Clarity Act ethics provisions expand to incoming officials

The Clarity Act is undergoing significant revisions, adding 630 pages and over 114 new provisions to its contents, with a notable focus on ethics provisions. A procedural cloture vote is scheduled for Tuesday at 2:15 p.m. ET, requiring 60 votes for the bill to proceed. The revisions have increased the odds of the Clarity Act’s passage to 31%, aiming for final approval by 2026. However, the ethics provisions, although a major part of the revisions, remain a contentious issue among lawmakers. source

The updated ethics language expands the definition of covered officials to include elected but not yet sworn-in officials and their spouses. The text requires divestment or placement of assets into blind trusts for those covered officials. The provisions include restrictions on personal financial interests of officials and apply to spouses of incoming elected officials.

The revised text contains no sunset date for the ethics requirements. Earlier language would have allowed expiry in January 2029. The current draft therefore does not include the previously proposed January 2029 expiry. The law’s ethics provisions remain a sticking point in the bill.

The expansion to incoming elected officials and spouses, together with mandatory divestment or blind trusts and no sunset date, constitutes a central ethics change in the revision. Lawmakers continue to treat these ethics provisions as contentious.

The Clarity Act revisions introduce significant regulatory changes, notably categorizing “decentralized-in-name-only” protocols under the purview of the Commodity Futures Trading Commission (CFTC) registration and the Bank Secrecy Act rules. This move aims to enhance oversight and regulatory compliance of these protocols within financial markets. In parallel, the Securities and Exchange Commission (SEC) has proposed allowing blockchains to be used as official records for stock ownership, a reform that could streamline securities management and increase transparency.

In the context of legal proceedings, the CFTC recently moved to dismiss a lawsuit by the CME regarding perpetual futures contracts, known as “perps,” while Coinbase filed to bring single-stock perps into the onshore market environment. These moves reflect ongoing legal and regulatory frameworks adjusting to the evolving digital asset landscape.

Market impacts expected from the successful passage of the Clarity Act are significant. If enacted, the bill could lead to a positive market response, particularly benefiting major cryptocurrencies such as Ethereum (ETH). Additionally, revenue-generating protocols like Hyperliquid and Lighter are likely to see substantial gains. This is because clearer regulations could reduce uncertainty for investors and foster a more supportive environment for growth and innovation in digital assets. However, the positive effects would largely depend on the implementation of these regulatory frameworks and market adaptations.

In the Senate, Republicans hold 53 seats, and at least two members are expected to vote against the Clarity Act’s cloture vote. This procedural vote requires 60 votes to proceed, making bipartisan support crucial. Senator Cory Booker has criticized the revised text, stating it still falls short of expectations.

The political negotiations have involved significant input from Donald Trump, described as the “crypto president,” and GOP aides who indicated he approved about 80% of an ethics counteroffer proposed by Senators Thom Tillis and Ruben Gallego. Republicans have expressed that their “last, best and final offer” has Trump’s backing for stronger ethics rules, though there remains uncertainty about whether enough Democrats will support the vote.

A no vote on Tuesday means opposing real ethics reforms on politicians’ personal investments, handing American leadership in digital assets to our foreign competitors, and leaving Americans with zero protections in the digital asset markets.

The updated ethics provisions remain a sticking point, with expanded restrictions on officials’ personal financial interests and coverage extended to incoming elected officials and spouses. The procedural vote will decide whether those ethics provisions move forward alongside other regulatory changes affecting digital asset markets, leaving the balance between ethics restrictions and market regulation unresolved.