What the 2026 Midterm Elections Mean for Crypto Regulation and the Clarity Act

The election gives crypto a chance to reset its relationship with incoming lawmakers, Mike Katz argued, while Justin Slaughter said many new members of Congress have not yet formed views on the industry. Democrats won the popular vote by 13 points, compared with an 8-point margin in the 2006 Democratic midterm wave. Slaughter put the Clarity Act’s chances of passing before the election at 5% and said a Democratic-controlled Congress was unlikely to pass it in the lame-duck session. Democrats who follow crypto reportedly consider about 80% of the bill acceptable, leaving a disputed 20% that includes issues important to the industry.

The shape of future legislation will depend partly on whether Democrats focused on relitigating 2024 or more pragmatic centrists seeking to pass laws prevail. Maxine Waters is the presumptive chair of House Financial Services, and Elizabeth Warren is expected to chair Senate Banking. Reports say House Financial Services staff are drafting a separate crypto market-structure bill, but its content is unclear; Slaughter characterized possible provisions as a rough draft. They could include stricter ethics rules for officials’ crypto holdings and industry ties, tighter DeFi rules, stronger audit and payout requirements, and moving more jurisdiction from the CFTC to the SEC. Slaughter urged DeFi to monitor the proposal.

Congressional scrutiny is expected to focus on Trump family crypto ventures, including meme coins and World Liberty, and possible self-dealing, quid pro quo, foreign influence, or funding involving the UAE and Saudi Arabia. Jamie Raskin said Democrats would target corruption, not businesses or individuals, and speakers said such scrutiny can coexist with support for sensible market-structure legislation. Lawmakers may also question dismissed crypto cases and other regulatory decisions, including whether political donations were exchanged for pardons or dropped cases. One speaker called oversight appropriate but said reviving the cases could be difficult because they were weak and the prior SEC was losing many of them.

Slaughter expects painful oversight hearings but doubts they will produce much beyond that. He anticipated an intense Warren-led effort involving letters and hearings on crypto, prediction markets, AI, and other industries, while the effect of that pressure remains uncertain. He also doubted that pressuring executives to resign or return money would be effective. Separately, speakers expect SEC and CFTC crypto rules to change little over the next two years; SEC Chair Atkins is pursuing a limited number of rules rather than a slate of 30 or 40. An appropriations rider that pauses some rulemakings was described as a small risk, though Congress could use funding powers to complicate agency work.

Stablecoins have codified law, but crypto market structure has not. Congress cannot repeal the Genius Act, but lawmakers on committees overseeing the agencies implementing it could make implementation difficult; one speaker said banks are trying to undermine the law. The Act takes effect January 17, 2027, whether or not its rules are final, and the OCC was the only agency said to have finalized rules, with several others still outstanding. Waters could also expand the Crypto Investor and Consumer Bill of Rights into a broader market-structure bill. Possible measures include payouts within 24 hours, mandatory audits, and separating custody from exchange ownership. Speakers said these ideas are not necessarily non-starters, although structural separation would be complicated and would mean more regulation than the industry prefers.

The speakers urged crypto advocates to engage with skeptical Democrats in good faith, explain the issues in terms lawmakers understand, and pursue rules that can withstand court challenges and be costly for a future administration to repeal. The next two years were described as an opportunity to rebuild ties before 2028, rather than wait for the next election. Sherrod Brown is likely to focus on reelection in 2028, and Slaughter said he could make Senate passage of a House crypto bill harder; Brown’s Ohio race is an uphill battle after he won by about four points in a year when Democrats won the popular vote by 13. Fairshake spent $56 million trying to defeat Brown, who won, and played in only two races. Speakers said the result showed that a crypto war chest alone cannot intimidate Democrats or secure legislation, and argued that political spending should be a last resort rather than the industry’s primary tool.