TD Cowen has issued a warning regarding the legislative timeline for a major digital asset market structure…

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TD Cowen has issued a warning regarding the legislative timeline for a major digital asset market structure bill, suggesting that the upcoming 2026 midterm elections in the United States could significantly impede the support required for its passage. The bill, which was passed by the U.S. House of Representatives in July under the name CLARITY Act, is currently referred to as the Responsible Financial Innovation Act in the Senate. According to recent reports from TD Cowen’s Washington Research Group, the legislation is now more likely to achieve congressional approval in 2027 rather than during the current legislative session.

The investment bank noted that while the House successfully moved the bill forward earlier in the year, the Senate timeline faces unique political pressures. Reports have indicated that the Senate Banking Committee was preparing for a markup on the legislation during the second week of January, marking a critical step in the bill’s path through the chamber. However, the shadow of the 2026 elections remains a primary concern for the bill’s momentum. If the bill does eventually pass in 2027, the bank suggests that final implementation of the new regulatory framework may not occur until 2029. This potential delay highlights the complex intersection of federal election cycles and the development of comprehensive digital asset regulation in the United States. The legislative journey of the Responsible Financial Innovation Act continues to be monitored as it awaits further markups in both the Senate Banking and Senate Agriculture Committees before it can be considered by the full chamber for a final vote.

Context

The Responsible Financial Innovation Act is currently awaiting crucial markups in both the Senate Banking Committee and the Senate Agriculture Committee. These proceedings are essential precursors to the bill being brought to the floor for consideration by the full Senate chamber. Reports specifically signaled that the Banking Committee was gearing up for its markup in the second week of January, indicating an attempt to move the legislation forward in early 2025. If the bill is eventually signed into law, it is expected to bring about a significant shift in the regulatory landscape for digital assets in the United States.

Specifically, the legislation would give the U.S. Commodity Futures Trading Commission (CFTC) increased authority over the digital asset market. This move would effectively shift regulatory power away from the Securities and Exchange Commission (SEC), which has historically maintained a primary role in oversight. This transition of authority comes at a time of notable political uniformity within the two primary regulatory bodies. As of January, both the SEC and the CFTC are led exclusively by Republican commissioners. This situation followed the departure of SEC Commissioner Caroline Crenshaw, and as of the current reporting, no replacements for the vacant Democratic seats have been announced. The alignment of leadership within these agencies, combined with the proposed legislative shifts, underscores the importance of the markups currently pending in the Senate committees. These committees must navigate the complexities of redefining jurisdictional boundaries between the SEC and the CFTC while addressing the broader goals of market structure reform.

Impact

TD Cowen suggests that the political environment surrounding the 2026 midterm elections will directly influence the willingness of Senate Democrats to support the market structure bill. There is a concern that Senate Democrats could withhold support for the legislation because the upcoming elections could change the current balance of power in Congress, which presently favors Republicans. This political calculation introduces the possibility that lawmakers may delay or stall the bill until after the midterms, waiting to see if a different party gains the majority. In addition to general election concerns, specific provisions within a bipartisan draft of the market structure released by the Senate Agriculture Committee in November have introduced further complications.

This draft included “conflict of interest safeguards” designed to restrict certain activities by high-level officials. Specifically, these safeguards could prevent government officials, U.S. President Donald Trump, and members of his family from holding cryptocurrencies or being directly involved in the digital asset industry. Concerns have been raised regarding potential conflicts of interest, including the President’s involvement with the crypto platform World Liberty Financial. Other areas of scrutiny include the pardoning of former Binance CEO Changpeng Zhao and the President’s ties to the crypto mining company American Bitcoin. The inclusion of these conflict provisions is a significant point of contention, as Democrats must weigh the benefits of passing market structure reform against the specific restrictions placed on the current administration and the possibility of future shifts in Congressional leadership following the 2026 election cycle.

Outlook

The outlook for the Responsible Financial Innovation Act is heavily tied to the long-term legislative calendar. TD Cowen’s Washington Research Group has indicated that the most realistic path forward places the bill’s passage in 2027. This timeline suggests that the digital asset industry should prepare for a prolonged period of regulatory transition, with the final implementation of the rules potentially not occurring until 2029. This extended schedule may actually benefit the bill’s enactment by allowing current political tensions and specific conflict of interest problems to dissipate over time. In the interim, the industry continues to navigate a landscape where high-profile entities and assets remain under scrutiny for potential conflicts.

These include the crypto mining company American Bitcoin and the Official Trump (TRUMP) memecoin, both of which have been highlighted as potential areas of conflict for the current administration. Furthermore, the regulatory environment will be shaped by the ongoing leadership within key agencies. As of January, both the SEC and the CFTC are operating with only Republican commissioners, a status quo that will persist until new appointments are made for the vacant Democratic seats. This agency composition, combined with the projected legislative delays, means that the shift of regulatory power from the SEC to the CFTC—a core component of the proposed bill—remains a distant prospect. Market participants must therefore account for a regulatory environment that may remain largely unchanged in its formal structure until the latter half of the decade, as the 2026 midterms and subsequent 2027 legislative session dictate the final version of the market structure framework.