Bernstein warns of crypto sell-off as CLARITY Act stalls in Senate

The CLARITY Act, a pivotal piece of legislation intended to define market structure and divide oversight between the SEC and the CFTC, now faces a precarious timeline. While Senate Majority Leader John Thune retains the authority to force a floor vote later this week, the absence of a confirmed timetable has rattled confidence. On prediction markets like Polymarket, the probability of the bill passing before the end of 2026 has plummeted to 28%, a decline of 10 percentage points in just one week.

Bernstein analysts warn that a failure to advance the legislation would likely trigger a knee-jerk sell-off across Bitcoin and broader crypto markets. Should Congress remain deadlocked, focus will shift toward the SEC and CFTC, which may attempt to fill the regulatory vacuum through Project Crypto. While this could provide temporary guidance on token classifications and decentralized finance, it offers none of the statutory certainty that a passed bill would guarantee. With the Senate expected to enter a state work period from August 10 through September 11, the window for action is effectively closing, leaving the sector vulnerable to further legislative inaction.