CLARITY bill hits a stalemate: the “vacuum enforcement” gimmick of moral clauses

Authors: Nick Carpinito & Luke Leasure

Translated by: Deep Tide TechFlow

Deep Tide Quick Take: Trump personally stepped in to push the CLARITY bill, but Democrats and Republicans are completely torn apart over who should hold enforcement power—Republicans want it handed to the Department of Justice, and the DOJ nominee happens to be Trump’s personal attorney. Last year alone, he earned $1 billion just from cryptocurrency. This “regulate yourself” design has quickly cooled the market from Tuesday’s frenzy to Wednesday’s profit-taking.

On Wednesday, the market caught its breath, and optimism around the CLARITY bill cooled after a revised Senate bill text was released. Although crypto equities gave back some of their recent gains, ETF inflows continued to strengthen, extending the strongest streak of consecutive inflows since May. Below, we pull away from the lively headlines and break down what the CLARITY latest draft actually changed—and which parts are most critical for the crypto market.

Market Dynamics

On Wednesday’s intraday trading, the picture was mixed: BTC and stock indexes edged lower, giving back the gains from earlier this week. The probability that the CLARITY bill passes during Tuesday’s session jumped from 31% to 51%, driving crypto stocks like COIN and CRCL to surge by double digits—but since then, that probability has fallen back to 38%, dragging crypto stocks and other indexes lower as well.

On Wednesday, Senate Republicans released an updated bill text that incorporates moral terms into law. The market can now price the prospects of voting on this actual language—not just hype headlines. The volatility in these crypto stocks suggests this segment could be the biggest beneficiary in getting the bill over the line. Stock index futures fell overnight, and the Nasdaq opened down -0.97%, weighing on major crypto assets with slight declines ahead of Thursday’s open.

The brief spike in CLARITY probability lifted most crypto assets. If momentum keeps building and the probability keeps rising, we should expect this legislation to become the rising tide that lifts all boats. Moving from a high level of uncertainty to a low level of uncertainty is itself a positive—no matter how tough the final rulemaking ends up being.

Chart: CLARITY bill passage probability (Source: Blockworks Research)

What supports price even more is that ETFs are in their longest consecutive inflow cycle since early May. Over the past 5 days, they attracted $750 million in net inflows.

Chart: ETF consecutive inflows (Source: Blockworks Research)

Cutting Through the CLARITY Noise

Trump this week broke the CLARITY summer stalemate, but the core struggle over enforcement authority is still unresolved. A White House official told Republican negotiators that the president accepted a moral clause barring federal senior officials—including the president himself and the vice president—from holding personal crypto financial interests. That took CLARITY one step closer to a Senate vote. Lummis released updated text on Wednesday, combining the work of the Banking Committee and the Agriculture Committee, so the moral clause is now clearly visible. But it still doesn’t say who would enforce the ban, and Democrats say they haven’t seen a version they can accept.

Lummis and Moreno negotiated this moral clause package with the White House without Democratic signoff. It bars the president, vice president, members of Congress, federal judges, and their spouses from issuing or sponsoring digital assets in exchange for compensation during their terms, and the clause expires on January 20, 2029. Covered officials must sell their crypto and crypto-company holdings, or move them into blind trusts they can’t control. Republicans would hand civil enforcement authority to the Department of Justice, including the power to prosecute exchanges that list banned tokens; for intermediaries, the maximum penalty is up to $250k per day per violation, while individual officials face disgorgement of gains plus a $500k penalty or a 10% fine. Sales above $1,000 must be disclosed, and the Government Accountability Office (GAO) will study remaining loopholes.

Both sides are split on enforcement. Senate Democrats want state attorneys general to regulate the restriction. The White House and Republicans want it enforced by the federal attorney general and the Department of Justice. Democrats argue that federal enforcement alone would be essentially meaningless for a president—because this president’s former private attorney, Todd Blanche, is awaiting confirmation in the Senate as the DOJ nominee, and his disclosure forms show that last year alone he earned more than $1 billion from cryptocurrency. Senator Angela Alsobrooks said DOJ-only enforcement is “not serious.” Pressure is also coming from the left. Indivisible and Demand Progress have been pushing Senate Democrats—including Kirsten Gillibrand—to reject a weak moral deal this week. Those are the exact votes Republicans need to reach 60.

Changes to the rest of the bill text are largely limited. Insiders say the Blockchain Regulatory Certainty Act is unchanged from the May version produced by the Banking Committee, continuing to exclude non-custodial developers and infrastructure providers from the definition of money movers; the Lummis-Grassley amendment retains criminal liability for intentionally helping illegal traders, and the Protect Your Coins Act protects self-custody rights. The stablecoin revenue section keeps the Tillis-Alsobrooks compromise: banning interest on idle payments based on stablecoin balances, but allowing activity-based rewards. A new enforcement chapter funds state and local crypto investigations and establishes a cybersecurity center targeting North Korea and Iran. It also requires stablecoin issuers to comply with lawful freeze and attachment orders, and the bankruptcy provision treats customer assets as customer property rather than the assets of a failed custodian—this is a direct response to FTX.

Time Window: Less Than Three Weeks

With less than three weeks remaining, majority leader John Thune has pledged to schedule a floor vote before the recess around August 7. The Senate vote only has to clear one hurdle. The House will take up the revised version after returning from its September recess, followed by the president’s signature and subsequent rulemaking by the CFTC and SEC.

Chart: CLARITY bill timeline and moral clause sunset milestones (Source: Blockworks Research)

How Markets Price the “Vote”

Traders price the “vote” separately from the “outcome.” The probability that the Senate will vote before the recess is close to 72% on Kalshi, but trading volume is only $31k—so thin it’s effectively ignorable. On Polymarket, the probability of “signed into law in 2026” is close to 41% (volume $2.4 million), while the deeper market on Kalshi about “crypto market structure becomes law by year-end” is close to 42% (volume $3.6 million). These two deepest order books differ by 10 percentage points on the same question, and neither side sets enactment probability above 50%. The “passing probability above 50%” narrative sits right at the optimistic edge of this range.

Chart: Kalshi and Polymarket pricing for CLARITY passage probability (Source: Blockworks Research)

Chart: Crypto market structure legislation probability order book (Source: Blockworks Research)

Loudest This Week, Shallowest Roots

The loudest thing this week is precisely the one with the shallowest foundation. An unverified rumor claims CLARITY will geoblock U.S. users at the RPC layer, enforce actions on specific wallets, and frame it as a negative for HYPE. It also pairs with another unverified claim—that Multicoin allegedly sold about $120 million worth of HYPE before the July 28 unlock. Multicoin’s Tushar Jain confirmed a large de-leveraging on Wednesday, but said the company has not exited, because it was a privacy-driven “wallet rotation” rather than a sell. No one has produced draft bill text supporting such a geoblocking mechanism, and the version Lummis released on Wednesday contains no such clause.

Reading & Listening

Helium Q2 Token Holder Report

Blockworks interprets this quarter as a “price reset” rather than a demand slump: after June 4’s HIP-143 cut operator-paid pay rates from $0.50/GB to about $0.10/GB, uninstall volume grew by about 20% quarter-over-quarter during the transition. DC-burn revenue was $3.35 million, down 14%. Blockworks points out that the headline metric “2.2x revenue covers emissions” is emissions-driven—because HNT emissions fell 39% to $1.5 million, while the revenue line itself is also declining, so an exit rate of around 1.7x is the cleaner forward-looking read. After the quarter, HIP-149 approved by veHNT moved deployer rewards to usage and retired “Proof-of-Coverage,” with funding coming from a supplemental pool of about 141 million HNT that will self-terminate. It flips the network from deflationary to net inflation—this is the key question for whether Helium’s pure operator model can self-sustain its “blood.”

Chart: Helium Q2 tokenomics data (Source: Blockworks Research)

Stablecoins Hit Ramp

Ramp partnered with Privy to add a stablecoin rail to its payment platform, letting businesses open “stablecoin accounts” holding USDC or USDT backed by cash reserves, earning up to 3.25% in rewards, and making payments to vendor wallets in more than 140 countries—or exchanging into more than 40 fiat currencies. Stablecoins also became an independent payment method in “Bill Pay”: businesses can fund spending using dollar bank accounts, and Ramp completes the exchange before sending, with no need for a pre-existing balance. Ramp says more than 1,000 businesses already pay vendors this way, and more than 70% of transaction volume occurs outside traditional bank operating hours—exactly the core selling point: 24/7 settlement in the face of wire cutoffs and cross-border delays.

Chart: Ramp stablecoin payment rail (Source: Blockworks Research)

Making Money in Dollars, Not Liquid Dollars

Sky’s global BD head John Conneely believes the stablecoin rankings are using the wrong numbers—mixing “payment dollars” and “savings dollars” into one race, even though they compete for different shelf space. His case for USDS/sUSDS boils down to “where the yield is.” Governance publishes Sky savings interest, which is native to the asset itself; meanwhile, payment dollars like OUSD keep returns inside distribution agreements decided by the platform. He anchors the argument on Sky’s $13.96 billion collateral ledger—across more than 40 positions, including $4 billion in stablecoin reserves, $1.5 billion in tokenized treasuries held via BlackRock’s BUIDL and Janus Henderson Anemoy, and nearly $3 billion across cross-chain and OTC crypto lending—treating “allocation” rather than “supply” as the indicator that determines the savings race. Read this as a BD case for Sky, not a neutral investigation; Conneely notes that the viewpoint is his personal opinion, not from the Sky Frontier Foundation.

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