Bernstein analysts told clients Monday that the CLARITY Act has made more progress than markets expected and that investors have not priced in any positive surprise ahead of Tuesday's cloture vote.

Why Bernstein Thinks the Market Is Wrong

In a note cited by The Block, Bernstein analysts led by Gautam Chhugani wrote that prediction markets have been too pessimistic on the CLARITY Act, with Kalshi odds climbing back above 30% after Senate Republicans released what they called a final draft Sunday night.

The draft incorporates 126 substantive changes Democrats requested, and President Donald Trump agreed to most of a bipartisan ethics proposal, including giving state attorneys general an enforcement role and adding crypto divestment and blind trust conditions for public officials.

"Any positive surprise is definitely not priced in," the analysts wrote. Bernstein called the ethics offer "probably as good as it gets," arguing the concessions could win over enough Democrats to clear Tuesday's 60-vote cloture threshold.

Republicans hold 53 seats, meaning seven to 10 Democrats need to cross over. Bloomberg reported that roughly that many Democrats "sound like they want to ultimately pass a bill."

Why Everyone Loses If the Bill Fails

Bernstein argued that a failure hurts the banking lobby just as much as the crypto industry.

The latest draft gives banks guardrails around stablecoin yield and deposit flight during a potential banking crisis.

Without that language, third-party platforms keep offering full yield on idle stablecoin balances with no restrictions, the exact outcome banks have been pushing to prevent.

The analysts also noted that Senate Democrats face their own political risk heading into the midterms.

The crypto lobby has backed candidates from both parties, and voting against the bill risks being cast as anti-crypto in competitive races.

What This Week Could Mean for Crypto Prices

Bernstein warned that this week stacks two major catalysts back to back: Tuesday's CLARITY Act cloture vote and Wednesday's Fed rate decision.

A hawkish Fed combined with a failed vote could trigger a major drawdown across both crypto assets and crypto stocks.

Current positioning carries a bearish bias, so a positive outcome on either front would hit an underpositioned market hard to the upside.

If the bill fails, Bernstein said the SEC and CFTC would likely accelerate their own crypto rulemaking, which could help crypto stocks recover after an initial selloff.

CFTC Chair Michael Selig has warned that regulators could end up writing all the rules themselves if Congress does not act.