Bernstein has warned that if the U.S. Congress fails to pass the Digital Asset Market Clarity Act, or CLARITY Act, before the summer recess, the crypto market could face a “knee-jerk” wave of selling, according to a report cited by Cointelegraph. The firm said Bitcoin and broader crypto valuations could move lower if the legislation stalls.
With the Senate’s summer break approaching, concern has been building over the lack of progress on crypto legislation. In a report published Monday, Aug. 3, Bernstein said a failure to move the bill through Congress could trigger an immediate negative reaction across the digital asset sector.
Prediction markets have turned more pessimistic
That view lines up with current pricing in prediction markets. Data from Polymarket shows the odds of the CLARITY Act being signed into law by the end of 2026 at 31%. The probability has fallen 7% over the past week and 9% over the past month. The market tied to that outcome has attracted about $3.7 million in wagers.
On June 26, crypto investment firm Galaxy Digital had already lowered its own estimate of the bill’s passage odds to 50%. It also warned that the Senate had limited legislative time left before the August recess.
Bank opposition and political bargaining are complicating the bill
The report said resistance is coming from both traditional finance and Washington politics. Banks have pushed back against the current draft, arguing that it would let crypto companies offer yield on stablecoins without being held to the same strict regulatory standards that apply to banks.
At the same time, White House officials are weighing an ethics counterproposal put forward after weeks of negotiations by Republican Senator Thom Tillis and Democratic Senator Ruben Gallego. The proposal would allow state attorneys general to sue federal officials when the Department of Justice does not enforce ethics law, adding another layer of complexity to the legislative process.
Bernstein sees a faster regulatory fallback through Project Crypto
Bernstein said a legislative setback could still push regulators to act more quickly. If Congress ultimately fails to advance the bill, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are expected to speed up work on their joint “Project Crypto” initiative.
The initiative was first proposed by SEC Chair Paul Atkins in July 2025 and expanded into an interagency plan in September that year. Its stated aim is to use existing authority to build a workable regulatory framework for digital assets before Congress finishes broader legislation.
Bernstein expects the SEC and CFTC to release more interpretive guidance on token taxonomy, clarify rules around decentralized finance, or DeFi, and possibly accelerate an “innovation exemption” that would allow certain tokens to avoid being treated as securities for a limited period.
Bernstein's market view extends beyond the immediate shock
In the same report, Bernstein said that after a short-term setback tied to legislative disappointment, the crypto market could find a bottom between late third quarter and early fourth quarter of this year, then rebuild upward momentum ahead of the midterm elections.
That means a CLARITY Act failure, in Bernstein’s view, would likely bring short-term volatility, while a regulatory alternative from the SEC and CFTC could still offer policy support for the market later on.