Why the CLARITY Act Could Be Ether's Biggest Catalyst This Year

The Digital Asset Market Clarity Act reached a decisive milestone on 14 May, when the Senate Banking Committee advanced it by a vote of 15 to 9, with support from Democrats Angela Alsobrooks and Ruben Gallego. Alsobrooks said at the time that her committee vote "would not translate into support on the floor" without additional modifications to the bill. The text was reported to the Senate legislative calendar on 1 Jun, making it formally eligible for a floor vote. The House of Representatives passed it in July 2025, during the same legislative sequence as the GENIUS Act. The bill will likely need 60 votes to overcome a potential cloture procedure in the Senate before the 7 Aug recess, failing which its 2026 trajectory becomes significantly more complicated. 

As at 12:20UTC on 17 Jul, Polymarket places the probability of passage this year at 32%, down from 33% yesterday and from above 70% in May.

It is also important to understand what the CLARITY Act would actually change. Much of the groundwork has already been laid by the joint interpretation published by the SEC and the CFTC on 17 Mar. That document introduced a five-category taxonomy and explicitly classified 16 major assets, including Bitcoin (BTC), Ether (ETH), Solana (SOL), XRP, Cardano (ADA), Chainlink (LINK) and Avalanche (AVAX), as digital commodities. The CLARITY Act, therefore, does not aim to redefine the status of these assets. Its objective is rather to enshrine in law a framework that currently rests on a regulatory interpretation.

This may seem like a legal nuance, but it is significant for institutional investors. A bank or asset manager can adapt to a regulatory interpretation, but it will more readily build long-term infrastructure when a framework is written into statute and less likely to be reversed after a change in administration. This is why the CLARITY Act could have more impact on medium-term capital allocation than on very short-term prices.

All assets now classified as digital commodities would benefit from regulatory clarification if the CLARITY Act is adopted. The question is rather which networks are best positioned to capture that benefit.

Solana retains several strengths, including a staking yield generally higher than Ethereum's and rapidly growing DeFi activity. XRP remains closely associated with payment use cases and settlement infrastructure. Ethereum stands out more for its simultaneous exposure to various themes that the CLARITY Act would reinforce: staking within ETF products, legal certainty for the DeFi ecosystem, and the tokenization of real-world assets (RWA).

Other networks are well positioned in certain of these segments, but Ethereum appears today as the one most clearly sitting at the intersection of all three.

Three structural channels

Staking ETFs

Until recently, staking was largely absent from US spot Ether ETFs, as issuers had been required to remove this feature from their filings to obtain SEC approval. The joint interpretation published by the SEC and the CFTC in March changed the landscape by clarifying that rewards from protocol staking typically did not fall under the securities' regime, thereby opening the door for ETFs incorporating staking. Products already exist, and several other managers are now seeking to add this component to their Ether ETFs. In this context, the CLARITY Act would not introduce a new regulatory possibility but would reinforce its durability by writing it into law. For institutional investors, the stakes are significant. An Ether ETF capable of generating recurring yield through staking offers a different investment proposition than simple price exposure to the asset. Even modest, this yield adds an income dimension that can make ETH more attractive within a long-term allocation framework.

DeFi legal certainty

One of the most important aspects of the CLARITY Act concerns the treatment of decentralized protocols and their developers. The text specifies that executing administrative functions or implementing decisions made through decentralized governance should not be automatically treated as a form of centralized control. 

This clarification could reduce some of the legal uncertainty that has weighed on the American DeFi ecosystem for several years. Entities such as the Ethereum Foundation, Uniswap Labs or Lido could benefit from a more legible framework when developing or maintaining decentralized protocols. Ethereum remains the leading DeFi ecosystem in terms of total value locked, even though Solana and Base have gradually gained ground in recent years. In this context, the primary contribution of the CLARITY Act would not be to create new activity but to make it easier for developers, investors and companies in the sector to operate under American jurisdiction.

Tokenization

Ethereum remains the primary infrastructure for tokenized real-world assets. The network hosts approximately $16.6bn in RWA, representing slightly more than half of the global market, a figure that has more than tripled over the past year. Most of the highest-profile institutional initiatives, whether BlackRock with BUIDL, Franklin Templeton or Ondo Finance, already rely on the Ethereum ecosystem. The GENIUS Act provided an initial framework for payment stablecoins. The CLARITY Act would go further by clarifying the regulatory treatment of digital assets that circulate on these infrastructures. Taken together, the two texts would create a regulatory environment far more complete than what existed previously, with rules for both settlement instruments and the tokenized assets themselves. This is precisely the type of framework that institutions have been waiting for to accelerate their tokenization initiatives.

Passage scenario, failure scenario

If the CLARITY Act is adopted, Ethereum will appear as one of the primary beneficiaries of regulatory clarification. Spot ETH ETFs already recorded more than $1.5bn in net inflows in May, one of their strongest months since launch. This improvement in flows contrasts with the still disappointing price performance of ETH over the year and can be interpreted as a sign of growing institutional interest in the thesis.

Conversely, a failure of the bill would leave in place a framework resting primarily on regulatory interpretations rather than on a law passed by Congress. In this scenario, some current discount on Ether could be justified, particularly on the themes of staking, DeFi and tokenization. The risk would not only be the absence of a new catalyst but also a postponement of the legislative debate to 2027, giving more time to other jurisdictions such as the European Union, Hong Kong, Singapore and Dubai to consolidate their regulatory lead in digital assets.

Three risks nonetheless deserve consideration. The first is the calendar. The Senate returned on 13 Jul with roughly four weeks before the 7 Aug recess, a window Senator Cynthia Lummis and others have called the last realistic chance for passage in 2026; missing it could push market-structure legislation as far out as 2030, a dynamic Sandmark examined in June. The second risk is political. Several Democrats remain reluctant to support the text without stricter ethical provisions addressing the ties between public officials and the crypto industry, a topic that continues to fuel debate around the bill, including the Trump family's own crypto holdings. Finally, there is a more structural risk. Major market structure reforms rarely pass without resistance and often require multiple attempts before succeeding.

Ultimately, the question is not whether regulatory clarification would be positive for Ethereum. It probably would be. The real question is how much of that scenario is already priced in and how much still depends on the CLARITY Act being adopted in the coming weeks. In an environment where catalysts specific to the crypto market remain relatively scarce, this bill could constitute one of the most significant regulatory events of the year for ETH.