The cryptocurrency industry is at a crossroads as the Clarity Act, a bipartisan effort to establish a regulatory framework for digital assets, faces a critical deadline before the August recess. With the midterm elections looming, the next four weeks are seen as the last opportunity to pass this landmark legislation. The bill’s supporters, including prominent senators and regulators, are rallying for its passage to provide much-needed regulatory certainty to the crypto market.
The Clarity Act has garnered significant attention from both sides of the aisle, with Wyoming Senator Cynthia Lummis and Commodity Futures Trading Commission Chairman Michael Selig leading the charge. Senator Lummis has emphasized the urgency of the situation, stating that this is likely the last chance to enact real legislation for digital assets before 2030. Chairman Selig has warned that without the Clarity Act, regulators may unilaterally impose rules without bipartisan approval.
Key Developments in the Crypto Regulatory Landscape
The regulatory landscape for cryptocurrencies is evolving rapidly, with several key developments shaping the future of the industry. The Securities and Exchange Commission (SEC) is preparing a rulemaking proposal for crypto asset offerings, with a Notice of Proposed Rulemaking (NPRM) targeted for issuance this month. This proposal is currently undergoing review by the White House, highlighting the administration’s involvement in the regulatory process.
Federal Judge Denies Kalshi’s Request for Preliminary Injunction
A federal judge recently denied prediction market platform Kalshi’s request for a preliminary injunction to block New York from enforcing gambling laws against its sports-related offerings. The judge removed the New York State Gaming Commission as a defendant in the case, retaining officers in their official capacity. This decision underscores the ongoing legal battles between crypto platforms and state regulators.
House Judiciary Democrats Request Ban on Judiciary from Prediction Markets
Rep. Jamie Raskin (D-MD) and Rep. Hank Johnson (D-GA) have sent a letter to the Director of the Administrative Office of the U.S. Courts, encouraging the Judicial Conference to prohibit federal judges, clerks, and judicial staff from participating in prediction markets. The lawmakers expressed concerns about insider trading and the appearance of impropriety, arguing that a clear ban is needed to safeguard the integrity of the courts.
The Clarity Act and Anti-Money Laundering (AML) Requirements
The Clarity Act aims to create an anti-money laundering framework for digital assets, but some crypto advocates argue that existing laws already cover these requirements. The Bank Secrecy Act (BSA) provides federal regulators with tools to oversee much of the crypto market, including centralized intermediaries. Many exchanges and custodians are already subject to BSA requirements, and the GENIUS Act extends AML coverage to permitted payment stablecoin issuers.
However, the current Clarity Act fails to address several AML gaps. It does not require all digital asset service providers (DASPs) and other intermediaries, including DeFi entities, to comply with the BSA. This approach leaves significant openings for some custodians, exchanges, unhosted wallet providers, and DeFi developers to operate outside the regulatory perimeter. Additionally, the bill does not give Treasury clear authority to sanction mixers, tumblers, and other tools used to launder money, finance terrorism, and evade sanctions.
Strengthening the Existing Foundation
Congress does not need to start from scratch when it comes to AML requirements for the crypto industry. The existing framework under the BSA provides a solid foundation that can be strengthened to cover the current ecosystem. The Treasury Department has the authority to require digital asset intermediaries not already subject to the BSA to comply with its obligations. However, to date, it has not fully exercised this authority.
The Clarity Act should reinforce the AML framework authorized by existing law rather than weakening those requirements. A comprehensive crypto anti-illicit finance framework depends on regulators exercising their current authority, which could be further strengthened by targeted legislative fixes. Rewriting the law in a way that exacerbates existing regulatory gaps would enable criminals to continue exploiting the system.
OCC Grants Preliminary Conditional Approval to Charter Connectia Trust
On July 2, 2026, the Office of the Comptroller of the Currency (OCC) granted preliminary conditional approval for the establishment of Connectia Trust, National Association, a new national trust bank wholly owned by Sony Bank Incorporated. The new trust bank will focus its operations on dollar-backed stablecoin issuance, non-fiduciary custody, and other stablecoin-related services. The OCC noted that Congress, in the GENIUS Act, has expressly recognized uninsured national banks’ authority to issue stablecoins.
Key conditions for the approval include maintaining a minimum of $60 million in Tier 1 capital, conforming stablecoin activities with the GENIUS Act, and maintaining 180 days of operating expenses in eligible liquid assets. This approval highlights the growing acceptance of stablecoins and the regulatory framework supporting their issuance.
