US government shutdown complicates crypto market structure bill's path forward

The U.S. government’s shutdown last week may not completely derail cryptocurrency legislation efforts, but according to insiders, it’s certainly not helping.

The government is now in its second week of going silent after Congress failed to reach a deal on funding, furloughing employees, and significantly limiting what federal agencies can do. This disruption comes as lawmakers in the Senate Banking Committee were deep into drafting a bill that would regulate the crypto industry at large, designating authorities over digital assets between the Commodity Futures Trading Commission and the Securities and Exchange Commission.

Its counterparts in the Senate Agriculture Committee, which has jurisdiction over the CFTC, have not yet released their version of the bill.

Typically, agency staff play a critical role in advising lawmakers during the drafting process.

However, with many being furloughed, that is "now probably the biggest setback at this time," said Kristin Smith, president at the Solana Policy Institute, as staff are no longer able to work on it because of the shutdown.

"This is a small setback for market structure, but I know that this is a high priority for the House and Senate, particularly over on the Senate side right now and that they are continuing to have discussions despite the shutdown," Smith added.

The next step for the Senate Banking Committee would be a formal vote on its version of the bill.

"So it seems that at least the shutdown right now will definitely be affecting when that vote in Senate Banking happens," said Ron Hammond, head of policy and advocacy at Wintermute.

As for when the Senate ultimately votes on a crypto market structure bill before the end of the year, Hammond put that at a 60% chance.

"It kind of lines up with a lot of bills being rushed out before the year's end, but of course, the shutdown is the biggest factor in all this," Hammond said. "Depending on how long this goes, if it goes for a whole month for example, I'll definitely change my analysis here."

Ultimately, the Senate's bill will need to be reconciled with progress in the House. Over the summer, the House passed the Clarity Act, marking a significant step forward, though it has a few differences compared to the Senate's version.

Hammond put the odds of having a market structure bill signed into law before the midterm elections in November 2026, given that the Senate is done with its market structure version, between 80% to 90%. However, if the Senate does not wrap up its bill until the spring, that's a different story.

"But if this leads more into the spring… that's a very different calculus there, less than 50% at that point, but timing is of the essence," Hammond said.

Midterm elections loom 

As the 2026 midterms approach, the political calculus around crypto legislation may change. Midterm elections could really affect how lawmakers approach legislation as they look to keep their seats and shift their focus to campaigning.

A government shutdown won't throw off crypto policy if it's a couple of weeks long, said Rebecca Liao, co-founder and CEO of Saga. Liao was also a member of former President Joe Biden's 2020 presidential campaign.

"I don't think it's going to be deprioritized as a result of the government shutdown," Liao said. "It's too important to the Trump administration."

However a longer delay won't be good, Liao added.

Several Democrats have increasingly raised concerns about Trump's ties to digital assets, which have in turn complicated legislative efforts. Bloomberg has estimated the sitting president has profited some $620 million from his family's crypto ventures, including the World Liberty Financial DeFi and stablecoin project and the TRUMP and MELANIA memecoin launches.

The Trump family also has a 20% stake in the mining firm American Bitcoin . Trump and his three sons are also listed as co-founders of the crypto company World Liberty Financial.

From Democrats' perspective, they may want to give up support for crypto if it means they have a "really simple flashpoint for people to rally around" and help them keep their seats, Liao said.

"If you say that the Trump family has siphoned away billions of dollars in this asset that most people have no idea what it is, I think it's perceived as a good talking point for the Democrats heading into the midterms," she said.

What still needs to be hashed out

Passing a crypto market structure bill is a much harder feat than when lawmakers were able to get a stablecoin bill to President Donald Trump's desk over the summer. Both the House and Senate voted to pass the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS Act), which created a federal regulatory framework for stablecoins. That was soon after signed by Trump into law.

"Shutdown or no shutdown, this is a really big task that these committees have and it is important that we get this right," said the Solana Policy Institute's Smith.

Smith notes that there was positive language for software developers in the Senate Banking Committee version, as well as language that addresses how the Justice Department interprets money transmitting, which she hopes are in the Senate Agriculture committee version as well.

Some in the crypto industry are waiting to see what is in the Senate Agriculture Committee's version. The decentralized finance industry specifically is "corraling" around ancillary assets in the Senate Banking Committee version, Wintermute's Hammond said.

Ancillary assets, which the bill describes as an "intangible, commercially fungible asset, including a digital commodity, that is offered, sold, or otherwise distributed to a person in connection with the purchase and sale of a security through an arrangement that constitutes an investment contract," and looks to set out which cryptocurrencies are not securities. 

Hammond added that the bill could look very different as it continues to be amended.

Keep it simple 

In a paper published last month, Teresa Goody Guillén warned that both the Clarity Act and marked structure legislation needed to be scaled back and said they are nearsighted "in their reliance on decentralization as the key factor in classifying an asset." Goody Guillén is a partner at the BakerHostetler law firm and a former litigation counsel for the SEC.

She also said the term ancillary asset in the Senate Banking Committee version doesn't work.

"Further, the Senate draft’s re-labeling of the 'subject' of an investment contract as an 'ancillary asset' is doctrinally incorrect and confusing," she said.

Simple is better, said the Solana Policy Institute's Kristin Smith.

"In a general matter, simple is better," Smith said. "I think that this is a really complex issue. As a general matter, we want to be able to have flexibility as the technology evolves."

Another challenge to market structure legislation has been banks' behemoth lobbying efforts to prevent crypto exchanges from offering yield on stablecoins. That was not a part of the GENIUS Act, but banks are now seeing if they can get the change into a market structure bill. Crypto industry groups have since pushed back.

"It remains to be seen if they're going to get their final wish in the product, but it is a battle of the juggernauts in DC of crypto versus TradeFi and there's a lot of fights being thrown around," Hammond said.

All in all, crypto market structure legislation needs to be done right and in a bipartisan manner, said Blockchain Association CEO Summer Mersinger in a statement.

"There’s genuine momentum on both sides of the aisle, and a shared understanding that the U.S. needs clear rules of the road," Mersinger said. "That kind of alignment doesn’t come often in Washington, and it’s why we remain optimistic that Congress can deliver a balanced framework that gives this industry the regulatory clarity it needs to grow responsibly."