The White House pushed back against Senate Democrats’ rejection of the latest version of the CLARITY Act, saying ethics remained a major bottleneck.
The clash comes despite President Donald Trump’s decision this week to accept new ethics restrictions and reflects how far apart negotiators are as lawmakers try to move forward with sweeping legislation for the cryptocurrency market.
On July 22, Senate Republicans introduced the revised CLARITY Act, which would prohibit the president, vice president, members of Congress, federal judges, and other covered officials from issuing or sponsoring digital assets for compensation while in office.
These officials will be required to sell certain crypto assets, place them in blind trusts that they do not control, or use a combination of both approaches. Sales of virtual currency for more than $1,000 may also trigger disclosure requirements.
The proposal would also give the Justice Department civil enforcement powers for violations, including cases involving exchanges that knowingly list prohibited digital assets.
Leading Senate Democrats reject latest CLARITY draft
The revised ethics code failed to gain support from several Senate Democrats who could have given Republicans the votes needed to pass the CLARITY Act.
Sens. Angela Alsobrooks, Cory Booker, Catherine Cortez Masto, Ruben Gallego, John Hickenlooper, Mark Warner and Raphael Warnock said the latest Republican draft remains inadequate on ethics, illicit financing, conflicts of interest and other unresolved issues.
Their opposition carries particular weight because they have previously supported efforts to establish a federal framework for digital assets.
Mr. Allbrooks and Mr. Gallego joined Republicans when the Senate Banking Committee voted 15-9 to advance the Clarity Act in May, but they cautioned that committee support does not guarantee support on the Senate floor.
Albrooks said at the time that ethics and other regulations required further negotiations. Mr. Booker, Mr. Cortez Masto, Mr. Hickenlooper, Mr. Warner, and Mr. Warnock are also participating in Democratic efforts to craft a virtual currency bill.
Seven senators have not given up on negotiations, but their rejection of the current draft creates an immediate vote count issue for Republicans.
Republicans hold 53 seats in the Senate, and assuming all Republicans support the bill, at least seven Democrats would be needed to reach the 60 votes needed to overcome procedural hurdles.
That assumption is also uncertain. North Carolina Sen. Thom Tillis said additional ethics changes were needed to secure his support, and Louisiana Sen. John Kennedy raised concerns about other provisions, such as stablecoin rewards.
Democratic criticism has focused on whether the revised ethics language would meaningfully limit President Trump’s existing crypto operations.
Sen. Elizabeth Warren, the top Democrat on the Senate Banking Committee, said the proposal would not prevent Trump from making an additional $1.4 billion in cryptocurrencies. She said:
A new draft of the Senate Republican crypto bill would not prevent President Trump from making the next $1.4 billion from cryptocurrencies. It will further intensify President Trump’s crypto corruption. This bill should be invalid upon arrival.
Warren has repeatedly argued that while Congress creates a new regulatory framework for digital assets, government officials should not be allowed to continue profiting from companies affected by those rules.
Amanda Fisher, director of financial policy at Better Markets, similarly argued that the draft could leave some revenue streams tied to Trump-related businesses untouched.
Fischer said the proposal does not explicitly prohibit transaction fees related to existing businesses or income from accumulated assets, and criticized its compliance timeline, lack of state or private enforcement, and exclusion of officials’ offspring.
He also questioned a provision that requires certain violations to be committed “knowingly and knowingly” before the Justice Department can impose civil penalties, arguing that this standard could make enforcement more difficult.
These concerns strengthened Democrats’ argument that the ethics code amendment remains too narrow in scope and Republicans do not currently have the bipartisan support they need to pass CLARITY in the Senate.
White House pushes back against Democratic opposition
The White House has rejected two of the challenges threatening Democratic support for the revised CLARITY Act.
Patrick Witt, the White House’s senior cryptocurrency adviser, said the debate has narrowed to center around whether state attorneys general should be allowed to enforce ethics provisions and whether the bill should address President Donald Trump’s past cryptocurrency activities.
In a July 22 post about X, Witt argued that denying state attorneys general enforcement powers is consistent with existing federal ethics laws.
he said:
“If you have position (1), you’re basically saying that none of the current federal ethics laws are enforceable by state executive agencies, so they’re meaningless.”
He also pushed back against Trump’s previous calls for tighter regulation of cryptocurrency activity, sparking another debate over how far Congress can go in response to actions that predate the bill’s enactment.
Crypto industry warns that broader reforms could be sunk in ethics battle
In the ensuing back-and-forth between Democrats and the White House, crypto industry leaders have warned that the ethics debate could derail the broader regulatory framework.
Miles Jennings, general counsel for Andreessen Horowitz’s crypto division, argued that lawmakers risk losing proposed rules for exchanges, intermediaries, illicit finance and other digital asset markets if negotiations break down over ethics provisions.
His argument is that rejecting the CLARITY Act on the grounds that it is insufficiently regulated will leave the industry operating under the existing regulatory structure.
Faryal Shirzad, chief policy officer at Coinbase, similarly said that the industry did not accept everything it wanted in the proposal and urged lawmakers to accept that major legislation requires compromise.
Still, he said the broader framework is an important step toward bringing digital assets under clearer federal oversight.
Stuart Alderotti, Ripple’s chief legal officer, also defended the bill, citing provisions covering anti-money laundering requirements, law enforcement, and consumer protection.
he said:
“Perfect cannot be the enemy of good.”
But Democrats involved in the negotiations have rejected suggestions that opposing the current draft would amount to maintaining the status quo.
Their position is that lawmakers still have time to strengthen the bill before establishing a regulatory framework that could be difficult to review once passed.
This gap leaves the CLARITY method caught between two competing calculations. The question is whether lawmakers should accept an imperfect compromise now or hold off for stronger ethical protections, risking delaying the broader cryptocurrency framework.
