The US crypto industry faces a more challenging legislative environment after Democrats won control of Congress, potentially delaying the CLARITY Act and increasing scrutiny of President Donald Trump’s crypto-related business interests.

The political shift complicates efforts to establish comprehensive rules for digital assets. However, growing bipartisan support and the sector’s expanding role in financial markets make a broader reversal of crypto policy less likely.

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For years, crypto companies sought regulatory clarity while facing an approach largely centred on enforcement. Conditions improved following Trump’s 2024 election victory, which gave the industry greater access to policymakers. The latest midterm results have introduced new uncertainty.

CLARITY Act Faces A More Difficult Path

The return of crypto critic Sherrod Brown, a Democrat from Ohio, to the Senate, alongside the continued influence of Massachusetts Senator Elizabeth Warren, could shift attention towards industry oversight rather than legislation supported by crypto companies.

TD Cowen Washington analyst Jaret Seiberg said Brown’s victory weakened the industry’s political position. The firm had already expected the CLARITY Act to struggle in the Senate over the next two years, and the election results reinforced that outlook.

Crypto companies spent more than $200 million trying to influence the midterms and elect lawmakers supportive of comprehensive market-structure legislation. However, the CLARITY Act had already stalled in the Senate.

Seiberg also expects Democrats to investigate Trump’s crypto interests, including World Liberty Financial. Such scrutiny could make it harder to secure support for a version of the bill acceptable to the industry.

Crypto Policy Extends Beyond Market-Structure Legislation

The debate reaches well beyond the CLARITY Act. Stablecoin regulation, decentralised finance, access to banking services, tokenisation and tax policy will all influence the United States’ position in the global digital-asset market.

Although Democrats have traditionally been less supportive of crypto than Republicans, the political divide has narrowed as more lawmakers recognise the sector’s economic and technological importance.

Even without major new legislation, crypto’s growing role in payments, settlement and investment markets could be difficult to reverse. Financial regulators also retain the ability to shape the industry through rule-making, independently of congressional action.

Pro-Crypto Lawmakers Retain Significant Influence

Despite the political setback, the next Congress is expected to include a substantial number of lawmakers supportive of digital assets. Coinbase Vice President of US Policy Kara Calvert said the incoming 120th Congress could have more pro-crypto freshmen than any previous class.

“Crypto is 100% bipartisan, and that’s why the future of finance does not rest on either political party or a single election night,” Calvert said. She added that both Democrats and Republicans recognise the importance of clear rules for protecting consumers and keeping innovation in the US.

According to advocacy group Stand With Crypto, 19 candidates it classified as pro-crypto had been elected to the Senate as of Thursday morning, compared with eight classified as anti-crypto. In the House, the figures stood at 228 and 106, respectively.

Several races remained undecided. Meanwhile, crypto-backed super PAC Fairshake, launched in 2023, had won 29 of the 34 races in which it spent money, according to Reuters. The results highlight the industry’s growing political reach across party lines, although campaign spending does not guarantee legislative support.

Stablecoin Legislation Offers A Bipartisan Example

Dante Disparte, chief strategy officer and head of global policy and operations at Circle, said the election could delay the CLARITY Act’s return to the legislative agenda. However, he cautioned against viewing the setback as a defeat, arguing that the industry must continue demonstrating how its interests align with those of voters and lawmakers.

“Crypto is purple,” Disparte said, emphasising that the sector should not be associated exclusively with either political party.

He pointed to the GENIUS Act, bipartisan stablecoin legislation passed last year and scheduled to take effect in January. In his view, the law gives Democrats a stake in crypto policy and demonstrates how cross-party cooperation can support future legislation.

Innovation May Continue Despite Regulatory Delays

Joseph Chalom, chief executive of ether treasury company Sharplink, expects the CLARITY Act to remain on hold through 2028. Nevertheless, he sees opportunities for progress in stablecoins and the tokenisation of public equities, including through the Securities and Exchange Commission’s five-year innovation exemption.

“Technological progress is rarely rolled back,” Chalom said, pointing to faster settlement, lower costs and markets operating around the clock as developments that could attract investors and financial institutions regardless of the outcome of the 2028 presidential election.

Although the path towards comprehensive US crypto regulation has become more difficult, the industry’s development will depend on more than legislation. Regulatory decisions, bipartisan cooperation and the ability of digital assets to deliver practical financial benefits will also shape its future.