Government Shutdown Freezes CLARITY Act: Crypto Bill Stalled as Senate Vote Looms

Introduction

The U.S. government shutdown has stretched to 38 days, stalling the long-anticipated crypto market structure legislation known as the CLARITY Act as the Senate readies a critical funding vote. The Republican-backed proposal needs 60 votes to advance; however, partisan disagreements over Affordable Care Act subsidies and expiring tax credits have frozen progress. With roughly 1.4 million federal workers affected and agencies scaling back services, the shutdown is weighing on the economy and delaying action on crypto regulation and digital assets policy.

Regulatory operations at the SEC and CFTC are running on skeleton crews, pausing reviews of key filings such as crypto ETF applications and slowing momentum on bipartisan crypto legislation. Senators John Boozman and Cory Booker had signaled daily workstreams with hopes for a pre-Thanksgiving vote on the CLARITY Act, but the extended budget impasse threatens that timeline. Markets are responding to the policy uncertainty: Bitcoin price action has retreated from recent highs, reflecting tighter liquidity conditions and risk-off sentiment amid the shutdown’s broader macro impact.

Economists warn the prolonged government shutdown could shave up to two percentage points from Q4 GDP, with estimates of $10–$30 billion in weekly losses, while court-ordered SNAP funding battles highlight the shutdown’s social strain. Prediction markets reflect fading optimism: Polymarket pricing shows higher odds that the shutdown extends beyond mid-November. For crypto, the takeaway is clear—until Congress resolves the budget standoff, the Senate vote on the crypto bill, market structure clarity, and progress on crypto ETFs will remain on hold, reinforcing volatility and headline risk across digital assets (CryptoNews).

Background

The U.S. government’s 38-day shutdown—the longest in modern history—has done more than halt federal paychecks and freeze public services. It has also paralyzed progress on one of the most important crypto regulatory efforts in years: the Digital Asset Market CLARITY Act of 2025. The bill, which aims to define how cryptocurrencies are regulated in the United States, was expected to clarify the roles of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) in overseeing digital assets. Now, with federal agencies shuttered and Senate calendars consumed by spending negotiations, the crypto industry is stuck waiting for Washington to turn the lights back on.

The CLARITY Act—passed by the House in July with rare bipartisan support—seeks to end years of “regulation by enforcement” that have defined the U.S. digital asset landscape (Arnold & Porter). The legislation would give the CFTC authority over most digital commodities like Bitcoin and Ethereum, while the SEC would retain oversight of investment contract assets and initial token offerings. Stablecoins would fall largely under banking regulators as permitted payment stablecoins. This clearer division of jurisdiction was widely praised by investors and industry groups for reducing compliance uncertainty. However, as Payment Week noted, Senate committees have been forced to slow all work on the companion bill, leaving Congress unable to act until the shutdown is resolved. Key reviews by the SEC and CFTC—both operating with skeleton crews—are on hold, which means pending crypto exchange-traded fund (ETF) applications, DeFi studies, and new exchange registrations are frozen.

The impact extends well beyond Capitol Hill. The SEC’s Crypto Assets and Cyber Unit has paused nonessential activity, including ETF filings, IPO approvals, and enforcement investigations. Analysts at CCN point out that fewer than 6% of SEC and CFTC staff are working during the shutdown, creating a “regulatory blackout” across financial markets. Coinbase CEO Brian Armstrong had recently expressed optimism that the market structure bill could pass before Thanksgiving, but that target has now slipped into 2026. Economists warn the shutdown could shave two percentage points off U.S. GDP, costing the economy $15 billion per week and eroding momentum for crypto-friendly regulation. Meanwhile, other jurisdictions are racing ahead: the European Union’s MiCA framework, Singapore’s stablecoin rules, and the U.K.’s new digital asset guidance have positioned their markets as leaders while the U.S. waits.

For crypto investors and builders, the message is clear: political gridlock is now a bigger risk than market volatility. Until the federal government reopens and the CLARITY Act advances, the U.S. will remain a step behind in providing the legal certainty needed for innovation and institutional adoption. As SEC Commissioner Hester Peirce succinctly put it, “Washington can only delay crypto clarity for so long—eventually, the need for consistent rules will force bipartisan action.”