CLARITY Act Hits New Impasse as Ethics-Enforcement Fight Whipsaws Crypto Stocks

The market's early-week CLARITY Act rally faded after senators published revised legislative text that surfaced a central political sticking point: who would enforce a proposed ethics ban on senior federal officials' crypto holdings. Crypto-related equities cooled sharply after Tuesday's surge. BTC and major U.S. equity indices also slipped, while spot crypto ETFs extended their strongest inflow streak since early May. Market moves: probabilities spike, then retrace During Tuesday's session, betting-market odds of the bill passing jumped from 31% to 51%, helping drive double-digit gains in crypto-linked stocks such as COIN and CRCL. By Wednesday, that implied probability had fallen back to roughly 38%, dragging the sector lower. Overnight index futures weakened, and Nasdaq opened down 0.97%, nudging major cryptocurrencies slightly lower into Thursday. ETF demand, in contrast, remained firm. Over the past five trading days, crypto ETFs posted about $750 million of net inflows, marking their longest consecutive run of net creations since early May. What changed in the latest CLARITY draft President Trump has pushed to break the summer stalemate around CLARITY, and a White House official told GOP negotiators he accepted an ethics provision that would bar senior federal officials—including the president and vice president—from holding personal cryptocurrency interests. Sen. Cynthia Lummis released updated bill text on Wednesday, incorporating work from the Senate Banking and Agriculture Committees and making the ethics language public. The ban would cover the president, vice president, members of Congress, federal judges and their spouses. It would also prohibit those officials from issuing or endorsing digital assets for compensation during their term. The ethics restrictions would sunset on January 20, 2029. Covered officials would be required to sell cryptocurrency holdings and shares in crypto companies, or move them into blind trusts beyond their control. The unresolved fight: who enforces the ethics ban The revised text still leaves Democrats and Republicans split on enforcement authority. Senate Democrats want state attorneys general to oversee the restrictions. Republicans and the White House want enforcement centralized with the U.S. Attorney General and the Department of Justice. Republicans' framework assigns civil enforcement to DOJ, including authority to prosecute exchanges that list prohibited tokens. Penalties include fines of up to $250,000 per day per intermediary, plus additional penalties of $500,000 or 10% of proceeds and disgorgement for officials. Transactions above $1,000 would require disclosure, and the Government Accountability Office (GAO) would study remaining loopholes. Democrats argue DOJ-only enforcement would lack credibility given that Todd Blanche—Trump's former personal attorney—is awaiting Senate confirmation as Attorney General nominee, and disclosed filings show he earned more than $1 billion last year from cryptocurrency. Sen. Angela Alsobrooks said DOJ-only enforcement was "not serious." Outside pressure is also building. Indivisible and Demand Progress have urged Senate Democrats, including Kirsten Gillibrand, to reject what they see as a weak ethics package—votes Republicans need to reach the 60-vote threshold. Most of the bill remains intact Beyond the ethics section, the draft is largely unchanged, according to industry observers. Key elements retained include: - The Blockchain Regulatory Certainty Act language matching the May Banking Committee version, continuing to exclude noncustodial developers and infrastructure providers from the definition of money transmitters. - The Lummis-Grassley amendment keeping criminal liability for intentionally aiding illicit actors. - The Protect Your Coins Act preserving self-custody rights. - Stablecoin yield language reflecting the Tillis-Alsobrooks compromise: no interest on idle payment stablecoin balances, but activity-based rewards remain permitted. A new enforcement chapter would fund state and local crypto investigations and create a cybersecurity center focused on North Korea and Iran. It would also require stablecoin issuers to comply with lawful freeze and seizure orders, and it would classify customer assets as customer property rather than assets of a failed custodian—a provision framed as a direct response to FTX. Timeline: less than three weeks The Senate clock is tight. Majority Leader John Thune has said he plans to schedule a floor vote before the recess, expected to begin around August 7. If the Senate clears that hurdle, the House would take up the revised version after returning in September, followed by presidential signature and rulemaking by the CFTC and SEC. How markets are pricing the vote vs. the outcome Traders are distinguishing between the likelihood of a Senate vote and the probability of ultimate enactment. On Kalshi, the probability of a vote before adjournment is near 72%, though the market is thin at about $31,000 in volume. On Polymarket, the probability of CLARITY becoming law by 2026 sits near 41% on about $2.4 million in volume. Kalshi's deeper market on "crypto market structure becoming law by year-end" is near 42% with about $3.6 million in volume. Neither market prices enactment above 50%, placing "greater than 50%" odds at the optimistic edge of current ranges. Rumor-driven volatility: HYPE geofencing claim unsubstantiated The week's noisiest narrative was also the least supported. An unverified rumor claimed CLARITY would mandate geofencing U.S. users at the RPC layer and enable actions against specific wallets, framed as a negative catalyst for HYPE. A separate unverified claim alleged Multicoin sold roughly $120 million of HYPE ahead of its July 28 unlock. Multicoin's Tushar Jain confirmed a large unlock on Wednesday but said the firm had not exited, attributing activity to privacy-driven "wallet rotation," not selling. No draft text supporting the alleged geofencing mechanism has been presented, and the Lummis version released Wednesday includes no such provision. Also on the tape Helium Q2 token holder report Blockworks characterized the quarter as a "price reset" rather than a demand collapse. After HIP-143 cut operator payment rates from $0.50/GB to about $0.10/GB on June 4, offload volumes rose roughly 20% quarter over quarter during the transition. DC burn revenue was $3.35 million, down 14%. Blockworks noted the "2.2x revenue coverage over emissions" headline is driven by emissions dropping 39% to $1.5 million; it suggested an approximate 1.7x withdrawal rate as a cleaner forward-looking indicator. After the quarter, HIP-149, approved by veHNT, shifted miner rewards toward usage and retired Proof-of-Coverage. The change is funded via a self-terminating supplemental issuance of about 141 million HNT, moving the network from deflationary to net issuance—a key variable for Helium's operator model. Ramp adds stablecoin payment rails Ramp partnered with Privy to add stablecoin payment channels, letting businesses open "stablecoin accounts" holding USDC or USDT backed by cash reserves. Users can earn up to 3.25% in rewards, pay supplier wallets in more than 140 countries, or convert to over 40 fiat currencies. Stablecoins can also be used within "Bill Pay": businesses fund expenses from a USD bank account and Ramp converts before sending, with no stablecoin balance required. Ramp says more than 1,000 businesses already use the method, with over 70% of volume occurring outside traditional banking hours. Sky's view: separate payment dollars from savings dollars John Conneely, Global BD Lead at Sky, argues stablecoin leaderboards conflate payment dollars and savings dollars, which compete for different use cases. He positions USDS/sUSDS around "where the yield is," saying Sky's savings rate is governed natively by the asset, while payment dollars like OUSD distribute returns through platform-set protocols. He points to Sky's $13.96 billion collateral book across more than 40 positions, including $4 billion in stablecoin reserves, $1.5 billion in tokenized U.S. Treasuries via BlackRock's BUIDL and Janus Henderson Anemoy, and nearly $3 billion in cross-chain and OTC crypto lending. Conneely notes these are his personal views, not those of the Sky Frontier Foundation.