Galaxy lowers chance of CLARITY Act in 2026 to 10%

The chance that the US law on regulating crypto markets, the CLARITY Act, will still pass this year has fallen sharply. Galaxy Research now estimates that chance at only 10%. With the legislation stuck in the Senate, both the securities regulator SEC and the commodities regulator CFTC are accelerating their own policy measures to nevertheless provide clarity to the crypto sector. Those measures are temporary in nature and can be reversed by a subsequent administration.

In short:

• Galaxy Research lowers the probability of approval of the CLARITY Act in 2026 to 10%.
• The SEC is preparing two major exemptions to enable crypto issuance and the tokenisation of securities, but keeps withdrawing those plans.
• Administrative measures by the SEC and CFTC can temporarily fill a gap, but do not offer a legally sustainable replacement for legislation.

Why the CLARITY Act is stalling

After a broadly supported consideration in the Senate Banking Committee in May, the prospects for the CLARITY Act initially looked good. But in recent weeks, obstacles have piled up. A lingering conflict over stricter ethics rules for politicians involved in crypto remained unresolved, while banks, especially smaller community banks, stepped up their objections and support for the bill among a number of Republican senators began to wane.

Senate Majority Leader John Thune failed to gather the required 60 votes to overcome a filibuster, and did not call a vote before the August recess. Shortly before the recess, the first vote was formally announced, allowing the Senate to still vote after returning in mid-September. Galaxy Research, however, considers that hardly realistic: the September session lasts only two to three weeks, leaving little room to shepherd such a substantial bill through the Senate.

SEC and CFTC respond with their own steps

With the CLARITY Act stalled, the SEC and CFTC are resorting to their own tools. According to Galaxy Research, the SEC is preparing two exemptions. The first, Reg Crypto, is intended to open a new track for the public issuance of cryptoassets. The second, the Innovation Exemption, would enable secondary trading in tokenised securities via DeFi. The SEC appeared to be on the verge of publishing these exemptions several times, but withdrew the plans each time after resistance from the traditional financial sector.

The CFTC, meanwhile, plays its own role. The regulator is trying to strengthen its authority over so-called prediction market contracts and issued an emergency measure against an attempt by the New York Attorney General to block prediction market platform Kalshi through a court ruling.

Administrative measures are not a sustainable solution

Galaxy Research states that the steps taken by the SEC and CFTC can fill a temporary gap as long as legislation has not been finalised. But there is a clear limitation: measures implemented through administrative policy lack the legal durability of a law. A subsequent administration can amend or withdraw them. They therefore do not replace a structural legal framework established by Congress.

Still, Galaxy expects the SEC to publish the texts of Reg Crypto, the Innovation Exemption or both within weeks to a few months. Partly because SEC Commissioner Hester Peirce has to leave her seat in November, the regulator is under pressure to lock in these policy initiatives in time.