Senators from both parties raised concerns about a crypto market structure bill during a hearing of the Senate Banking Committee Wednesday—with even a staunch Trump ally expressing worry about allowing the crypto industry to write its own rules.
“To what extent should we allow you to draft [these rules]?” Sen. John Kennedy (R-LA) asked a panel of crypto leaders including Ripple CEO Brad Garlinghouse.
“I've… heard some of you say that digital assets represent the next generation of the internet,” Kennedy continued. “Well, we let the current generation of the internet correct their own rules, and frankly, what we got as a result looks like somebody knocked over a urine sample."
Kennedy was not alone in sounding alarms about the danger of passing an insufficiently strong market structure bill. The legislation would, for the first time, create a framework for issuing and trading most crypto assets in the United States.
Many Senate Democrats argued Wednesday that the House’s market structure bill, the CLARITY Act, would have devastating consequences for the broader economy if passed. The bill is expected to face a vote in the House next week.
Sen. Tina Smith (D-NM), for instance, questioned witnesses over language in the CLARITY Act that would exempt digital assets deemed to be collectibles, art, or possessing other utility from SEC regulation—and how such determinations would be made.
“This seems to me like a loophole you could drive a truck through, and I don't think that is an accident,” Smith said.
Sen. Elizabeth Warren (D-MA), a longtime crypto industry critic, spent much of her questioning time asking whether current market structure legislation could allow traditional finance players to escape SEC oversight by tokenizing their financial offerings. That would mean offering things like stocks and other equities as crypto tokens on blockchain networks rather than traditional brokerages or exchanges.
“Yes, it certainly could,” former CFTC chair Timothy Massad said in response to one such question.
Massad went on to argue that if market structure legislation carves out an exception for all decentralized finance activity—as the House’s CLARITY Act currently does—one could tokenize an existing stock like Tesla and trade it on DeFi protocols to avoid SEC oversight. Decentralized finance, or DeFi, refers to products that allow for the trading, borrowing, or lending of digital assets without third-party intermediaries, like banks.
“So in effect, we start to repeal the SEC,” Warren replied.
Though Warren has long expressed resistance to crypto legislation, she did explicitly say Wednesday that there would be a path to earning her support for a market structure bill, so long as it met certain criteria. Those principles include “protecting bedrock security laws,” as well as implementing anti-money laundering and sanctions enforcement programs.
She also said the bill, to earn her support, would need to include provisions banning the president and vice president from engaging in crypto activities while in office—a top priority among Democrats, given President Donald Trump’s lucrative involvement in the industry. Republicans have been steadfast in rejecting the inclusion of such measures.
Crucial to the calculus of whether market structure legislation can ultimately pass the Senate will be the votes of moderate and more pro-crypto Democrats, who voted to pass the nation’s first stablecoin legislation, the GENIUS Act, last month in large numbers.
While most Democrats insisted on including language in that bill that would ban the president from issuing his own stablecoin, many of them ultimately acquiesced after it wasn’t included and voted for the legislation anyway.
Whether these Democrats will swallow that pill twice could likely seal the fate of market structure legislation, one way or the other.
Sen. Raphael Warnock (D-GA) was one such Democrat who voted for the GENIUS Act despite his stated reservations about its lack of provisions banning Trump’s crypto dealings. On Wednesday, the senator appeared to draw a firmer line on the subject.
"I agree that President Trump's crypto corruption distorts the digital asset marketplace,” he said. “Writing a bill with a corruption caveat for the president sends a clear message: that Congress is not serious about addressing corruption, which we know undermines investors’ faith in capital markets.”
“Corruption creates an unfair market that stifles innovation,” Warnock continued. “Investors justifiably do not want to compete against the president of the United States.”
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