The crypto market structure bill, or the Clarity Act, is becoming less likely to pass this year as the political environment around the legislation continues to worsen, according to investment bank TD Cowen.

"The political environment is getting worse for the Clarity Act," Jaret Seiberg, managing director at TD Cowen's Washington Research Group, said in a note on Tuesday. "It is why we remain pessimistic that Clarity will become law this year."

Notably, earlier this month, the Senate Banking Committee advanced the bill despite objections from Democrats and banks. At the time, Seiberg said that the committee vote shifted the fight to the full Senate rather than signaling a deal had been reached. He also warned that major obstacles remained, particularly around conflict-of-interest provisions.

In his latest note, Seiberg said a series of recent developments involving President Donald Trump and his administration are making it politically harder for Democrats to support the crypto bill.

'Clarity Act keeps becoming a harder vote for Democrats'

One issue highlighted by Seiberg involves a recently settled legal case between Trump and the Internal Revenue Service. The settlement created a $1.776 billion anti-weaponization fund to compensate individuals who claim they were victims of government "weaponization or lawfare." The deal also permanently bars the IRS from auditing past tax returns of Trump, his family, and related companies. The deal came as Trump agreed to drop his $10 billion lawsuit against the IRS in exchange for the establishment of a fund for people he believes were wronged by federal investigations or prosecutions.

"We have never seen a taxpayer-funded fund like this, which seems aimed at the President's supporters," Seiberg said. "It also establishes a precedent for future Presidents to sue the government and then settle in a way that can be used to reward supporters."

Another development cited by Seiberg was a recent New York Times investigative report examining how prediction markets and crypto interests have pushed their agenda with the Commodity Futures Trading Commission. The report alleged that experienced regulators had been sidelined to make the agency more supportive of the sectors. Seiberg noted that the allegations in the report remain unconfirmed and that CFTC Chair Michael Selig told the NYT the agency is focused on major wrongdoing and not playing favorites.

The NYT report also highlighted ties between the Trump family and several crypto and prediction market businesses, an issue that Seiberg believes is becoming increasingly relevant to congressional negotiations.

Seiberg also pointed to financial disclosures released by the government earlier this month showing that around 3,600 stock trades were executed on Trump's behalf during the first three months of 2026. Some of the trades appeared to coincide with periods when Trump publicly discussed companies or policy matters that could affect them, Seiberg noted. The White House has said the trades were executed without the involvement of Trump or his family.

According to Seiberg, these developments are increasing pressure on Democrats to demand conflict-of-interest provisions before supporting the crypto bill.

"It makes it politically hard for a Democrat to back a crypto bill unless it contains conflicts of interest standards that apply to the President," Seiberg said.

The situation also creates challenges for Republicans, Seiberg said, noting that they may become less willing to bring the bill forward if doing so forces them to vote against conflict-of-interest amendments aimed at Trump.

As a result, Seiberg expects lawmakers may choose to delay action while waiting to see whether the political controversies fade.

"This leads to inaction as lawmakers wait to see if the uproar will recede," Seiberg said. "The problem is that the upcoming [midterm] election leaves little room for further delay."

Seiberg has previously said that the window to pass the crypto bill likely extends until the August recess, and that delays could push passage to 2027, with final rules potentially not taking effect until 2029 if the current hurdles are not resolved this year.