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US Senator Cynthia Lummis revealed that Democrats voted no on the CLARITY Act even after she and her colleagues conceded to a proposal from them to adjust the bill. In her latest post on X, Lummis stated that Democrats asked for tougher restrictions on affiliate trading than the House version of the CLARITY Act included, but voted against the bill after their request was met
In the CLARITY Act debate, affiliate trading refers to situations where a crypto exchange has a related entity that engages in proprietary trading or market-making on the same platform. The concern is that an exchange could have a conflict of interest when its affiliated trading firm operates alongside customers
These concerns were reflected in the final compromise draft of the CLARITY Act, which addressed potential conflicts of interest involving affiliate trading and corporate “vertical integration” through structural separation. The draft included an “affiliate counterparty prohibition” and separate requirements for vertically integrated businesses and proprietary trading activities
Despite these concessions, Democrats reportedly rejected the CLARITY Act mainly because of presidential conflicts of interest, consumer protections, and traditional banking stability. There are no reports that they explicitly rejected the specific adjustments to affiliate trading at the time of writing
While major crypto stakeholders expressed disappointment at the Senate’s failure to pass the CLARITY Act, the ecosystem remains active and fully functional, with the regulatory center of gravity shifting entirely to administrative agency rulemaking. As of writing, federal regulators have taken responsibility to fill the legislative void using their existing authority
The Senate’s failure to advance the CLARITY Act leaves key questions around crypto market structure and regulatory oversight unresolved. Until Congress reaches a new agreement, investors and crypto businesses will need to follow developments from the SEC and CFTC, as well as future legislative efforts
For investors, the key areas to watch are new agency rules, enforcement actions, court decisions, and further congressional negotiations, as these developments could shape how digital assets, exchanges, and related businesses operate in the U.S
Related: CFTC Opens Consultation on Leveraged Retail Crypto Trading After Clarity Act Stalls
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