The CLARITY Act faces a new fight over whether crypto companies must separate their conflicting businesses ahead of next week’s Senate vote.
Politico reported Thursday that vertical integration has become the latest sticking point in CLARITY Act negotiations.
In simple terms, it means crypto companies often run exchanges, brokerages, and trading firms all under one roof without the walls between them that traditional finance requires.
FTX’s 2022 collapse showed exactly why that matters, with the lack of separation between its exchange and a Bankman-Fried-controlled trading firm helping bring the whole thing down.
Democrats want the bill to force regulators to set minimum standards for these vertically integrated crypto companies, pointing out that Republicans backed similar language earlier this year.
Republicans say they support conflict of interest rules in principle but draw the line at the Democratic version, warning it could hand a future administration the tools to break up crypto companies entirely.
What the Key Players Are Saying
Politico quoted Duke University lecturing fellow and former Federal Reserve official Lee Reiners, who called vertical integration “the whole ballgame,” arguing the crypto industry wants legal certainty without changing a single thing about how it operates.
Coinbase (NASDAQ:COIN) Vice President of US Policy Kara Calvert pushed back, telling Politico that separation for separation’s sake does not automatically protect consumers and can actually weaken risk management and cybersecurity.
Sen. Cory Booker (D-NJ), who leads Democratic negotiations on the Senate Agriculture Committee’s portion of the bill, told Politico he has “shared values” with Republicans but will not support a bill that fails to protect consumers from the risks of blockchain-based finance.
He is in active talks with Sen. Cynthia Lummis (R-Wyo.) and Senate Agriculture Committee Chair Sen. John Boozman (R-AR) to find common ground.
Why the Odds Look Slim
The vertical integration fight adds to the ethics provision standoff over President Donald Trump’s family crypto profits that has already pushed Polymarket traders to price the CLARITY Act becoming law in 2026 at just 17%.
The CFTC is pursuing its own conflict of interest rule separately, but without a legislative deal, industry players face ongoing regulatory uncertainty heading into what was supposed to be crypto’s biggest legislative moment.
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