The crypto industry’s best shot at comprehensive legislation is looking increasingly like a long shot. Bernstein analysts are now warning that the CLARITY Act, the sweeping bill designed to sort out which regulator oversees what in digital assets, is running out of runway in the Senate.

Here’s the thing, though: the bill’s likely death might not be the disaster it sounds like. Bernstein suggests the failure could actually accelerate rulemaking by both the SEC and CFTC through their joint initiative, Project Crypto, potentially delivering the regulatory clarity the industry has been begging for, just through the back door instead of the front.

The CLARITY Act’s fading pulse

The Digital Asset Market Clarity Act, formally known as H.R. 3633, passed the House back in 2025. The bill would give the CFTC oversight of digital commodities while limiting the SEC’s jurisdiction over certain asset classes.

Senate Republicans released an updated version of the bill’s text on July 22, 2026. But despite that refresh, prediction-market odds for the CLARITY Act passing in 2026 have dropped to roughly 31%.

Project Crypto steps into the breach

Project Crypto, the joint regulatory initiative that’s been quietly building since early 2026, combines efforts from both agencies to tackle token taxonomy and reduce regulatory fragmentation. Initiated in 2025, Project Crypto started as an SEC-led initiative under Chairman Paul Atkins before evolving into a coordinated effort involving both the SEC and CFTC by early 2026. The program focuses on taxonomy, self-custody interpretations, and possible exemptions to spur innovation within the market.

Without a legislative framework to defer to, the SEC and CFTC would face mounting pressure to establish their own rules for how digital assets get classified and regulated, potentially delivering clearer definitions for what counts as a digital commodity versus a security.

What this means for investors

Bernstein expects the CLARITY Act’s failure to generate short-term volatility in digital asset markets. However, the prompt acceleration of rulemaking under Project Crypto could result in a more regulated and clearer operational environment for digital assets in the long term, stabilizing and potentially uplifting market confidence particularly among institutional investors who favor clear regulatory guidelines.

The risk is that agency rulemaking without legislative guardrails could be reversed by a future administration, given that rules were not enshrined in statute.