A failure to pass the CLARITY Act this week will put the bill in a “walking dead” state, but won’t stop the crypto industry’s march forward, according to Bitwise chief investment officer Matt Hougan.
In a blog post on Wednesday, Hougan said while many, including himself, have called it the “make or break” week for the CLARITY Act, the reality is that the crypto industry has made too much progress to “go back in the bottle.”
“The reality is that Washington is always late to major technology shifts, and it has rarely mattered as much as people feared,” said Hougan.
His comments come as the Senate faces an Aug. 5 deadline to advance the landmark crypto market structure bill before its summer recess, with many concerned that failure to pass this week could see the bill pushed into the next year as lawmakers focus on the midterm elections in November.
Prospects for CLARITY this year fade
Market observers are increasingly pessimistic about the CLARITY Act’s passage this year. In July, Galaxy Research lowered its probability of the CLARITY Act passing in 2026 to 30%, while Polymarket currently shows a 23% chance of it being signed into law this year, down from 82% in February.
On July 24, NYDIG global head of research Greg Cipolaro said the latest draft was more complete but still lacked sufficient bipartisan support.
“The central investor takeaway is that Republicans have produced a substantially more complete bill, but not yet one with a credible path to 60 votes,” Cipolaro said.
According to sources speaking to Punchbowl News, without signs of progress from the White House on a bipartisan ethics deal, and movement on illicit finance and stablecoin yield, Senate Democrats will deny cloture for the crypto bill.
Polymarket odds for the CLARITY Act passing in 2026 are at 23%. Source: Polymarket
Hougan said failure to pass the bill will put it in a “walking dead” state, stalled, but not permanently defeated. He said there is some hope that the bill could pass in September, or even in December, when Congress returns for a lame duck session.
“Congress often bundles multiple bills into a year-end “omnibus” package, forcing legislators to vote on a single bill that includes things they like and things they hate. Maybe the Clarity Act can pass that way.”
“Crypto will be fine,” Bitwise’s Hougan says
If the CLARITY Act fails to pass this year, Hougan said that the industry will fall back to the SEC-CFTC’s joint interpretation issued in March, which classifies Bitcoin and other assets as digital commodities and replaces the SEC’s 2019 staff guidance.
SEC Chair Paul Atkins reinforced this last week, saying his agency is “ready, willing, and able to come out with rules that address the same issues as CLARITY and other aspects of the crypto market.”
Related: CLARITY Act failure could send crypto valuations lower: Bernstein
However, the rules issued by the two regulators aren’t as durable as legislation, and could be challenged in court or reversed by a future administration. Atkins even acknowledged this in March when the two agencies released the interpretation.
Source: Cynthia Lummis
“Only Congress can ensure that regulation in this area is future-proofed through comprehensive market structure legislation,” Atkins said.
WisdomTree chief legal officer Ryan Louvar has argued that the absence of legislation would continue to impede the market, despite the regulators’ efforts.
“A market cannot function well when its participants cannot tell in advance which agency’s rules apply to them,” Louvar said at a July congressional hearing.
Hougan said “crypto will be fine” despite this, as it would still give the industry two and a half years to accelerate before a new administration could potentially install a new SEC.
“Washington is dysfunctional. It seems crazy to me that we can’t get our act together to pass legislation that would improve investor protections and spark new innovation,” said Hougan.
“But it’s not a referendum on crypto’s validity as a pillar of the global financial infrastructure. That ship has long since sailed. At this point, crypto has enough momentum that it will reshape finance for decades, regardless of what happens in the next few days.”
Magazine: CLARITY hopes fade, BitMEX shuts as lawsuit looms: Hodler’s Digest, July 26