The fight over whether stablecoin holders can earn yield is the single unresolved clause holding up the CLARITY Act, and it has become the clearest measure of how far apart Republicans and Democrats remain on crypto oversight. The bill came close to advancing before that dispute stalled it, according to Benzinga’s account of Kevin O’Leary’s remarks, and the deadlock now runs straight into Tuesday’s midterms.
One Clause, Two Visions
At issue is USDC, the dollar-pegged stablecoin issued by Circle. The CLARITY Act would split oversight of crypto markets between the Securities and Exchange Commission and the Commodity Futures Trading Commission, but lawmakers could not agree on whether USDC should be permitted to offer yield, O’Leary said. That is the sticking point.
The question matters beyond one token. A stablecoin that pays interest starts to look like a deposit account, which pulls it toward banking rules and the agencies that enforce them. A stablecoin that pays nothing stays closer to a payments instrument. The yield clause decides which regulators, which disclosures and which consumer protections apply to a $292 billion stablecoin market, a figure CoinGecko put at down 0.4% on Nov. 3.
The Numbers Behind the Lobbying Blitz
Crypto groups spent roughly $176 million across more than 100 races this election cycle, according to an Oct. 27 Reuters report cited by Cointelegraph. Coinbase, Ripple and Andreessen Horowitz are among the main financiers of the Fairshake political network, which pushes crypto-friendly policies.
Republicans entered Tuesday controlling both chambers, with 219 House seats and 53 Senate seats, according to the Blockchain Association’s election dashboard. Voters decide all 435 House seats and 35 Senate races. Prediction markets favor a Democratic sweep: Polymarket put the probability near 72% on Nov. 2, per Reuters, while JPMorgan assigned 66% to a Democratic-controlled House and Senate.
That spending buys access, not outcomes. The CLARITY Act struggled under Republican leadership even before the yield fight surfaced, which tells you the divide is not purely partisan arithmetic.
What a House Flip Would Change
Democratic control would bring more congressional scrutiny of Trump-linked crypto businesses and of regulators’ decisions, Cointelegraph reports. Control of the Senate would also shape confirmation of future presidential nominees to regulatory posts.
O’Leary warned on X on Oct. 29 that a shift in House control could produce “gridlock” in Washington and make the CLARITY Act harder to pass. He also cautioned that passage would not automatically lift Bitcoin: “Even if the legislation passes, I’m not convinced it automatically sends Bitcoin higher,” he wrote.
Individual races carry their own weight. Ohio’s Senate contest between Republican Jon Husted and Democrat Sherrod Brown has drawn more than $50 million in industry spending opposing Brown, a longtime crypto critic who could return to a senior Senate committee role. In Nebraska, Republican Sen. Pete Ricketts has benefited from nearly $11 million in Fairshake spending, according to the Washington Examiner. In Texas, the Winklevoss-backed Digital Freedom Fund has spent money supporting Republican Ken Paxton against Democrat James Talarico.
GOP skepticism has deep roots. Josh Mandel, the former Ohio treasurer characterized as far-right, opposed crypto regulation in past campaigns, a marker of how the party’s base has treated oversight.
Markets Are Already Pricing the Uncertainty
Bitcoin traded at $77,178.96 on Nov. 3, down 2% over 24 hours, with $25.25 billion in volume and a market cap near $1.55 trillion, according to CoinGecko data recorded at 1:30 AM UTC. The Fear and Greed Index dropped to 26, signaling fear.
The token has struggled to break out of a $70,000 to $80,000 range, which O’Leary attributes to regulatory uncertainty around the stalled bill and to quantum computing risks. He estimates quantum concerns now deter 15% of potential Bitcoin investors, up from 10% previously.
History offers a caution rather than a guide. Bitcoin traded near $6,400 around Election Day 2018 before falling to roughly $3,180 in December, a decline of about 50%. In 2022 it sat near $20,600 before reaching about $15,800, a drop of around 23%, with the FTX collapse adding pressure. Both periods coincided with broader crypto bear markets, so the elections alone do not explain the moves.
Tokenized Assets and Real World Assets were the strongest-performing crypto categories over the past day, even as the global market cap slipped 0.5% to $2.67 trillion.
Gridlock Has a Price Tag
Morgan Stanley research released Thursday found the S&P 500 has posted an average annual gain of 23% following midterm elections under Republican presidents when Congress was split, against 16% when Democrats controlled both chambers. Analysts often credit gridlock for the difference.
Ariana Salvatore, head of US public policy research at Morgan Stanley, is not buying the repeat: “We don’t think this trend will hold this time, and we continue to see many reasons to stay positive on the US equity market.” JPMorgan projects the S&P 500 moving between a 0.25% decline and a 0.50% gain under Democratic control, and rising 0.5% to 1% under a split Congress.
The narrow projected moves suggest markets have already absorbed the likely outcome. A surprise would land harder.
What Comes Next
The CLARITY Act’s failure to advance in the Senate has already pushed the CFTC to act. The agency said this month it is advancing its first set of crypto market-structure rules, with chairman Michael Selig calling the effort “just the beginning.” That means rules are coming regardless of whether Congress passes anything, written by regulators rather than legislators.
Democratic control of either chamber would hand the party committee chairmanships and subpoena power, opening investigations into corporate conduct and federal spending. President Donald Trump retains veto power and broad authority over tariffs and federal oversight, so the reach of any legislative change stays bounded.
For stablecoin holders, the practical answer to the yield question may arrive from the CFTC and the SEC before it arrives from the House floor. The next hard date on the calendar is Tuesday’s vote, with all 435 House seats and 35 Senate races on the ballot.
Sources
- Josh Mandel
- Kevin O'Leary Says Bitcoin May Not 'Automatically' Rally Even If CLARITY Act Passes, Warns Midterms Could Create Washington 'Gridlock'
- Crypto News Nov 3 Covers Bitcoin, Binance Hack, US Midterms and More
- What’s at Stake for Crypto as the US Votes in the 2026 Midterms?
- US Midterms Put Bitcoin on Edge as Markets Brace for Volatility
- Big Tech dreads US ballot… Morgan Stanley warning over sweeping upsets in defense, healthcare, crypto, and AI
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