July 27: This week in crypto federal policy

DC Decentralized: A weekly newsletter on developments in digital asset and blockchain federal policy

This week decoded

Driving the week in crypto federal policy, Senate Republicans released revised text of the Clarity Act that includes White House-approved ethics limits which would apply to the president and vice president, members of Congress, senior federal officials, judges and their spouses (but not children of federal officials); the U.S. attorney general would have sole jurisdiction over enforcing ethics violations, while state attorneys general are specifically banned from enforcing the rules; and primary restrictions would sunset on Jan. 20, 2029, the last day of President Donald Trump’s second administration.

Key Democrats and some Republicans immediately called the agreement inadequate and pledged to provide a counteroffer. Meanwhile, a number of Republican senators expressed reservations about other provisions in the Clarity Act and are seeking changes ahead of a potential vote. Senate Leadership has cast doubt on floor consideration before the August recess, while Clarity supporters in the Senate urge a vote this week.

DC Decentralized will return with Congress in September. Have a great August!

Read more below

Congress

Hearings

Last week

• On July 21, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions held a hearing on “Oversight of the Financial Crimes Enforcement Network.”

• On July 21, the House Agriculture Commodity Markets, Digital Assets, and Rural Development Subcommittee held a hearing on “Examining Prediction Markets: Customer Protections and Market Integrity in Sports Event Markets.”

Legislation

• Senate Banking Digital Assets Subcommittee Chair Cynthia Lummis (R-WY) released updated text for the Digital Asset Market Clarity Act, including merged work products of the Banking and Agriculture Committees and White House-approved ethics language. (Press release)

Correspondence

• Sens. Martin Heinrich (D-NM), Richard Blumenthal (D-CT), Mark Kelly (D-AZ), Patty Murray (D-WA), Tammy Baldwin (D-WI), Alex Padilla (D-CA), Jacky Rosen (D-NV), Adam Schiff (D-CA), Brian Schatz (D-HI), Gary Peters (D-MI) and Senate Committee on Commerce, Science, and Transportation Ranking Member Maria Cantwell (D-WA) sent a letter to Senate Committee on Banking, Housing, and Urban Affairs Chairman Tim Scott (R-SC) and Ranking Member Elizabeth Warren (D-MA) and Senate Committee on Agriculture, Nutrition, and Forestry Chairman John Boozman (R-AR) and Ranking Member Amy Klobuchar (D-MN) urging their committees rein in prediction markets based on federal commodity and derivatives rules to offer nationwide sports and event wagering and infringing on tribal gaming sovereignty and circumvents state regulatory powers. (Letter)

• Sen. Elizabeth Warren (D-MA) sent a letter to Acting Comptroller General Orice Williams Brown urging the Government Accountability Office (GAO) to launch a review of staffing cuts at the Commodity Futures Trading Commission (CFTC) and their impact on enforcement capability. (Letter)

• Reps. Sean Casten (D-IL), Bill Foster (D-IL), Jim Himes (D-CT), Vicente Gonzalez (D-TX), Brad Sherman (D-CA), Ritchie Torres (D-NY), Gregory Meeks (D-NY), and Janelle Bynum (D-OR) sent a letter to the Securities and Exchange Commission (SEC) Chair Paul Atkins requesting the SEC clarify its jurisdiction over prediction markets that reference securities or related financial metrics. (Letter)

Publications and Events

• Rep. Mike Flood (R-NE) announced the Flyover Fintech Conference will feature a panel on prediction market and whether states should have greater authority over prediction markets; (Press release)

• Senate Banking Committee minority staff released an analysis of the ethics compromise between Senate Republicans and President Trump. (Report)

Trump Administration

Office of the Comptroller of the Currency (OCC)

• The OCC is seeking comment on additions to its March 2 proposed rule on the process by which entities may seek OCC approval to become a PPSI or for foreign payment stablecoin issuers to register with the OCC. The OCC proposes new information collection which includes the application forms which these entities will complete and submit to the OCC. (Notice)

Noteworthy Quotes and Events

ADMINISTRATION

White House

• President’s Council of Advisors for Digital Assets Executive Director Patrick Witt posted “Democrat opposition to the historic ethics provision in the Clarity Act appears to take one of two forms, either:(1) An ethics provision that lacks enforcement by state AGs is meaningless. (2) An ethics provision that does not penalize President Trump for prior crypto activity is unsatisfactory.If you hold position (1), then you are basically saying that ALL current federal ethics laws are meaningless because none of them are enforceable by state AGs. If you hold position (2), then there is literally nothing that can be done to appease you because what you are advocating for is blatantly unconstitutional (see Article I, Section 9).”

• Witt also posted “For the past year, I have worked diligently to get the Clarity Act passed, fulfilling President Trump’s vision to make the U.S. the crypto capital of the world. Last week, it was reported that I was set to leave for mandatory training as part of my service in the Georgia Army National Guard, right before Clarity hits the Senate floor. While I remain committed to fulfilling my service obligation, I am grateful to report that my training has been deferred, and that I will be able to see this effort through to the end. Thanks to POTUS and DavidSacks for the opportunity to continue this important work and to everyone who reached out last week. Let’s finish the job.”

Securities and Exchange Commission (SEC)

• Chair Mike Selig posted “Great meeting with SenAshleyMoody to discuss the importance of well-functioning commodity derivatives markets to the farmers, ranchers, and producers in our home state of Florida. We also discussed the importance of regulatory CLARITY for crypto asset markets to ensure the new frontier of finance is built in the United States.”

CONGRESS

Clarity Act

• Sen. John Cornyn (R-TX) said he has concerns with several provisions and that he is “diving in … to see if they can be addressed… We’re just getting started.” (x.com)

• Cornyn also said, “Crypto is not going to be loaning any money for small businesses.” (Punchbowl)

• Sen. John Curtis (R-UT) said, “If we’re taking loan capacity away from our banks who are in these communities – I want to make sure that we’re not hurting the very people who rely on these banks.” (Punchbowl)

• Sen. Bill Cassidy (R-LA) said, “I might, but I’m actively getting those addressed. I won’t tell you my concerns, because it may be that my concern is something that shouldn’t worry me.” (Punchbowl)

• Sen. John Kennedy (R-LA) said, “I know of one, maybe two, other Republicans who are not going to vote for it. There could be others, because the bankers are as mad as murder hornets, and they’re lobbying hard.” (Punchbowl)

• Sen. Cynthia Lummis (R-WY) posted “Crypto exchanges, DeFi platforms, and crypto ATMs won’t hide from the law anymore. The Clarity Act closes the DINO loophole and brings every corner of the digital asset market inside the Bank Secrecy Act and sanctions framework.”

• Lummis also posted “The Clarity Act finally answers a question crypto has asked since Howey: when does a digital asset stop being a security? By defining “ancillary assets,” we’re giving builders a clear path forward instead of years of regulatory guesswork that’s driven innovation offshore”

• Lummis also posted “Right now if your brokerage fails, federal law keeps your securities out of the bankruptcy estate. If your crypto platform fails, your assets got thrown in with everyone else’s. The Clarity Act closes that gap. Segregation of customer funds means bankruptcy court, not a stakeholder squabble.”

• Lummis also posted “When Celsius and Voyager went bankrupt, customer deposits didn’t stay customer deposits. They became assets in a bankruptcy pool, fought over by creditors who had never even heard of the customers who owned them. The Clarity Act changes the rule so your crypto stays yours, even if the company fails.”

• Sen. Bill Hagerty (R-TN) posted “The time for CLARITY is now. America needs clear rules of the road for digital assets that protect consumers, support innovation, and keep jobs and investment here in America. Let’s get it across the finish line.”

• Rep. Tom Emmer (R-MN) posted “Big news: GLFOP is now in support of passing the Clarity Act, ensuring the United States remains THE global leader in digital assets. Republicans and the White House are committed to working with and supporting our law enforcement partners. Thank you GLFOP for the support, now let’s pass it in the Senate!”

• Rep. William Timmons (R-SC) posted “America should lead the world in digital assets, not force innovation overseas. One year after the House passed the CLARITY Act, I joined my colleagues in NYC to discuss how we’re advancing clear rules that protect consumers, unleash innovation, and keep the next generation of financial technology here in America.”

Clarity Act Ethics

• Sens. Mark Warner (D-VA), Angela Alsobrooks (D-MD), Cory Booker (D-NJ), Catherine Cortez Masto (D-NV), Ruben Gallego (D-AZ), John Hickenlooper (D-CO), and Raphael Warnock (D-GA) released a statement on the updated draft of the CLARITY Act, saying, “The Republican-proposed text of the CLARITY Act as it currently stands falls short. Key provisions including those addressing ethics for elected officials, consumer protection, illicit finance, conflicts of interest and market integrity must be strengthened. We have been working in good faith with our Republican colleagues for the past year and will continue doing so to get this over the finish line.” (Press release)

• Sen. Ruben Gallego (D-AZ) said, “Whatever piece of shit they sent back to us, that was not a serious effort. I can’t imagine that that’s a serious effort — after all the work that we’ve done with our Republican colleagues, that they would take the months and months of work and somehow interpret that and turn around and think what they offered was even remotely close.” (Politico)

• Gallego also said, “We are still in this fight. We are going to send back language.” (Politico)

• Sen. Cory Booker (D-NJ) said, “The new Clarity text is a Republican text. There’s only one way to get there, which is a bipartisan pathway.” (Politico)

• Sen. Mark Warner (D-VA) said, “Two Republicans agreeing with the White House approach — that would indicate they must be passing a Republican-only bill.” (Punchbowl)

• Sen. Angela Alsobrooks (D-MD) said, “It’s an absolute that we cannot completely rely on the DOJ, given what we’ve seen of their inability and their unwillingness to enforce the law. The backstop is going to be that we must empower state-level attorneys generals if the DOJ does not do its job… Although I have been supportive to this point, I absolutely will not support on the floor any legislation that does not include provisions around ethics.” (Semafor)

• Alsobrooks also said, “For many of us, that is an absolute” and that relying solely on DOJ is “wild and unserious and stone-cold crazy.” (Semafor)

• Sen. Cynthia Lummis (R-WY) said, “There’s not going to be a provision that makes opponents of the president happy that also makes the president happy.” (Punchbowl)

• Lummis also said, “For both Republican senators and the White House, state attorneys general are not the right venue. It needs to be the Department of Justice. That’s it. That’s the bright line.” (Punchbowl)

• Lummis also said, “President Trump is supporting the most robust ethics rules ever imposed on the office of the presidency, choosing a higher standard than the law required of him and truly putting America first.” (Politico)

• Lummis posted “Nancy Pelosi made millions off stock trades in Congress and fought a trading ban for years. President Trump is voluntarily binding himself to the Clarity Act’s conflict-of-interest rules on digital assets in ways she’d never apply to her own bottom line. Ask yourself who actually believes in accountability.”

• On potential support for the bill, Sen. Thom Tillis (R-NC) said, “The answer is no. We’re very close. But we do have a couple of open switches.” (Punchbowl)

• Tillis also said, “But we’ve got to get to 60 votes. The baseline, I think, falls short of what some of the Democrats want. We have to have one final discussion with the White House to see if a couple of other things that look reasonable to me are acceptable to the president.” (Politico)

• Sen. Elizabeth Warren (D-MA) released a statement saying, “Donald Trump raked in more than $1.4 billion from cryptocurrency ventures, and this bill does nothing to prevent him from vacuuming up his next $1.4 billion in crypto profits. Even if it did, the President can, and will, simply ignore the law because he handpicked his personal lawyer to lead the Department of Justice that is charged with enforcement and everyone else – including state attorneys general – are explicitly prohibited from bringing any enforcement actions. The bill goes even further to protect the President’s crypto profits by barring the next Department of Justice from ever holding Trump accountable. On top of all of this, the underlying bill still fails to adequately protect investors, our financial system, and our national security. This bill should be dead on arrival.” (Press release)

• Warren posted “The new draft of the Senate GOP crypto bill does nothing to stop President Trump from making his next $1.4 billion from crypto. It’ll supercharge Trump’s crypto corruption. This bill should be dead on arrival.”

• Sen. Chris Murphy (D-CT) posted “Yes, it grandfathers in all of Trump’s existing crypto corruption. And it doesn’t cover the family businesses. AND it sunsets after just a few years. Just a joke.”

Clarity Timing

• On whether Clarity can get a vote before August recess, Senate Majority Leader John Thune (R-SD) said, “I don’t think we’ll be able to get them done. I would like to at least get Clarity started. We’ll see where the votes are.” (Punchbowl)

• Earlier this week, Thune said, “Once the text is out, we’re gonna have to figure out what the traffic will bear, what changes have to be incorporated in order to get 60 [votes] on the floor.” (Punchbowl)

• On waiting until September to vote, Sen. Thom Tillis (R-NC) said, “It’s gotta be done in this work period.” (Punchbowl)

• Sen. John Kennedy (R-LA) said, “If we don’t have a positive vote before the August break, I think the odds shift against us.” (Punchbowl)

Prediction Markets

• Rep. Steven Horsford (D-NV) posted “Nevada built the gold standard for gaming because we take oversight, consumer protection, and integrity seriously. I’m proud to work with MarkAmodeiNV02 on bipartisan legislation to make sure prediction markets cannot use a federal loophole to operate like sportsbooks without following the same rules as everyone else. This is about fairness. If a company wants to profit from gaming, it should meet the same standards Nevada’s legal gaming industry follows every day. Protect consumers. Product jobs. Protect Nevada’s gaming economy. #NV04”

• Horsford also posted “If they look like sports betting and act like sports betting, they should be treated like sports betting. That’s why MarkAmodeiNV2 and I introduced the Prediction Markets Are Gambling Act, a bipartisan bill to stop federally regulated trading platforms from offering sports betting and casino-style gambling under the guise of financial products. These platforms are exploiting regulatory loopholes and putting consumers at risk.”

• Rep. April McClain Delaney (D-MD) posted “Kids shouldn’t be the next target of the online gambling industry. This week in the House Agriculture Committee, I pressed witnesses on why prediction markets aren’t subject to the same youth advertising standards as licensed sportsbooks. As youth gambling addiction is becoming a national concern, our kids deserve strong protections in the addiction markets”

• Rep. Seth Moulton (D-MA) posted “Disgusting. Kalshi letting users bet on deportation numbers is just as perverse as Polymarket letting people wager on the lives of our troops. I was the first Member of Congress to ban staff from trading on prediction markets because human lives are not casino chips. Kalshi, you claim to be the more ethical platform... Prove it and shut this down now.”

• Rep. Greg Landsman (D-OH) posted “This is exactly why we introduced a bill to ban Supreme Court Justices and their staff from betting on prediction markets.”

• Rep. Don Davis (D-NC) posted “Prediction markets are evolving quickly, and our regulatory framework must keep pace. Regardless of the product, the American people deserve transparency and accountability.”

• Rep. Joe Neguse (D-CO) posted “House Republicans aren’t just pushing a bill with huge loopholes for Members of Congress to trade stocks — they refuse to ban Members from betting in prediction markets either.”

• Rep. Jill Tokuda (D-HI) posted “You can put lipstick on a pig. It’s still a pig. Call it gaming. Call it a prediction market. At the end of the day, when people are wagering money on a sports event, it’s gambling. Hawaiʻi has made its choice: no gambling. Prediction markets should not be allowed to exploit a regulatory loophole to offer what is effectively sports betting, overriding states’ rights and evading safeguards meant to protect our people.”

• Rep. Josh Gottheimer (D-NJ) posted “Underage children are logging into their parents’ or friends’ accounts to gamble or trade online. It’s time to put a stop to it. My bipartisan Facial Recognition to Protect Children Act will require sports books and prediction markets to run a visual age check before anyone can place a bet.”

• House Committee on Agriculture posted “Today’s hearing is about the unique nature of protecting customers and building healthy markets in prediction markets – specifically sports-related prediction markets. It is also about whether the CFTC has the right tools to do the job. How we address those risks is essential to building fair and safe markets.”

Crypto Tax

• Finance Chair Mike Crapo (R-ID) said, “I think we need to deal with the issue. We are not at the point where we can announce legislation here, but we are working on the issue. I’m very focused on what the House does.” (Punchbowl)

• Sen. John Kennedy (R-LA) said, “We’re having enough trouble in market structure, without adding taxes to it.” (Punchbowl)

• Sen. Steve Daines (R-MT) said, “I was working with [Smith] staff-to-staff, and getting an understanding of where the House was. We’re working with the Finance Committee as well, so keeping everybody in line and informed and try to move forward hopefully in a collaborative fashion.” (Punchbowl)

Miscellaneous

• Sen. Angela Alsobrooks (D-MD) posted “This week I spoke at Semafor’s World of Work about the future of work and how we ensure innovation creates opportunity for everyone. From AI to digital assets, we must embrace new technologies while protecting workers, expanding pathways to wealth, and keeping America competitive.”

• Rep. Sean Casten (D-IL) posted “People across IL-06 are falling victim to crypto scams every day, with seniors and other vulnerable Americans too often being the targets. That’s why I introduced the bipartisan Stop Crypto ATM Scams Act to strengthen protections for consumers and hold scammers accountable for preying on vulnerable people.”

• Rep. Gabe Vasquez (D-NM) posted “MYTH: This bill bans members of Congress from trading stocks. REALITY: Under this bill, rich members of Congress can keep getting richer through insider trading and by: Moving their money into crypto; Keeping their current stocks; Buying new privately traded stocks MY RECORD: I don’t own or trade individual stocks — I’m lucky to have my truck, my dog, and my house. I support strong, bipartisan stock trading bans with NO LOOPHOLES like the Restore Trust in Congress Act and the TRUST in Congress Act.”

• Rep. Teresa Leger Fernández (D-NM) posted “This is a Trojan Horse with the SAVE Act tucked inside a bill that lets members keep stocks, sell stocks, get more stocks and doesn’t put any limits on a corrupt President who made billions from stock and crypto trading.”

What I’m Reading This Week

• The British Are Ahead on Crypto Lending, Lee A. Sheppard, Tax Notes.

About Zero One Strategies

Zero One Strategies is a specialized government relations practice dedicated to navigating the complex landscape of U.S. federal policy in emerging technologies. As advancements in technology continue to outpace regulatory frameworks, Zero One Strategies aims to provide strategic guidance and bipartisan advocacy for innovators and businesses operating at the forefront of technological development.

The practice focuses on key areas such as artificial intelligence, digital assets, blockchain, decentralized technologies, cybersecurity, data, and digital infrastructure, as well as the multiple policy issues impacting these sectors, including tax and financial services.

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