Potential Delays in U.S. Crypto Legislation Due to 2026 Elections, Investment Bank Alerts

As the 2026 midterm elections draw near, a significant initiative aimed at establishing a comprehensive regulatory framework for digital assets in the United States may face setbacks, as cautioned by investment bank TD Cowen.

Key Takeaways

The 2026 U.S. midterm elections could postpone the approval of a crucial crypto market structure bill, potentially until 2027.
Senate Democrats might refrain from supporting the bill before the elections.
Central to the discussion are conflict-of-interest rules targeting prominent figures, including Donald Trump.

In a report released on Monday, the Washington Research Group at TD Cowen noted that the extensive crypto market structure bill, which is presently being debated in Congress, is increasingly vulnerable to political risks as lawmakers focus on the upcoming election cycle.

Potential Delays in U.S. Crypto Legislation Due to 2026 Elections, Investment Bank Alerts

TD Cowen Warns of Possible Delays in U.S. Crypto Legislation

The legislation, dubbed the CLARITY Act—after it passed the House in July and was branded the Responsible Financial Innovation Act in the Senate—now seems more likely to clear Congress in 2027 instead of next year.

Its full rollout might be delayed even further, with projections extending to 2029.

Analysts at TD Cowen reported that Senate Democrats could hesitate to endorse the bill as elections might change Congress's current Republican tilt. With uncertain results, lawmakers may choose to push off critical decisions until after the midterms when the political landscape becomes clearer.

“Election outcomes are inherently unpredictable, which is why Democrats might negotiate a deal,” the bank remarked, emphasizing that the timing of political events could play a more significant role in the bill’s destiny than its actual content.

A bipartisan framework unveiled by the Senate Agriculture Committee in November sought to tackle one of the most contentious issues: conflicts of interest. This proposal would prevent senior government officials, including Donald Trump and his family, from possessing cryptocurrencies or engaging directly in the sector while in office.

These provisions have arisen from persistent concerns among Democratic lawmakers regarding Trump’s associations with crypto-related businesses.

Critics have highlighted potential connections linked to World Liberty Financial, a cryptocurrency mining operation recognized as American Bitcoin, the introduction of Trump-branded tokens, and the high-profile pardon of former Binance CEO Changpeng Zhao.

Delayed Timeline Could Mitigate Political Tensions, Says TD Cowen

TD Cowen indicated that a delayed timeline might facilitate compromise. If the legislation is passed in 2027 and takes effect in 2029, some of the immediate political pressures might subside.

In this scenario, the crypto industry would need to acknowledge that the results of presidential elections could influence final regulations, while Democrats may have to accept that conflict rules will not apply retroactively to Trump.

Meanwhile, the legislative journey continues. The Responsible Financial Innovation Act is poised for markups in both the Senate Banking Committee and the Senate Agriculture Committee, with reports suggesting that the initial markup could take place later this month.

Last week, Coinbase’s head of institutional strategy expressed that comprehensive crypto market structure laws will take longer to finalize than stablecoin regulations, yet remained optimistic that bipartisan effort would ensure the bill's passage in 2026.

John D’Agostino informed CNBC that the increasing need for regulatory clarity abroad and the rapid exit of talent from the U.S. create pressing motivation to establish federal guidelines this year.