Two-Month Countdown: Democrats Regain Control of Congress, Crypto Firms' Compliance Responses and Strategic Pivots

By Murtuza Merchant, Forbes

With two months until Congress transitions in January, crypto companies have only that much time to adapt to a completely different policy landscape in Washington. Democrats will take control of Congress, and the industry's flagship market structure bill essentially has no chance of advancing during the lame-duck session. Crypto companies will need to shift their focus from lobbying for legislation to preparing for hearings and facing stricter regulatory scrutiny.

Democrats gaining control of both the Senate and the House in the midterm elections is a significant headwind for an already struggling crypto bill.

Shifting Congressional Landscape: Market Structure Bill Stalls

The Clarity Act, designed to clarify trading rules and regulatory jurisdiction for crypto tokens, passed the House in July 2025 with 294 votes in favor and 134 against, including 78 Democratic lawmakers. However, the bill stalled in the Senate. An attempt to advance it on September 15 fell short, as Senators Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis joined Democrats to vote against it, with disagreements centering on ethics provisions and other ancillary details.

The new Congress officially convenes on January 3 of the following year, leaving only a lame-duck period in between, making almost no one optimistic about the bill making progress during this window. Lee Reiners, a researcher at Duke University's Center for Financial Economics, stated, "The Clarity Act is dead." He noted that prediction markets place the probability of the bill being enacted before 2027 in the single digits.

Industry insiders share this view. Ryan Myher, co-founder and COO of self-custodial crypto exchange Genius, said the current version of the bill is essentially moot and that there is no political momentum to rush it through in the coming weeks. Tomer Sharoni, CEO of Addressable, believes the bill's roadblock stems from ethical controversies rather than fundamental framework disagreements. He anticipates a new version of the market structure bill will be introduced in 2027, incorporating stricter anti-money laundering (AML), DeFi, and conflict-of-interest provisions.

The Lobbying Myth Shattered: Shifting from Political Donations to Substantive Evidence

Crypto industry groups previously poured massive sums into attempting to influence this round of congressional elections, but key races yielded results contrary to expectations. Former Ohio State Senator Sherrod Brown defeated Republican candidate Jon Husted. Myher said, "Industry PACs collectively invested around $170 million, mostly to support Republicans and block Democrats, but ultimately did not deliver the expected outcome."

However, Democrats are not entirely dismissive of the crypto industry, as evidenced by the 78 Democratic votes supporting the Clarity Act in the House. The current challenge is that the industry must change its messaging. Sharoni argues that large donations have branded cryptocurrency as a "partisan tool"; to persuade the Democratic majority, companies must rely on substantive arguments. "If I were to advise the industry: bring evidence, not campaign contributions; prove to regulators that platforms have the capacity to independently curb fraud and prevent sanctioned activity evasion."

Myher also agrees the industry needs to pivot: "In the future, companies will need to learn to work with a Democrat-led Congress rather than stand in opposition." This means maintaining bipartisan relationships in the House, where they originally had broader support, and reducing campaign spending aimed at attacking opponents.

Subpoena Power and Hearings: Sharper Regulatory Swords

Bbeginning in January next year, Democrats will hold committee chairmanships and subpoena powers, a development that may impact the crypto industry more than any single piece of legislation. Sharoni noted, "I predict hearings will happen long before any new bills are passed."

Myher pointed out that Democrats prioritize consumer protection, illicit finance, and conflicts of interest, and now they control the agenda. Reiners stated that hearings will likely investigate government-crypto industry interactions, details of collaboration among certain companies during the legislative process, and how regulators are enforcing rules. Sharoni predicts that crypto projects linked to the presidential family will become the breakthrough point for Democrats exercising their subpoena power for the first time.

New crypto legislation is unlikely to be a Democratic priority. Reiners cited polling showing only 4% of U.S. voters say a candidate's stance on crypto will influence their vote; Democrats prioritize addressing cost-of-living issues. Even if crypto policy is discussed later, Democrats would redraft legislation from scratch, and the party itself is not unified on the issue. Reiners supports classifying crypto tokens as securities regulated by the SEC for spot markets, but whether there is sufficient political will to implement this remains uncertain.

Comprehensive Tightening of Existing Rules: Stablecoins and AML Take Center Stage

Regulators do not need new congressional legislation to tighten rules. The Office of the Comptroller of the Currency (OCC) issued final guidance accompanying the GENIUS Act stablecoin bill on October 21, which officially takes effect on January 18, 2027. The OCC and the Treasury Department will also jointly release detailed AML and sanctions compliance guidelines for stablecoin issuers. Sharoni believes this is the direction legislators will tackle first: "AML will be the top priority because both parties agree on this." Platforms will need to explain how they identify sanctioned individuals and criminal users, even if a single person controls dozens of wallet addresses.

Stablecoin yield is another major point of contention. New OCC rules prohibit issuers from directly paying interest to token holders, and regulators have made it clear that indirectly distributing yields through partnering third parties is equally non-compliant. Regulatory documents state verbatim that issuers cannot indirectly do what regulations explicitly forbid.

Myher added that tokenized stocks and other RWAs will face even denser scrutiny in 2027: "Even without new legislation, enforcement and regulatory pressure will continue to tighten." For companies that have already established stablecoin operations, the core regulatory framework is set. The GENIUS Act was signed into law in July 2025, with relevant provisions scheduled for implementation in January, unaffected by the shift in congressional control. Teymour Farman-Farmaian, co-founder and CEO of cross-border payment platform Higlobe, therefore concluded that the election will have limited impact on day-to-day operations. He believes the core challenge ahead is not overturning existing laws, but whether lawmakers will continue to support digital asset innovation.

More critically, it depends on how regulators enforce existing rules and whether companies can secure a stable, predictable regulatory environment. The adoption of stablecoins stems from genuine demand for faster, lower-cost cross-border payments—a demand that will not vanish due to shifts in the political landscape. Myher noted that the SEC and CFTC can achieve most of the regulatory objectives originally intended by the Clarity Act using only their existing enforcement authority.

Window Period Response Advice: Prioritizing Compliance Capabilities Over Seeking Exemptions

During the window period leading up to January 3, the focus should be on response, not lobbying. Myher advises: "Investors and companies should view the next two months as a planning cycle, rather than a push for legislative gains." Specific actions include strengthening AML controls and user-facing disclosures; testing the compliance of tokenized products under tighter regulatory oversight; and avoiding reliance on the near-term passage of the market structure bill.

Sharoni recommends that companies audit their risk control screening capabilities, specifically whether they can link wallet addresses to actual holders and trace fund flows back to criminal or sanctioned entities. He also advises businesses to proactively engage with Democratic offices before investigative committees are formally established, using data-driven evidence instead of vague promotional rhetoric: "My advice to companies is to treat 2027 as a year to demonstrate compliance capabilities, not to lobby for regulatory exemptions."

For investors, increased market volatility is highly likely, but the long-term trend remains unchanged: cryptocurrencies will continue to be integrated into the mainstream financial system, albeit at a slower pace and under stricter regulatory standards.