CLARITY Act Faces New Hurdle as Democrats Push Vertical Integration Provision, GOP Resists

The CLARITY Act faces a new hurdle as Democrats and Republicans clash over adding a vertical integration provision to the crypto bill. This comes ahead of next week’s cloture vote, which would begin the process towards passing the bill.

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CLARITY Act Faces New Issue as Lawmakers Clash Over Vertical Integration

According to a Politico report, Democrats are pushing a provision in the crypto bill that directs regulators to establish new standards for vertically integrated crypto companies to avoid conflicts of interest. These senators argue that the provision is similar to what Republicans supported when they advanced the bill earlier this year.

However, while GOP senators support including conflicts-of-interest standards in the CLARITY Act, they warn that a future Democratic president could weaponize a vertical-integration provision. Crypto industry stakeholders have also pushed back against including such a provision.

Vertical integration involves companies controlling multiple stages of their supply chain; in crypto, that could look like FTX, which ran an exchange and operated as a market maker through its Alameda Research firm. The clash over a vertical integration provision is one of several issues lawmakers are trying to address to reach a bipartisan deal.

Lawmakers have yet to agree on a bipartisan ethics provision, while banks continue to lobby against the stablecoin yield provision. This comes ahead of next week’s cloture vote, with Treasury Secretary Scott Bessent urging senators to pass the CLARITY Act or risk the U.S. losing its crypto leadership.

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Negotiations Ongoing Between Both Sides

Democrats and Republicans are negotiating over the vertical integration provision, with Democrat Senator Cory Booker and Republican Senators Cynthia Lummis and Ag Chair John Boozman in talks on the language. Speaking to Politico, Senator Booker said that the two sides have “shared values” in their fight, signaling progress in negotiations.

However, he said that he will not support the CLARITY Act if it doesn’t protect consumers from the “potential downsides of a Web 3.0.” With several issues on all fronts, the crypto industry may be resigning itself to the possibility that next week’s cloture vote may fail.

Coinbase CEO Brian Armstrong said that crypto will get regulatory clarity even if the crypto bill fails to pass in the Senate. A final vote on the bill may not happen until the lame-duck sessions after the midterm elections, even if the cloture vote passes.

This is because the House has canceled its late-September sessions and will head for an early recess after the first half of this month. Data from the top crypto prediction market platform Polymarket shows only a 17% chance that President Trump will sign the CLARITY Act into law this year.