TD Cowen's warning on the CLARITY Act is fresh, and it points to a narrower window for U.S. crypto rules in 2026. For founders and investors, the practical result is simple: capital will keep favoring companies that can survive without Washington settling the question quickly.
The CLARITY Act is no longer just another crypto bill moving around Capitol Hill. It is the market-structure fight that could decide how digital assets are classified, which regulator takes the lead, and how much confidence institutions can have before they commit more serious money to U.S. crypto businesses.
According to Reuters, the Senate version unveiled in May would create a federal framework for cryptocurrency, clarify the jurisdiction of the Securities and Exchange Commission and the Commodity Futures Trading Commission, and expand the CFTC's role over spot crypto markets. One of the most contested sections deals with stablecoin rewards, with the SEC, CFTC, and Treasury Department directed to write rules for how that provision would work.
That is why TD Cowen's latest view matters. Jaret Seiberg, managing director at the firm's Washington Research Group, said in a May 26 note that the odds of the CLARITY Act becoming law this year are fading as the political environment deteriorates. The bill cleared the Senate Banking Committee earlier this month, but that moved the fight to the full Senate rather than proving a broad deal had been reached.
The sticking point is not technical drafting alone. Democrats have pushed for conflict-of-interest safeguards before supporting a crypto market-structure bill, while banking groups have raised concerns over stablecoin language. A recent New York Times report about the CFTC has also made the politics harder by adding another reason for Democrats to question whether the agency should receive broader authority over crypto markets. TD Cowen's concern is that Republicans may not want to force floor votes on those amendments either, leaving both parties with reasons to wait.
That waiting game has a real cost. Seiberg has pointed to the August congressional recess as the practical window for action. If lawmakers miss that period, the bill could slip into 2027, and the implementing rules might not take effect until 2029. For a market that has already spent years living between enforcement actions, agency guidance, and court fights, that is not a small delay. It changes planning horizons.
Why delay is not neutral
For crypto founders, uncertainty is not an abstract policy problem. It affects how products are designed, how tokens are issued, how compliance budgets are set, and how investors price risk. A company building custody, surveillance, auditing, or institutional infrastructure can usually argue that it is useful under almost any rulebook. A startup built around a novel token model has a harder pitch when no one can say with confidence how that token will be treated two years from now.
That pushes capital toward safer parts of the stack. Venture firms may still back crypto, but they are more likely to favor businesses that look durable under multiple regulatory outcomes. Custody, on-chain analytics, reporting tools, tokenization rails, and institutional compliance platforms become easier to defend than aggressive retail-facing launches. In practice, the companies that already behave as if the strictest regime will apply may have the cleaner story in the second half of 2026.
Token issuers face the sharpest pressure. When legal status can turn on classification, disclosure, market structure, or distribution design, teams spend more time with lawyers and less time proving product demand. That does not stop innovation, but it slows the clean fundraising narrative founders prefer. Institutional buyers also become more cautious, because they are not only underwriting adoption. They are underwriting the chance that the rules arrive late or land differently than expected.
The White House has tried to keep pressure on the process. Reuters reported in February that a meeting with banks and crypto companies failed to resolve the stalemate, and Treasury Secretary Scott Bessent later urged Congress to pass digital-asset legislation, saying earlier that a bill would give the market great comfort during volatility. Executive pressure helps frame urgency, but it cannot replace votes.
If the CLARITY Act stalls, narrower bills remain possible. Lawmakers could try to separate stablecoins, disclosures, anti-money-laundering rules, or other less sweeping pieces from the broader market-structure fight. Agencies can also keep moving through guidance and rulemaking, as the SEC did in March with crypto-related guidance. But piecemeal action does not give exchanges, brokers, token issuers, and large financial institutions the same durable jurisdictional reset a statute would provide.
There is also a wider regulatory mood to consider. Reuters reported in November that stock exchanges warned the SEC not to let crypto companies bypass normal market rules when tokenized stocks are involved. That caution matters because it shows the fallback is not a frictionless, innovation-first path. Even where regulators are more open to digital assets, they are still being pressed to protect existing market safeguards.
For founders, the fundraising pitch now has to account for time. For investors, the question is not whether crypto regulation eventually becomes clearer, but whether a portfolio company can keep building while the answer remains unresolved. If Congress misses the 2026 window, the winners will likely be the firms that treated regulatory ambiguity as a condition to design around, not a problem someone else would solve for them.
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