TD Cowen: Midterm elections could block CLARITY Act and test crypto's influence

Bitcoin Magazine reports on TD Cowen's midterm election analysis.

Next week's midterm elections will determine the fate of crypto policy in Washington, according to a TD Cowen policy note provided to Bitcoin Magazine.

Analyst Jaret Seiberg cautioned that likely election outcomes could hinder Congress from passing the CLARITY Act in the next two years. The legislation aims to establish regulations for bitcoin and other digital assets. The crypto industry has poured $176 million into over 100 congressional races to influence the results. The note outlines several scenarios.

A Democratic sweep is the most probable outcome

According to prediction markets referenced in the report, Democrats have a 90% probability of taking the House and a 62% probability of taking the Senate. TD Cowen views this as the worst outcome for bitcoin and crypto generally. In this scenario, Senator Elizabeth Warren would assume the chair of the Senate Banking Committee. Seiberg characterizes Warren as a critic of digital assets who has spearheaded opposition to the CLARITY Act, and he anticipates she would impose rigorous scrutiny on federal regulators.

Warren is unable to prevent regulators from implementing industry-friendly policies. Seiberg believes President Trump will continue supporting crypto, leading him to veto any legislation that restricts his regulators' power. Democrats would not have enough votes to overturn a veto. Consequently, policy shifts are anticipated to center on tokenization, perpetual futures, and stablecoins.

A split Congress with Republicans holding the Senate

In the second scenario, Democrats retain the House, but tight Senate contests tip toward Republicans. Senator Tim Scott would retain his role as Banking Committee chairman. TD Cowen considers this outcome more favorable for bitcoin, as Representative Maxine Waters might exchange backing for elements of the market structure bill for investor safeguards and progress on her other concerns.

Harmful legislation would be prevented from reaching the White House.

A Republican sweep is the least likely but best outcome for crypto

According to Kalshi, Republicans have a 10% probability of holding the House and a 35% probability of holding the Senate. TD Cowen labels this scenario the most advantageous for crypto policy, though the size of the majority is critical. A larger Senate majority would increase the likelihood that leaders move the CLARITY Act forward in 2027 or 2028, and they might seek a revival during the lame-duck session.

A slim majority, however, would keep the bill stuck, as Democrats continue advocating for ethics provisions opposed by the president. When the Senate halted the legislation, bitcoin-related equities fell.

For context, the CLARITY Act would establish federal regulations for digital assets. The House approved its iteration in July 2025 with a vote of 294-134. The Senate Banking Committee endorsed its version in May 2026 by a 15-9 margin, with two Democrats siding with Republicans.

On the Senate floor, a cloture vote fell short on September 15, 49-50. Democrats seek ethics provisions that would prohibit senior officials, including the president, from earning profits from crypto projects. Republicans and industry groups oppose those restrictions. Stablecoin yield is another point of contention. Both sides accuse the other of impeding progress, leaving the bill stalled.