Key Takeaways
- Senate Banking Committee must advance the CLARITY Act by April’s end or 2026 passage probability plummets
- Prediction markets show declining confidence: Polymarket at 56% (down 9 points), Kalshi at just 30% by June
- Central conflict revolves around whether stablecoin issuers should be permitted to distribute yield to holders
- Coinbase withdrew its backing in January, stating a flawed bill is worse than no legislation
- Gnosis co-founder cautions the legislation could consolidate crypto power among centralized gatekeepers
Time is running short for the CLARITY Act, America’s proposed crypto market structure legislation. Galaxy Research’s head of research, Alex Thorn, cautioned that the bill needs to hit the Senate floor by early May to maintain viable prospects for 2026 passage. This requires Senate Banking Committee approval before April concludes.
Senate Majority Leader John Thune has already signaled pessimism about an April clearance. With the Senate prioritizing the SAVE America Act, the CLARITY Act has been relegated to a lower position on the legislative agenda.
According to Thorn, each passing day diminishes the available timeframe for substantive floor discussion. Should April close without committee authorization, he characterized 2026 passage prospects as “extremely low.”
Market forecasting platforms mirror this growing skepticism. Polymarket indicates the legislation’s probability of enactment this year has declined 9 percentage points to 56%. Kalshi presents an even bleaker outlook, assigning 30% odds before June and merely 7% before May.
Stablecoin Interest Distribution Emerges as Primary Battleground
The most contentious issue centers on stablecoin yield distribution. The fundamental question is whether issuers of stablecoins should be authorized to pass interest earnings to token holders.
Representative French Hill has declared that prohibiting stablecoin yield is essential for Senate advancement. Conventional banking institutions contend that interest-bearing stablecoins could siphon deposits from supervised financial entities.
Digital asset companies counter that yield-generating stablecoins enhance payment utility. Coinbase rescinded its endorsement of the legislation in January. Chief Executive Brian Armstrong stated the current draft would undermine decentralized finance, prohibit stablecoin yields, and restrict tokenized real-world assets. “We’d rather have no bill than a bad bill,” he declared.
Senator Angela Alsobrooks has suggested that compromise from both factions may be necessary. White House crypto adviser and Coinbase Chief Legal Officer Paul Grewal has also rebuked banks for impeding legislative momentum.
DeFi Oversight and Jurisdictional Questions Remain Unsettled
Thorn indicated that the stablecoin yield controversy might not represent the final hurdle. He identified outstanding questions surrounding decentralized finance supervision, developer liability protections, and the division of regulatory jurisdiction between the SEC and CFTC.
Attorney Jake Chervinsky noted that banking institutions are additionally concerned about stablecoin capital flowing into DeFi platforms, beyond just yield distribution.
Gnosis co-founder Dr. Friederike Ernst cautioned that the bill’s present framework risks channeling all crypto operations through licensed intermediaries. She expressed concern this could concentrate crypto infrastructure control among a limited number of major institutions.
Ernst acknowledged the bill does contain positive elements, including safeguards for peer-to-peer transactions and self-custody rights, along with clarification of SEC and CFTC regulatory boundaries.
Senator Bernie Moreno expressed continued optimism that the legislation will secure April passage and advance to President Trump for signature. Thorn suggested that schedule now appears increasingly challenging to meet.
