Next Week’s Midterms Could Stall the CLARITY Act and Test Crypto’s Political Clout: TD Cowen

Regulators are continuing to move forward with rules that benefit the crypto sector, even as next week's midterms might impede the CLARITY Act, according to TD Cowen.

A new policy note from TD Cowen, which was shared with Bitcoin Magazine, indicates that the trajectory of Washington's crypto agenda depends heavily on the upcoming midterm elections. Analyst Jaret Seiberg cautioned within the note that the likely election outcomes could present significant hurdles for Congress in passing the CLARITY Act over the ensuing two years. This proposed legislation is intended to establish the regulatory framework for bitcoin and other digital assets, and the industry has invested $176 million across more than 100 races to influence the results.

Several potential outcomes have been outlined. The most probable scenario is a victory by the Democrats. Prediction markets suggest a 90% probability of Democrats securing the House and a 62% probability of them winning the Senate. TD Cowen views this situation as the most unfavorable for the broader crypto sector and bitcoin. Should this materialize, Sen. Elizabeth Warren would assume the chairmanship of the Senate Banking Committee. Seiberg characterizes her as a skeptic regarding crypto and notes that she has previously opposed the CLARITY Act; furthermore, he anticipates she will oversee federal regulators rigorously. However, Warren would be unable to prevent regulators from implementing policies favorable to the industry. Given that President Trump is expected to maintain a positive stance toward crypto, he would veto any legislation that curtails his regulators' authority, and Democrats would not possess enough votes to override such a veto. Consequently, policy shifts are anticipated to concentrate on stablecoins, perpetual futures, and tokenization.

A second possibility involves a divided Congress, where Democrats retain control of the House, but crucial Senate races remain closely contested, potentially tipping in favor of Republicans. In this scenario, Sen. Tim Scott would retain his position on the Banking Committee. TD Cowen considers this outcome advantageous for bitcoin because Rep. Maxine Waters might exchange support for certain components of the market structure bill in return for investor protections and action on her other priorities. This division would prevent unfavorable legislation from reaching the president's desk.

The least likely but most beneficial outcome for crypto is a sweep by Republicans. Kalshi assigns a 10% likelihood to Republicans retaining the House and a 35% chance of keeping the Senate. TD Cowen describes this as the optimal path for crypto policy, though the degree of the majority is important. A broader Senate majority would increase the likelihood that leaders can advance the CLARITY Act in 2027 or 2028, potentially allowing for a revival during the lame-duck session. Conversely, a narrow majority would likely result in the bill remaining stalled, as Democrats continue to advocate for ethics provisions that the president opposes.

When the Senate previously blocked the bill, stocks related to Bitcoin experienced a decline. For context, the CLARITY Act aims to institute federal guidelines for digital assets. The House passed its version in July 2025 with a vote count of 294-134. The Senate Banking Committee endorsed its own version in May 2026 with a 15-9 vote, noting the inclusion of two Democrats among the Republicans. On the Senate floor, a cloture vote failed 49-50 on September 15. Republicans and industry groups oppose the ethics language sought by Democrats, which would restrict senior officials, including the president, from profiting from crypto ventures. Another point of contention is the yield on stablecoins, with each side claiming the other is obstructing progress, leaving the bill in limbo.