Key Points
- Brad Garlinghouse, CEO of Ripple, cautioned that the CLARITY Act faces a critical two-week window to move forward or risk being sidelined
- This federal legislation would establish crypto oversight by dividing regulatory authority between the SEC and CFTC
- A dispute over whether stablecoins can pay yield has stalled progress in the Senate Banking Committee
- Despite a recent compromise between Senators Tillis and Alsobrooks on stablecoin rewards, major banking institutions say the language is insufficient
- According to Garlinghouse, midterm election politics could delay the bill’s passage by nearly a year
The head of Ripple is sounding the alarm that time is running out for landmark cryptocurrency regulation in the United States. During his appearance at Miami’s Consensus conference on May 5, Brad Garlinghouse emphasized that lawmakers must take immediate action or risk losing momentum for many months.
At the heart of Garlinghouse’s concerns is the CLARITY Act, a groundbreaking piece of legislation that would establish the first comprehensive federal framework for cryptocurrency regulation in America. The bill proposes to split regulatory jurisdiction between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
After passing the House in July 2025, the legislation has encountered significant resistance in the Senate.
Before it can advance to a full Senate floor vote, the bill must navigate two critical committees: the Senate Agriculture Committee and the Senate Banking Committee. While the agriculture committee gave its approval in January 2026, the banking committee remains deadlocked.
Stablecoin Rewards Create Congressional Standoff
The central point of contention revolves around stablecoins and the question of whether these digital assets should be permitted to generate yield for their holders. A potential breakthrough emerged last week when Senators Thom Tillis and Angela Alsobrooks unveiled a compromise proposal.
Their draft agreement would prohibit rewards on passive stablecoin holdings that function similarly to traditional deposit interest. However, it would permit rewards connected to active participation such as trading, transaction processing, or staking activities.
Despite this effort, influential banking organizations remain unconvinced. The American Bankers Association and the Bank Policy Institute issued a joint statement on May 4 expressing concern that the proposed language contains loopholes allowing cryptocurrency platforms to offer deposit-equivalent returns through membership structures or balance-based reward programs.
“The proposed language falls short of that goal,” the groups said.
Garlinghouse conceded the legislation has imperfections. “I challenge you to show me any piece of legislation that we would call perfect,” he said. “There’s tradeoffs and compromises, but I do think clarity is better than chaos.”
Election Season Threatens Legislative Progress
The urgency stems from a very specific factor: the approaching 2026 midterm elections. Primary contests are already in progress across the country, with the general election scheduled for November.
Garlinghouse warned that unless the Senate Banking Committee schedules a markup hearing within the next fortnight, the bill’s prospects for passage will significantly deteriorate. As campaign season intensifies, legislators typically avoid controversial or complex policy initiatives that could become political liabilities.
“If it gets into midterms, it’s going to be too much of a loaded issue,” he said. “Post-elections in the fall, I think the likelihood that it gets picked up is even lower.”
Senator Cynthia Lummis, who serves on the banking committee, took to X on May 6 to declare that the CLARITY Act “is the priority” and urged her Senate colleagues to take action.
While the SEC and CFTC established a memorandum of understanding in March to enhance coordination on cryptocurrency oversight, both regulatory bodies are holding off on implementing major policy changes until Congress enacts formal legislation.
