Investment Bank Warns: 2026 Elections Could Stall Major US Crypto Legislation

Wall Street's crystal ball just went dim for crypto regulation.

### Political Gridlock Looms

An investment bank's latest analysis throws cold water on hopes for clear U.S. crypto rules before 2027. The culprit? The 2026 midterm elections. Their report suggests legislative momentum will grind to a halt as politicians shift to campaign mode—prioritizing soundbites over substantive lawmaking. It's the classic Washington playbook: when in doubt, kick the can past the next election cycle.

### The Lobbying Frenzy That Won't Matter

Expect a surge in crypto industry lobbying dollars targeting Capitol Hill. Firms will deploy armies of suits to schmooze and persuade. But the bank's warning implies it's largely theater—a performative dance where the music stops the moment re-election campaigns begin in earnest. All that financial firepower might buy access, but not action.

### A DeFi Silver Lining?

Paradoxically, regulatory paralysis could fuel decentralized finance. With traditional legislative pathways blocked, developers and users might accelerate the shift to permissionless protocols that operate outside legacy frameworks. Innovation won't wait for a Senate vote—it'll build around the obstruction.

### The Bottom Line for Investors

Prepare for extended uncertainty. The bank's analysis signals another two-plus years of regulatory ambiguity for U.S. crypto markets. That means continued compliance headaches for institutions and a potential competitive edge for jurisdictions with clearer rules. It's a cynical reminder that in high finance, political calendars often trump market needs—election season turns statesmanship into stalled ships, leaving billion-dollar industries in legislative limbo.

TD Cowen Warns US Crypto Legislation May Be Delayed Until 2027

The legislation, known as the CLARITY Act after passing the House in July and referred to in the Senate as the Responsible Financial Innovation Act, is now seen as more likely to clear Congress in 2027 rather than next year.

Full implementation could be pushed as far out as 2029.

TD Cowen analysts said Senate Democrats may hesitate to back the bill ahead of elections that could reshape control of Congress, which currently tilts Republican.

With outcomes uncertain, lawmakers could opt to delay key decisions until after the midterms, when the balance of power may be clearer.

“Election outcomes are always uncertain, which is why Democrats may cut a deal,” the bank said, adding that political timing rather than policy substance could ultimately determine the bill’s fate.

A bipartisan draft released by the Senate Agriculture Committee in November attempted to address one of the most contentious issues: conflicts of interest.

The proposal includes safeguards that would bar senior government officials, including Donald TRUMP and members of his family, from holding cryptocurrencies or playing a direct role in the industry while in office.

TD Cowen said U.S. crypto market structure legislation could see progress this year, but is more likely to pass in 2027, with final rules potentially taking effect as late as 2029. The note said a key hurdle is debate over conflict-of-interest provisions, with Democrats seeking…

Those provisions reflect long-standing concerns among Democratic lawmakers over Trump’s links to crypto-related ventures.

Critics have pointed to connections involving World Liberty Financial, a crypto mining operation known as American Bitcoin, the launch of Trump-branded tokens, and the high-profile pardon of former Binance chief executive Changpeng Zhao.

TD Cowen Says Delayed Timeline Could Ease Political Friction Over Crypto Bill

TD Cowen suggested that time could work in favor of compromise. If the bill passes in 2027 and takes effect in 2029, some of the immediate political pressure may ease.

Under that scenario, the crypto industry WOULD need to accept that presidential election results could shape final rules, while Democrats might have to concede that conflict provisions would not apply retroactively to Trump.

Meanwhile, the legislative process continues. The Responsible Financial Innovation Act is awaiting markups in both the Senate Banking Committee and the Senate Agriculture Committee, with reports indicating the first markup could occur later this month.

Last week, Coinbase’s institutional strategy chief stated that comprehensive crypto market structure legislation will take longer to finalize than stablecoin rules, but remains confident that bipartisan momentum will carry the bill across the finish line in 2026.

John D’Agostino told CNBC that regulatory clarity abroad and accelerating talent flight from the US create urgent pressure to establish federal frameworks this year.