Bernstein sees crypto selloff risk as CLARITY Act odds hit 31%

Wall Street broker Bernstein warned that failure to pass the CLARITY Act before the U.S. Senate's August recess could trigger an immediate negative reaction across Bitcoin and the broader crypto market, with prediction-market odds of enactment this year sliding to 31%.

"Clarity is the most consequential crypto market structure bill in U.S. history, but the chances of its 2026 passing seems to be dwindling," analysts led by Gautam Chhugani at Bernstein said in a note Monday.

The Digital Asset Market Clarity Act, which passed the House 294-134 in July 2025 and cleared the Senate Banking Committee 15-9 on May 14, would create the first federal market-structure rulebook for digital assets, splitting oversight between the SEC and the CFTC. Polymarket bettors assign the bill a 31% chance of becoming law this year, down 9 percentage points in a month, with about $3.7 million in trading volume backing the market. Senate Majority Leader John Thune confirmed a procedural vote remains on his pre-recess list, but the bill has yet to appear on the official floor schedule ahead of the Aug. 7 recess.

A stall would leave the industry's biggest regulatory milestone unresolved into September, when a fuller Senate calendar and midterm campaigning squeeze floor time. Bernstein expects the SEC and CFTC to accelerate rulemaking under Project Crypto, the joint initiative launched in July 2025, covering token taxonomy, DeFi guidance and an innovation exemption for new token issuances.

Odds Slide as Senate Window Narrows

The Senate's final scheduled week before recess runs Aug. 3-7, with the state work period beginning Aug. 10 and running through Sept. 11. Republicans hold 53 seats, so clearing the 60-vote cloture threshold requires at least seven Democratic votes. Josh Hawley and Rand Paul have opposed the bill, and JPMorgan analysts put passage odds at 37%, while Galaxy Digital estimated roughly 30% on July 25.

Negotiators remain deadlocked over government ethics provisions tied to President Donald Trump's crypto holdings, stablecoin reward rules and DeFi definitions. The current 616-page merged text bars certain senior officials from issuing or sponsoring digital assets until 2029, but Senate Banking Democrats argue enforcement and existing-holdings language still leaves loopholes. Banks want to close what they call a stablecoin-rewards loophole that could pull deposits out of the traditional system, while the compromise allows rewards for transactions, staking or platform activity.

SEC, CFTC Ready to Fill the Gap

Bernstein expects the SEC and CFTC to move faster on token classifications, DeFi guidance, self-custody rules and innovation exemptions even without legislation. Coinbase CEO Brian Armstrong framed the vote in stark terms on X: "This week we get to see who in the Senate represents the will of the people, and will step up to vote YES on this common sense legislation."

Grayscale has publicly called for an immediate Senate floor vote, while industry heavyweights including BlackRock, Fidelity, Goldman Sachs and the Fraternal Order of Police have backed the bill. Treasury Secretary Scott Bessent has pressured lawmakers to act now, and Anthony Scaramucci predicted Trump will ultimately endorse the bipartisan ethics compromise.

For listed companies, a failure would preserve the status quo: Coinbase would continue offering yield on idle stablecoin balances, while Circle would remain unable to do so directly as an issuer but could keep sharing distribution economics with partners, Bernstein said. A recovery in USDC supply growth remains the key driver for both stocks.

Bitcoin traded around $63,500-$64,000, roughly 50% below its October 2025 all-time high of $126,200 and down 27-30% year-to-date. Weekly performance slipped 2-3%, with ETF inflows showing signs of stabilization despite negative year-to-date flows. Bernstein expects the market to bottom in late third or early fourth quarter before the midterms, with year-end 2026 targets ranging from $100,000 to $150,000, while some analysts warn prices could fall toward $55,000-$60,000 if regulatory uncertainty persists.

The CLARITY Act remains strategically important because a Senate-passed statute would carry the weight of law and be harder to unwind under a future administration, while SEC and CFTC rules could be revised or reversed when regulators change. Watch the Senate floor schedule, any last-minute ethics agreement and agency statements under Project Crypto as the key signals this week.

This article is for informational purposes only and does not constitute investment advice.