《CLARITY Act》 Faces Dual Setback: Ethical Negotiations Collapse, Only 31-Day Window Before Senate Recess

June 11 – The so-called CLARITY Act, formally named the Cryptocurrency Market Structure Act, is hitting two major roadblocks as it advances through the U.S. Senate. On Tuesday, a closed-door meeting between a bipartisan group of senators and Patrick Witt, director of the White House Cryptocurrency Task Force, ended in a stalemate. Senate Republicans and the White House walked back a preliminary ethics deal reached before the May Banking Committee hearing, scrapping a provision that would have allowed state attorneys general (AGs) to sue the Department of Justice (DOJ) for failing to enforce crypto-related rules. Legal experts noted forcing the DOJ to act via that mechanism would be constitutionally questionable. In turn, GOP lawmakers proposed limiting enforcement authority to federal AGs and using impeachment as an alternative accountability tool. Senate Democrats called this a complete reversal, leaving negotiations deadlocked; further talks are set for Thursday. Democratic Sens. Gallego and Alsobrooks have tied their support for the bill to inclusion of a strong ethical safeguard targeting Trump’s cryptocurrency business interests – a Reuters estimate puts total profits for Trump and his family from crypto at roughly $2.3 billion since he returned to the White House. The second major obstacle stems from law enforcement’s concerns over Section 604, also called the Blockchain Regulatory Clarity Act. This provision states non-custodial software developers are not liable for third-party use of their code, but law enforcement worries it could weaken tracking of on-chain money laundering and other financial crimes. On Wednesday, the White House Cryptocurrency Task Force will convene representatives from the National Sheriff’s Association, Fraternal Order of Police, and agencies including the DOJ, Treasury Department, and FinCEN to discuss the provision in depth. Administration officials plan to emphasize the measure does not provide a shield for criminals. Sens. Warner and Cortez Masto have said they will not back the bill unless law enforcement’s concerns are fully addressed. The U.S. Senate has only 31 legislative days left before its August recess – widely viewed as an informal deadline for passing bills ahead of the midterm elections. Meanwhile, the House Ways and Means Committee held a Tuesday hearing on cryptocurrency taxation, reviewing six Republican-led bills and a discussion draft covering mining, staking rewards tax treatment, and voluntary disclosure programs. Unresolved issues include a minimum exemption threshold for small Bitcoin transactions, decentralized finance (DeFi) rules, and international tax frameworks. Per PolyBeats monitoring, prediction market Polymarket currently puts the odds of the CLARITY Act passing this year at 48%.