On Tuesday morning, May 12, Senate Banking Committee Chairman Tim Scott, Senator Cynthia Lummis, and Senator Thom Tillis released the 309-page substitute text of the Digital Asset Market Clarity Act. The committee will mark it up Thursday at 10:30 AM ET in Room 538 of the Dirksen Senate Office Building. Committee members have until close of business Tuesday to file amendments.
This is the most consequential moment in U.S. crypto regulation since the Securities and Exchange Commission (SEC) dropped the Ripple lawsuit. The bill, which the House passed 294 to 134 last July, would end a decade of regulation by enforcement and write a federal market structure into statute. Polymarket has the odds of CLARITY becoming law in 2026 at 75%.
But there is one provision missing from the 309 pages that could collapse the entire timeline. The bill contains no language restricting senior government officials from profiting off the digital asset industry while regulating it. Senate Democrats are now signaling they may withhold the votes the bill needs to clear the Senate floor unless that changes.
This is the fight that decides whether CLARITY becomes law by July 4 or stalls into 2027.
How We Got Here: The Coinbase Reversal That Made Thursday Possible
The path to May 14 ran through Coinbase. On January 14, 2026, hours before the originally scheduled Senate Banking markup, Coinbase CEO Brian Armstrong publicly pulled the company’s support for the CLARITY Act, citing concerns over stablecoin yield. Senator Tim Scott postponed the markup indefinitely. The bill sat in limbo for four months.
The breakthrough came on May 1, 2026, when Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) released a bipartisan compromise on stablecoin yield. The deal bans passive yield (holding USDC won’t generate interest-like returns) but permits activity-based rewards tied to actual transactions and platform use. Armstrong reversed course publicly that same day with a three-word X post: “Mark it up.” He had personally reviewed updated drafts alongside SEC Chairman Paul Atkins and Treasury Secretary Scott Bessent before the reversal.
That alignment of the administration, both regulatory agencies, and the industry’s most powerful domestic exchange behind a single piece of legislation gave Chairman Scott the political cover to schedule Thursday’s session.
What the 309 Pages Actually Say
The Scott-Lummis-Tillis text is structured across nine titles. The committee released a section-by-section summary alongside the bill. Here is what is inside.
Title I, the Lummis-Gillibrand Responsible Financial Innovation Act of 2026. This is the core securities framework. The bill defines a new category called “ancillary assets,” which are network tokens whose value depends on the entrepreneurial or managerial efforts of an originator. A rebuttable presumption treats all network tokens as ancillary assets unless the originator or a digital asset intermediary submits a written certification with reasonable evidence to the SEC. The SEC has 60 days to deny the certification. Once efforts end and the network reaches autonomy, the asset is no longer an ancillary asset.
Title I also creates “Regulation Crypto,” a new SEC exemption that lets companies raise up to $50 million per year for four years (or 10% of outstanding token value) without full securities registration, capped at $200 million in total gross proceeds per originator.
Title II, Protecting Against Illicit Finance. Digital commodity brokers, dealers, and exchanges are pulled under the Bank Secrecy Act and required to run AML and CFT programs comparable to futures commission merchants. The title also creates a federal regulatory floor for cryptocurrency ATMs, with fraud prevention measures, transaction limits for new customers, and a mandatory customer service helpline.
Title III, Responsible Innovation in Decentralized Finance. This is where the Senate text materially diverges from the House version. The bill defines when a DeFi protocol is “non-decentralized” based on control, discretion, or the ability to alter or censor protocol operations. Core infrastructure (nodes, validators, relayers) and security councils are explicitly excluded from being treated as controlling the protocol. The Treasury Department is directed to publish sanctions and AML guidance for U.S.-operated front-ends to DeFi protocols.
The title also includes the offshore stablecoin reporting requirement, the temporary hold safe harbor, and a voluntary NIST cybersecurity certification program for DeFi protocols.
Title IV, Responsible Banking Innovation. This is the stablecoin yield battleground. Section 401 amends the Bank Holding Company Act and the National Bank Act to clarify that financial holding companies, national banks, state banks, and certain credit unions can use digital assets and blockchain technology for any activity they are already permitted to conduct.
Section 404, the most-watched provision in the entire bill, prohibits covered digital asset service providers and their affiliates from paying U.S. customers passive, deposit-like interest or yield on payment stablecoin balances. Activity-based and transaction-based rewards are allowed under joint rules to be issued by the SEC, Commodity Futures Trading Commission (CFTC), and Treasury. This is the Tillis-Alsobrooks compromise. The American Bankers Association, the Bank Policy Institute, and the Independent Community Bankers of America formally rejected this language on May 9, but the text survived the rewrite untouched.
Title V, Responsible Regulatory Innovation. A joint CFTC-SEC micro-innovation sandbox for digital asset products, valid for up to two years with possible extension. The title also writes in tokenization provisions for real-world assets, makes clear that tokenized securities remain securities, and creates a voluntary NIST post-quantum cryptography standard for the industry.
Title VI, Protecting Software Developers and Software Innovation. Software developers and network participants in DeFi are explicitly protected from federal and state securities laws for compiling network transactions, providing computational work, or other activities relating solely to software development. The title also creates an NFT safe harbor (NFTs are exempt from securities laws unless they involve an investment contract), folds in the Blockchain Regulatory Certainty Act (exempting blockchain developers from money transmitter classification), and folds in the Keep Your Coins Act (protecting self-custody rights).
Title VII, Protecting Customer Property. This is the post-FTX title. Ancillary assets and digital commodities are defined as customer property under Chapter 7 bankruptcy. A separate insolvency safe harbor lets counterparties close out positions and access collateral outside standard bankruptcy proceedings, mirroring the protections that already exist for conventional derivatives.
Title VIII, Customer Protection. Educational materials, retail financial literacy studies, and a 270-day SEC deadline to issue rules requiring broker-dealers to disclose to investors how digital commodities and payment stablecoins would be treated if the broker-dealer enters insolvency.
Title IX, Other Matters. A joint SEC-CFTC advisory committee on digital assets, a mandatory memorandum of understanding between the two agencies on overlapping registrants, a $30 million annual FinCEN appropriation for the first five years, and a 20 percent premium FinCEN can pay to attract qualified hires. The title also includes the Build Now Act, a housing pilot program in Community Development Block Grant jurisdictions, which is an unusual addition signaling horse-trading among committee priorities. The general effective date is 360 days after enactment.
What is not in any of the nine titles is any restriction on senior government officials profiting from the crypto industry while regulating it. That is the omission Senate Democrats are now organizing around.
The Ethics Fight, in Detail
The conflict-of-interest question has been live in CLARITY negotiations since the second Senate Banking discussion draft in September 2025. Twelve Senate Democrats released a market structure framework that same month demanding ethics provisions. By January 2026, when the Senate Banking Committee released a 278-page draft, the language was watered down. In Tuesday’s 309-page text, it is gone.
Senator Adam Schiff, who joined Senate Banking in 2025, is reportedly demanding stronger provisions specifically addressing President Donald Trump and his family’s crypto dealings. The Trump family’s crypto ventures have expanded materially through 2025 and into 2026, including the World Liberty Financial DeFi protocol and the TRUMP memecoin.
Senator Kirsten Gillibrand, whose name is now on Title I of the bill, told the audience at Consensus 2026 in Miami last week that CLARITY needs an ethics provision barring senior government officials from profiting off the industry while regulating it. Her office reiterated the position in a press release citing CoinDesk-commissioned polling that found 73% of registered U.S. voters support such a restriction.
Senator Ruben Gallego of Arizona, a member of the Banking Committee, has emerged as a potential Democratic swing vote but has not committed publicly. Gallego ran for office on a moderate platform and has crypto industry support, which makes him the senator the Republican majority most needs to flip if they want any Democratic cover for Thursday’s vote.
The Banking Committee has 13 Republicans and 11 Democrats. Chairman Scott can pass the bill out of committee on a party-line vote without a single Democratic vote. The math problem is what happens next.
Galaxy Digital’s Head of Research, Alex Thorn, summarized the issue in one sentence: a purely Republican committee vote on Thursday makes it substantially harder to clear the 60-vote threshold on the Senate floor. The bill needs Democratic buy-in eventually. The ethics fight is where that buy-in gets purchased.
Stand With Crypto, the advocacy group representing 2.9 million supporters, has confirmed it will publicly score every senator’s vote on Thursday. With 70% of Americans supporting clear federal crypto legislation according to industry polling, both parties face political pressure, but in opposite directions.
Why Republicans Left Ethics Out
The Scott-Lummis-Tillis bloc made a deliberate calculation when they finalized the 309-page text. Three considerations point to why ethics language was excluded.
First, adding a Trump-targeted ethics provision would have forced the bill to die in committee. President Trump has publicly framed crypto policy as a 2026 deliverable for the Republican majority, and a provision restricting his family’s business interests would have triggered a White House veto threat. Chairman Scott would rather pass the bill out of committee on a 13-11 party-line vote and let the ethics fight happen at the reconciliation stage with the Senate Agriculture Committee.
Second, the text is structured to give Republicans plausible deniability. Title VI’s developer protections, the NFT safe harbor, and the Keep Your Coins Act are all framed as protections for ordinary builders and self-custodians, not as protections for politically connected actors. Republican leadership can publicly defend the bill without defending Trump-family-specific provisions.
Third, the political calendar is brutal. If the markup fails or slips past the May 21 Memorial Day recess, the bill drops into summer appropriations season and then into the midterm cycle. Senators Lummis and Bernie Moreno have both warned that a failure this week could push the next viable market structure window to 2030 or beyond. Trading the ethics issue for committee passage looks like the right trade from inside the Republican strategy room, even if it makes the floor math harder.
The bet is that Senate Democrats will eventually accept the bill without an ethics provision because crypto industry pressure (and 70% voter support for clear legislation) outweighs the symbolic loss of failing to restrict the Trump family.
What the Banks Lost
The other story buried in the 309 pages is that the banking lobby lost its drafting fight.
On May 9, four days before Tuesday’s markup announcement, the three largest U.S. banking trade groups (the American Bankers Association, the Bank Policy Institute, and the Independent Community Bankers of America) formally rejected the Tillis-Alsobrooks stablecoin yield compromise. They argued that activity-based rewards on stablecoins are economically indistinguishable from interest and would trigger deposit flight from checking accounts into yield-bearing stablecoin wallets like USDC. U.S. banks fund roughly 80 percent of their lending through customer deposits, so the funding-cost argument has financial logic.
Section 404 of the 309-page text contains the Tillis-Alsobrooks compromise unchanged. Either Chairman Scott called the banks’ bluff, or he is daring them to whip Republican committee members against the bill in public. Either way, the banking lobby’s leverage on the drafting process is over. Their last shot is amendments filed by close of business Tuesday.
The signal to watch is the next 12 hours of amendment filings. If multiple Republican senators file stablecoin amendments to tighten Section 404, the banks still have leverage. If only one or zero Republican stablecoin amendments materialize, the compromise text is locked.
What Happens Next
Three windows are now stacked on top of each other.
Window 1: Tuesday end of business, May 12. Amendments must be filed by committee members. After this point, the text and amendment slate are locked for Thursday’s session. Watch for Democratic amendments adding ethics language (Schiff, Warren, Gallego). Watch for Republican amendments tightening stablecoin yield rules (which would signal the banking lobby still has pull). Watch for ethics amendments filed by Republicans, which would signal an attempt to preempt the Democratic demand with a watered-down version.
Window 2: Thursday, May 14, 10:30 AM ET. The markup begins. The committee debates amendments and votes on advancing the bill to the full Senate. Three votes inside the committee will tell the market everything:
- The ethics amendment vote. If a Democratic ethics amendment is offered and fails on a party-line 13-11 vote, the bill is moving forward but the Senate floor fight is locked in. If even one Republican (Tillis is the most likely) crosses over to support a watered-down ethics provision, the bill becomes substantially more bipartisan and the floor math gets easier.
- The stablecoin amendment votes. Any tightening of Section 404 to please the banking lobby would alienate Coinbase, Circle, and the broader exchange industry, which has already conditioned its support on the activity-based rewards language. A clean Section 404 survives, or the industry pulls support.
- The final committee vote. A pure 13-11 party-line passage gets the bill to the Senate floor but signals that the 60-vote threshold is in jeopardy. A bipartisan margin of 14 or higher with at least one Democratic crossover (Gallego is the most likely) signals durable momentum.
Window 3: May 21 through July 4. If the bill clears committee Thursday, it heads next to reconciliation with the Senate Agriculture Committee’s separate market structure draft, which the Agriculture Committee advanced in late January 2026. The Senate Agriculture version handles the CFTC-side authorities and digital commodity intermediary registration. The two committee texts have to be merged before any floor vote.
The Senate Agriculture Committee chair has signaled cooperation, but the reconciliation process is where the ethics fight will get a second round. Senator Gillibrand sits on the Senate Agriculture Committee. Senator Warren, as Ranking Member of Senate Banking, will have a coordinating role. Democrats who lose the ethics fight on Thursday will reload for the reconciled bill.
After reconciliation, the full Senate vote is targeted for June. The bill then needs to be reconciled with the House version (which passed 294-134 in July 2025 and does not include the Senate’s DeFi or stablecoin language). The White House target for a presidential signature is July 4, the 250th anniversary of the United States.
That timeline is achievable only if every step from Thursday forward clears without delay. Galaxy Research currently puts 2026 passage odds at roughly 50% independent of Polymarket. Ripple CEO Brad Garlinghouse warned at Consensus 2026 that the bill’s odds would “drop precipitously” if lawmakers fail to act in the next two weeks.
The Bottom Line for Crypto Investors
The 309-page text is, on balance, exactly what the industry asked for. Title I gives token issuers a statutory path out of the SEC’s jurisdiction once their network is sufficiently decentralized. Title III gives DeFi a real framework instead of regulation by enforcement. Title VI protects developers and self-custody. Title IV permits banks to participate directly in digital asset activities. Title VII closes the FTX-shaped hole in bankruptcy law.
The single largest risk to passage is no longer the banking lobby. It is the ethics fight, and the ethics fight is now structural: even if Republicans force the bill out of committee on a party-line vote Thursday, the 60-vote Senate floor math gets harder without Democratic buy-in, and Democratic buy-in requires ethics language.
Bitcoin is consolidating around $80,000 to $82,000, well off its October 2025 all-time high near $126,000. A clean Thursday markup with bipartisan defections in favor (one or two Democrats crossing over) is the bull case that supports a July signing and a renewed institutional capital rotation. A pure party-line markup keeps the bill alive but pushes the realistic signing window to October or later, and a delayed or failed markup invalidates the regulatory tailwind that has supported the entire 2026 recovery.
Three numbers to watch over the next 48 hours. The number of ethics amendments filed by Democrats Tuesday. The vote count on those amendments Thursday. The party-line breakdown on final committee passage. Those three numbers tell you whether CLARITY signs by July 4, signs in the fall, or doesn’t sign at all.
The 309-page draft just put the variable in motion. By Thursday afternoon, the path resolves.