Democratic Sweep Kills Chances for Crypto CLARITY Act, TD Cowen Says

After the Associated Press called both chambers for Democrats, TD Cowen told clients the sweep closes the door on crypto market structure legislation such as the Clarity Act for the next two years and could eliminate any industry-friendly version.

Washington analyst Jaret Seiberg wrote, “We view this outcome as negative for our sectors.” His repeated caveat across the cycle still applies: the election “will not impact the ability of regulators to push their de-regulatory agendas,” and he expects the SEC and CFTC “to remain active including on crypto, prediction markets and perps.”

He points to the lame-duck session, congressional investigations of Trump, the debt ceiling and populist bills such as interest rate caps as the items to watch.

The note appears at the end of a bruising week for the sector: a record $6.34 billion Binance hack, the defeat of House allies Bryan Steil, Zach Nunn and Ann Wagner, and more than $170 million in super PAC spending that failed to yield the Congress it was supposed to buy.

Clarity, Brown and World Liberty

Seiberg’s crypto views rest on a note he published Tuesday, before the results were known. After about $64 million in industry money was spent trying to defeat him, Sherrod Brown’s return to the Senate from Ohio “damages the crypto industry’s political clout,” he wrote. He had not predicted the Clarity Act would pass in the next Congress; Brown’s victory “makes us more confident in our prediction.”

That legislation cleared the House in July 2025 but failed a Senate cloture vote 49-50 in September, and it expires Jan. 3 if the lame-duck session does not revive it. Seiberg takes it further than most: Democratic investigations of the Trump family’s crypto ventures, including World Liberty Financial, “may make it impossible to advance a version of Clarity that the crypto sector could back.”

That changes the focus from timing to whether any legislation the sector wants can pass under this Congress.

The regulators are the counterweight. Seiberg sees no shift at the SEC or CFTC, which have authorized bitcoin perpetuals, equity perps and a joint crypto taxonomy this year without Congress. The active threat to that route is the CME lawsuit over the perps approval, not the election.

Debt Ceiling, Confirmations and the Fed

The remainder of the note frames macro risk for an asset that has traded in step with the Nasdaq all autumn. He expects an attempt to raise the debt ceiling during the lame-duck session but has doubts it will pass, because Democrats will want to use the vote as leverage next year.

Under divided government, the chance of a shutdown or default standoff in 2027 goes up. He expects Trump and Senator Elizabeth Warren, the probable Senate Banking chair, to agree on an interest rate cap closer to 36% than to the 10% Trump has suggested, with fintechs more exposed than banks.

Two parts of the note involve the Fed. In his view, Senate Democrats will not confirm Trump’s nominees unless the president fills Democratic seats at agencies such as the FDIC and SEC, an outcome he considers improbable. In addition, the failure to get a replacement confirmed “may make Trump less inclined to fire”

The official in question is Fed Governor Lisa Cook, and firing her would remove one source of pressure on a central bank leaning toward a December hike.