TD Cowen analyst Jaret Seiberg warns that the upcoming midterm elections could significantly stall the passage of the CLARITY Act, a key piece of legislation designed to establish federal rules for bitcoin and other digital assets. The crypto industry has invested $176 million in over 100 races to influence these outcomes. Prediction markets cited in the report indicate a 90% probability of Democrats winning the House and a 62% chance of securing the Senate. TD Cowen identifies this scenario as the most negative for the sector, noting that Senator Elizabeth Warren, a known crypto skeptic, would likely chair the Senate Banking Committee and conduct rigorous oversight of regulators.
However, Seiberg notes that while Warren cannot block regulatory policies favoring the industry, President Trump is expected to veto any bills limiting his regulators' authority, which Democrats would lack the votes to override. Consequently, policy focus may shift toward tokenization, perpetual futures, and stablecoins. A second scenario involves Democrats retaining the House while Republicans hold key Senate seats, allowing Senator Tim Scott to remain Banking Committee chair. In this case, Representative Maxine Waters might trade support for market structure provisions in exchange for investor protections, potentially blocking adverse legislation from reaching the president.
The best path for crypto policy, according to TD Cowen, requires Republicans to keep both chambers, though Kalshi data gives them only a 10% chance in the House and 35% in the Senate. A wider Republican Senate majority would improve odds for advancing the CLARITY Act in 2027 or 2028. Conversely, a narrow majority could leave the bill stalled due to Democratic demands for ethics provisions barring senior officials from profiting from crypto ventures. The House passed its version of the act in July 2025 by a 294-134 vote, and the Senate Banking Committee approved its version in May 2026 by a 15-9 vote. However, a cloture vote on the Senate floor failed 49-50 on September 15, leaving the bill stuck amid disputes over ethics language and stablecoin yields.
The potential stalling of the CLARITY Act highlights the fragility of legislative progress in the face of partisan gridlock and electoral uncertainty. While the crypto industry’s substantial financial investment aims to shape regulatory outcomes, the divergence between executive branch preferences and congressional control creates a complex landscape. If Democrats secure majorities, the immediate legislative threat may be mitigated by presidential vetoes, but the resulting regulatory vacuum could force the industry to rely on administrative actions rather than statutory clarity. This dynamic suggests that short-term market stability may depend less on new laws and more on the continuity of existing regulatory frameworks favored by the current administration.
Investors and policymakers should monitor the specific mechanics of committee leadership and veto powers, as these institutional levers will determine whether regulatory advancements occur through formal legislation or executive directives. The failure of the cloture vote underscores deep ideological divides regarding ethics provisions and stablecoin yields, issues that are unlikely to resolve quickly regardless of election results. Consequently, the sector faces prolonged uncertainty where regulatory risk is managed not through comprehensive legal codification, but through incremental administrative adjustments and political maneuvering within divided government structures.
