Galaxy Research analyst Alex Thorn wrote that the sharp decline in the likelihood of the CLARITY Act passing in 2026 is pushing the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission to accelerate separate crypto regulatory efforts.
According to Thorn, the bill had earlier received bipartisan support in the Senate Banking Committee, but then stalled. He pointed to several reasons: unresolved crypto ethics rules for government officials, pressure from community banks that led some Republicans to soften their stance, and disputes over provisions meant to protect developers.
The Senate majority leader did not move the bill to a vote before the August recess. With only about two to three weeks available in the September session, Galaxy cut its estimate of the bill’s passage odds to 10%.
The SEC’s delayed crypto exemptions may return
On the SEC front, Thorn said the agency’s planned “Reg Crypto” exemption and “Innovation Exemption” have both been delayed multiple times. The first proposal would create a new route for primary issuance of crypto assets. The second would allow tokenized securities to trade on DeFi secondary markets.
Thorn said the agency had previously backed away after opposition from the traditional securities industry. With the legislative outlook now weakening, those proposals may be revived, and he expects draft text to be released in the coming weeks to months.
He said the measures are likely to take the form of time-limited sandbox arrangements. Even if they move forward, they are expected to face litigation and may require years of rulemaking and revision.
The CFTC keeps pressing its case on prediction markets
Thorn also said the CFTC is actively asserting jurisdiction over prediction market contracts. In connection with New York Attorney General efforts to seek a nationwide ban on Kalshi event contracts, the agency issued an emergency order. The dispute extends the ongoing legal fight between federal and state authorities over who controls prediction market oversight.
Politics is now weighing more heavily on the process
In Thorn’s view, the CLARITY Act still offers a broad framework covering registration, compliance monitoring and consumer protection, but the process is now being driven more by political factors.
He added that SEC Commissioner Hester Peirce plans to leave in November, increasing the time pressure around any rule push. For now, the latest agency actions are meant to fill a legislative vacuum, though the end result could still involve a long stretch of court challenges and formal rulemaking.