One in four. That is the probability investment bank TD Securities attached to the crypto market structure bill in a note released Monday, and it is the sort of number that recasts everything else said about the Clarity Act over the past few months.
Read from the other direction, the message is harsher. “The bill is not dead, but the path forward is harder,” the bank wrote. “We assign a 75% probability that Clarity fails to become law this fall.”
Nobody is calling it dead. What is being forecast is a stall — and on a calendar this compressed, a stall in the Senate ends up looking much the same.
The delay that moved the math
A vote on the long-awaited crypto market structure bill was supposed to happen before lawmakers left for a five-week recess. Word came last week that it would not. Senators will now take it up in September, once they are back from the August break.
That slippage, along with the prospect of Democratic foot-dragging, is what TD Securities built its call on. Passage before the summer is off the table, the bank said, which leaves September carrying a 25% chance.
How it fails, specifically
What makes the note worth reading is not the percentage. It is that TD Cowen laid out a mechanism.
One plausible sequence: cloture clears on the first attempt in September, Republicans then block Democratic amendments touching the ethics and anti-money-laundering provisions, and Democrats retaliate by sinking the second cloture vote. Cloture is the procedural device the Senate uses to close debate on a bill so it can reach a final vote. Two of them are required, and under this scenario the second one is the graveyard.
The bank floated a second route as well: no cloture vote is ever held. No floor drama, no standoff over amendments. The bill is simply never brought up.
The ethics language cuts both ways
The most recent draft, in circulation since July, includes wording that would bar government officials from promoting crypto or profiting from it. Democrats and Republicans wrote that section jointly.
It is exactly the kind of clause designed to neutralize an objection. It has not. Senator Elizabeth Warren, a critic of the Clarity Act since its earliest days, along with other Democrats, has argued the new legislation would enrich the president and his family.
Consider where the ethics section lands in TD Cowen’s failure scenario. It is one of the two areas where Republicans are expected to shut down amendments. The language drafted to settle the criticism turns out to be the language the fight travels through.
Who wants this and why it hasn’t been enough
Backing for the bill extends well past the usual crypto lobby. Goldman Sachs and Fidelity are on board. Law enforcement groups are too. The legislation was assembled on a bipartisan basis, and the House of Representatives cleared it last year.
None of it has yielded a vote in the Senate. Some Republicans have blamed Democrats for holding the bill up, which is a diplomatic way of conceding the votes have not materialized.
Should it become law, the Clarity Act would establish a federal rulebook governing U.S. cryptocurrency markets. That is the entire proposition, and it explains why the industry has invested so many months in it.
What to watch in September
Watch the first cloture vote rather than the coverage surrounding it. By TD Cowen’s own reasoning, that vote can go through and the bill can still collapse weeks afterward on the second one, so an early-September green light demonstrates less than it seems to.
The real signal is whether Democratic amendments on ethics and AML are given floor time. If they are not, the bank’s 75% may prove to be on the cautious side.