TD Cowen Sees Crypto Clarity Act Passage Unlikely This Year

TD Cowen analysts declared the prospects for comprehensive U.S. crypto legislation this year have sharply deteriorated in a note published on 26 May 2026. The investment bank now assesses the likelihood of the Lummis-Gillibrand Responsible Financial Innovation Act, commonly called the Clarity Act, passing in 2026 at just 33%. This marks a stark reversal from November 2025, when the firm assigned the same legislation a 58% chance of enactment. The primary driver is a worsening political environment for bipartisan cooperation on digital asset policy, complicating the path for market structure and stablecoin bills.

Context — [why this matters now]

The push for federal crypto legislation has been a multi-year endeavor. The last major attempt at a comprehensive package, the 2023 Financial Innovation and Technology for the 21st Century Act (FIT21), passed the House with bipartisan support but died in the Senate without a floor vote. The current political stalemate emerges against a backdrop of heightened regulatory scrutiny, with the SEC continuing its enforcement-first posture under Chair Gary Gensler. A key catalyst for the renewed legislative push in late 2025 was the conditional launch of spot Bitcoin exchange-traded funds (ETFs) in January 2024, which created a $150 billion regulated market segment demanding clearer rules. However, persistent partisan divides over jurisdictional control between the SEC and CFTC, coupled with election-year posturing, have eroded the fragile consensus that briefly existed following the ETF approvals.

Data — [what the numbers show]

TD Cowen’s quantitative probability assessment shows a 25 percentage point decline in passage odds over six months. The stablecoin-specific segment of the legislation, often considered the most viable standalone component, now faces its own hurdles. In the 118th Congress (2023-2024), over 50 distinct crypto-related bills were introduced, with zero becoming law. Market data reflects regulatory uncertainty: the Coinbase Global (COIN) share price is down 22% year-to-date, underperforming the Nasdaq Composite’s 8% gain. The aggregate market capitalization of the top 10 publicly traded crypto-centric companies has fallen by $18 billion since the start of 2026. Spot Bitcoin ETF assets under management have plateaued near $65 billion after initial inflows, as institutional adoption awaits regulatory certainty.

Metric	November 2025	May 2026	Change
Clarity Act Passage Odds	58%	33%	-25 ppt
COIN Stock YTD Return	+15%	-22%	-37 ppt
Bitcoin ETF AUM	~$72B	~$65B	-9.7%

Analysis — [what it means for markets / sectors / tickers]

The diminished legislative outlook directly pressures crypto-equity valuations. Publicly traded exchanges and custodians like Coinbase (COIN), Robinhood (HOOD), and MicroStrategy (MSTR) face continued regulatory overhang, potentially limiting new product launches and institutional partnerships. Conversely, the stalemate may benefit offshore, non-U.S. compliant exchanges and decentralized protocols that operate outside American jurisdiction, potentially capturing market share. A counter-argument is that legislative failure could push the SEC to take more aggressive unilateral action, accelerating enforcement rather than creating a regulatory vacuum. Current positioning shows institutional money flowing cautiously into spot Bitcoin ETFs as a regulated proxy, while hedge funds remain net short crypto equities via futures and options, betting on continued regulatory pressure. Treasury market flows indicate no material shift from crypto volatility as a macro driver.

Outlook — [what to watch next]

The immediate catalyst is the markup of the stablecoin bill in the House Financial Services Committee, scheduled for 5 June 2026. Its fate will signal whether any component of the broader package can advance. The second watchpoint is the 4 November 2026 U.S. election outcomes, which will reset the congressional composition and committee leadership for the 119th Congress in 2027. Market participants should monitor the 200-day moving average for the Valkyrie Bitcoin Fund ETF (BRRR) at $52.30 as a key technical support level for the regulated crypto equity complex. A break below this level on high volume would signal deepening bearish sentiment tied to regulatory delays.

Frequently Asked Questions

What does the crypto bill delay mean for Bitcoin ETF investors?

The delay maintains the status quo for existing spot Bitcoin ETF holders. These products will continue operating under their current SEC approvals and surveillance-sharing agreements. However, the lack of new legislation may slow the approval of novel crypto ETF structures, such as those holding Ethereum staking yields or other altcoins. It also leaves ETF issuers vulnerable to shifting SEC interpretations of existing rules, a persistent operational risk not alleviated by Congress.

How does this political environment compare to the Dodd-Frank Act passage?

The Dodd-Frank Wall Street Reform Act passed in 2010 following the 2008 financial crisis, a moment of intense public pressure for regulatory overhaul. The current crypto legislative effort lacks a similar catalyzing crisis, operating in a more politically fragmented environment. Dodd-Frank had a clearer jurisdictional framework within traditional finance, whereas crypto legislation battles over whether the SEC or CFTC should hold primary authority, creating a fundamental procedural roadblock absent in 2010.

Could states fill the gap if federal crypto legislation fails?

Several states, including Wyoming and New York, have enacted their own digital asset frameworks for licensing and custody. This creates a patchwork regime that increases compliance costs for national firms. While state-level innovation can proceed, it cannot resolve core federal issues like the legal status of a decentralized autonomous organization (DAO), the classification of certain tokens as securities, or the creation of a federally-regulated stablecoin, which requires federal banking or payments law changes.

Bottom Line

Crypto market regulation will remain a contested enforcement arena, not a collaborative legislative one, for the foreseeable future.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.