JP Morgan: Clarity Act Not Over, But Passage This Year Unlikely

Despite failing to secure the necessary 60 votes in the Senate on Thursday, the Clarity Act remains open for potential reconsideration, though JP Morgan analysts warn that time for passage this year is rapidly running out.

The bill received 49 yes votes and 50 no votes in a procedural vote, falling short of the threshold needed to advance. However, Republican Senator Tom Tillis switched his opposition to support, allowing for a potential re-vote if the GOP leadership chooses to pursue it.

JP Morgan noted that similar legislation, the Genius Act, was initially rejected but later passed after further negotiations. The Clarity Act remains on the Senate calendar and could be reconsidered before the end of the congressional session, though analysts suggest practical challenges remain.

With only a limited window before midterm elections and potential legislative gridlock in the coming sessions, key supporters are showing fatigue from prolonged negotiations. As a result, market focus is shifting toward the SEC and CFTC as regulatory bodies prepare to finalize virtual asset rules.

The analysts highlighted that while SEC and CFTC rulemaking could provide clarity for the industry and spur capital inflows, such measures may lack long-term stability compared to enacted legislation, especially given potential changes following a presidential transition or court rulings.

Market attention is now focused on whether the SEC will introduce an 'innovation exemption' for tokenized securities projects. JP Morgan previously reported that the SEC might move forward with its own approach after observing the Clarity Act's outcome.