saw through this.

My guess is that the Jamie Dimons of the world had some come-to-Jesus conversations with the Democratic caucus and that’s what really killed this bill. Now, the discussion we need to keep alive is about future versions of this bill knowing that there’s a Democrat lurking in Gillibrand who will try to find a way to get a version of this done after midterms or maybe in the next Congress.

CLARITY wasn’t just a crypto bill—it was step two of three. Step one, the GENIUS Act, already passed, giving stablecoins a federal framework. Step three, riding right behind CLARITY in the House package, was the Anti-CBDC Surveillance State Act, which would permanently ban the Federal Reserve from ever issuing a digital dollar. If that sounds bizarre that we would prevent our own central bank from operating a digital dollar thereby only allowing private enterprises like Tether, Coinbase, Circle and—ahem—World Liberty Financial, i.e., Eric fucking Trump, to do so, you’re not crazy.

The whole idea is batshit.

Because when you string them all together you get the real architecture: hand oversight to the weaker regulator at the CFTC, lock in friendly stablecoin rules, and permanently foreclose the one competitor—a public digital dollar—that could ever challenge private stablecoins.

Who benefits most? The Trump family’s own stablecoin, USD1, issued through World Liberty Financial, has grown past $4 billion dollars in circulation, trading over $1 billion dollars a day—the fourth-largest stablecoin in the world and gaining ground. You might ask, “What’s the big deal if they have to buy dollars?”

In other words, as long as they’re buying U.S. dollars do we really care? Yes.

Because a dollar isn’t a dollar. It’s cents above it. There’s a tiny fee to purchase a stablecoin that is backed by dollars—something called seigniorage. It’s one of the primary funding sources for the Federal Reserve. That spread is kept by the issuer. That is how a company like Tether, domiciled in El Salvador and under multiple international investigations for money laundering, can make such huge margins as it reported $1.5 billion in net income for Q2 of 2026 alone. Imagine the Trump family and their cabal of foreign investors making that kind of money every single month just because we granted them the ability to purchase our dollars.

So this is good news that this ended here. For now. But the fight isn’t over, and we need to keep an eye on Gillibrand because she’s the direct money conduit from the crypto industry into the Senate. And it kills me to say that.

But I’m going to go in a different direction and end on a positive note for once. Pretty hard to do these days.

To me, this is more than a failed cloture vote. I’m taking it as a sign that the worm has turned in Congress and that Trump might finally be out of aces. Trump has bent nearly every institution in Washington to his will for two years. Here, on a bill custom-built to hand his family’s crypto business permanent legal cover, he couldn’t get his own negotiating partners to close. He even had a powerful Democrat in the tank for him.

I know it won’t be reported this way, but I’m telling you that this is huge. Procedural bullshit like this that has powerful lobbying forces behind it and willing co-conspirators across the aisle tends to slip in under the cover of darkness.

And right now, with the war in Iran, the bond market on the edge, inflation concerns, skyrocketing gas prices and a million other distractions, things are pretty dark. It’s like when Clinton signed the Gramm-Leach-Bliley Act that repealed key parts of the Glass-Steagall Act of 1933 just a few days before the end of the legislative session in 1999. A flip of the calendar and it ushered in the new century of financial deregulation that led to the Global Financial Crisis.

That too was under the cloak of darkness, and few in the financial media understood the implications of it. But Wall Street did and so did the people who designed that legislation. The same holds true today only this time we dodged a bullet. For now. So even though very few people will understand how close we came to making Don, Don Jr. and Eric Trump one of the richest families on the planet post-presidency, just know that we chalked up a victory today. And that feels good.