Invest1 publisher3 min readPublished
Circle and Coinbase fell more than twice as far as bitcoin after the Senate stalled CLARITY
The Senate left the Clarity Act 11 votes short of the 60 needed on Tuesday. Bitcoin fell 4.5%, while Coinbase and Circle, the two firms that would have gained a primary regulator, fell 10.10% and 11.4%.
The Investor · Invest desk
What happened
- The Senate's procedural vote on the Clarity Act drew 49 votes in favor against the 60 needed, leaving the market structure framework that would split oversight between the SEC and CFTC unpassed.
- Senator Cynthia Lummis, the Wyoming Republican seen as the industry's biggest champion in the chamber, told reporters that if the procedural vote failed, "we're done, it's over."
- Bitcoin, which had rallied through late summer, fell 4.5% to $75,798 as of late Tuesday afternoon.
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Why it matters
- exposure It is the intermediaries that are priced for the unresolved jurisdiction. Circle's drop was about 2.5 times bitcoin's, so exchange and stablecoin equity holders are the ones holding the legal risk.
- constraint Whatever certainty the SEC and CFTC deliver by rule can be undone by the next chair, a limit the SEC's own chair acknowledged when he called legislation indispensable.
- decision Firms that budgeted lobbying against a near-term statute now choose between funding another campaign into 2027 and spending that money working two agencies' comment files instead.
- precedent With the chamber's most pro-crypto Democrat voting no, any future draft has to win over the industry's own allies before it goes after the skeptics.
Bitcoin fell 4.5% to $75,798 by late Tuesday afternoon [10]. Coinbase fell 10.10% and Circle 11.4% [11][12], about 2.2 and 2.5 times the coin's move [24][23]. Strategy fell 5.3% and Riot Platforms 6% [13][14]. The 6.1 percentage points between Circle and Strategy [26] separate two different businesses. Holding bitcoin on a balance sheet does not require a market structure statute; issuing a dollar token or running a spot venue does. The Clarity Act would have given the CFTC direct control over digital commodities and rulemaking power over crypto spot markets, making it the industry's primary regulator [3].
The industry spent hundreds of millions of dollars campaigning for the bill [5], got a version through the House last year [6], and finished 11 votes short of the 60 needed to advance a text running more than 600 pages [22][2]. Four Republicans voted against, among them Missouri's Josh Hawley [8]. Kirsten Gillibrand, the Senate's most pro-crypto Democrat, reportedly urged colleagues to support the bill and then voted no, according to The Daily Upside [9].
Circle's 11.4% assumes the bill as drafted was worth something to Circle. Bank trade associations wrote to Senate leaders on Monday asking for a tougher circuit breaker, one letting Treasury bar crypto firms from paying rewards like interest on stablecoins when those rewards pull significant money out of the banking system [15]. "A circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all," the letter said [16]. So the text that would have given a stablecoin issuer federal cover was also the text Democrats and banks were trying to load with a switch on its yield. Elizabeth Warren wanted stricter ethics rules covering elected officials' crypto holdings [17], and the legislation as drafted went too easy on crypto firms and lacked real safeguards [18].
The Daily Upside expects the next attempt at comprehensive reform to wait until 2027 [19]. Until then the rulebook is whatever the two agencies write, including the SEC's first proposed major crypto rule, on how token issuers can raise capital [20]. SEC Chair Paul Atkins said last month that Congressional legislation locking in a framework that future-proofs certainty for investors "remains indispensable" [21].
I would expect the discount to stay in the intermediaries' multiples, because the next chair can rewrite an agency rule and cannot rewrite a statute. The other reading is that Tuesday priced a calendar. If the SEC finalizes its token issuance rule and Coinbase and Circle recover Tuesday's declines well before any 2027 vote [20][19][11][12], then the equity market was marking down the wait. The statute the industry spent hundreds of millions to buy was worth less than the campaign implied [5].
What to watch
- Whether the SEC finalizes its proposed rule on how token issuers raise capital, and what the CFTC does alongside it.
- Whether Coinbase and Circle recover Tuesday's 10.10% and 11.4% declines before any 2027 legislative attempt.
- Whether the bank trade associations' circuit breaker language appears in any redrafted market structure bill.