CLARITY Act Senate Cloture Vote Fails — Crypto Regulatory Framework Dead for 2026
The US Senate failed to advance the Digital Asset Market Clarity Act on September 15, falling short of the 60-vote cloture threshold. The bill, which would have clarified CFTC vs SEC jurisdiction over digital assets, is dead for 2026. Prediction markets correctly priced passage at 20-30%. The failure means the CFTC vs states conflict over prediction market sports contracts must be resolved by courts, not Congress — putting the Supreme Court's handling of the NJ and Robinhood petitions at the centre of the regulatory endgame.
The US Senate voted on September 15 to block the Digital Asset Market Clarity Act from advancing, falling short of the 60-vote cloture threshold needed to begin floor debate. Republicans hold 53 seats and needed Democratic support to reach 60; last-minute revisions to the bill — adding ethics restrictions on officials profiting from crypto — were insufficient to secure the required crossover votes. The bill is dead for 2026. Prediction markets on Kalshi and Polymarket had priced the probability of 2026 passage at 20-30% — correctly sceptical. The failure removes the only remaining legislative route to resolving the CFTC versus states conflict over prediction market sports contracts before year-end. The question now belongs entirely to the Supreme Court.
For UK readers, the CLARITY Act is closest in function to the Financial Services and Markets Act framework that clarifies FCA and PRA jurisdiction over different financial activities. The US equivalent does not exist for digital assets: cryptocurrency, event contracts, and related instruments sit in a contested regulatory space where the CFTC claims jurisdiction over commodities and the SEC over securities, but no statute clearly delineates which digital assets and instruments fall into each category. The CLARITY Act would have resolved that ambiguity. Its failure means the CFTC's authority over prediction market event contracts rests on its interpretation of the Commodity Exchange Act's swap definition — the interpretation that the Third Circuit accepted in April and the Ninth Circuit rejected in August. Without a legislative fix, SCOTUS must answer the question the Act would have settled.
The failure's timing relative to the SCOTUS petition docket is significant. New Jersey filed its cert petition on September 2; Robinhood filed on September 9; Kalshi's en banc petition is pending at the Ninth Circuit. The CLARITY Act, had it passed, would have provided the Supreme Court with clear Congressional guidance on CFTC jurisdiction — potentially mooting the circuit split or shaping the Court's statutory analysis. With the bill dead, SCOTUS faces the question on the existing statutory record: the CEA's 2010 Dodd-Frank swap definition applied to event contracts by two circuits in opposite directions. The absence of Congressional clarification makes a SCOTUS ruling both more necessary and more likely to be appealed through legislative overrule — whichever side loses will have strong incentive to push Congress to correct the ruling in the next session.
The midterms on November 3, 2026 become even more significant for the regulatory outlook given the CLARITY Act failure. Prediction markets currently give Democrats a 50-55% chance of retaking the House; the Senate is competitive with a slight Republican lean. The composition of the 117th Congress will determine whether the CLARITY Act (or a successor bill) can advance in 2027. If Democrats retake the House and Republicans retain the Senate, bipartisan gridlock on digital asset regulation is the base case. If Republicans hold both chambers, advancing a modified CLARITY Act is plausible. If Democrats retake both — a lower probability outcome — a more restrictive regulatory approach to digital assets, including prediction markets, is more likely. The November 3 election outcome will be, among other things, a vote on the future of the prediction market regulatory framework that the CLARITY Act failed to provide.
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Recent updates
Utah Files Felony Charges Against Kalshi and Its Founders — Second State to Criminally Charge a Platform
Utah filed criminal charges against Kalshi and its two co-founders, Tarek Mansour and Luana Lopes Lara, on October 28 — 13 felonies and a misdemeanour, including a second-degree 'pattern of unlawful criminal activity' count and 12 counts of online gambling promotion. The charges stem from a September sting in which an undercover agent placed 12 sports wagers verified to be in Utah. The CFTC sued Utah the day before to block state enforcement, its tenth such suit. Utah is the second state after Arizona to criminally charge Kalshi, and the first to charge the founders personally. Kalshi called it a 'crazy overreach.'
NBA Names Kalshi and Polymarket Preferred Exchanges — Leaving the NFL Alone in Opposition
The NBA announced on October 26 that it has named Kalshi and Polymarket its 'preferred prediction market exchanges,' signed a non-binding memorandum of understanding with the CFTC on basketball integrity, and expanded its DraftKings deal to include prediction markets — the first league to extend a sportsbook partnership into the category. The exchange deals bar league and team personnel from trading NBA contracts, limit permissible markets, and require sharing suspicious-trading data, in exchange for NBA intellectual property and official data. The NBA joins MLB, the NHL, and MLS as partnered leagues, leaving the NFL as the lone major holdout — and the only league fighting the platforms in court.
CFTC Chair Says Agency Is Watching Prediction Markets for Manipulation Ahead of Midterms
CFTC Chairman Michael Selig said on October 23 that the agency is closely monitoring prediction markets for manipulation ahead of the November 3 midterms, and that it is separately scrutinising oil market trading tied to President Trump's announcements about the war in Iran. Combined midterm open interest on Kalshi and Polymarket stood at $250 million as of October 18, with Kalshi holding 84%. Selig acknowledged the agency often catches political figures trading 'oftentimes after the fact.' The remarks highlight the CFTC's dual role as both the platforms' federal protector and their manipulation watchdog.