Kevin O'Leary: The Crypto Clarity Bill is Expected to Return to the Agenda After the Midterm Elections, Possibly in Q1 Next Year
Investor Kevin O'Leary stated at the Avalanche Summit in New York that the Digital Asset Market Clarity Bill received only 49 votes in the Senate this week, falling short of the 60 votes needed to advance. He had previously assessed the probability of its passage as zero. He expects the bill to return to the agenda after the midterm elections, possibly in Q1 next year, regardless of which party controls Congress.
The voting result was 49 to 50, failing to achieve a majority, with four Republicans voting against it and no Democrats or independents supporting the motion to start deliberations. The House had previously passed the bill text with a vote of 294 to 134 in July 2025. On the day the bill failed, crypto-related stocks such as Coinbase, Circle, and Galaxy fell by more than 8%.
He pointed to the Digital Asset Tax Certainty Act, which advanced in the House Ways and Means Committee with a vote of 38 to 5. This draft covers staking, mining, small payments, and broker obligations, classifying income from validation activities as ordinary income and extending anti-abuse rules like wash sales to digital assets; network fees of $10 or less will not trigger taxable dispositions after the end of 2027, but the industry's request for deferral of rewards until sale confirmation was not included. The Treasury Department is required to establish a voluntary disclosure arrangement.
O'Leary's logic is that once Congress begins taxing activities like staking, it must also implement market structure policies, and the division of responsibilities between the SEC and CFTC cannot remain unresolved. He stated, "Once you start taxing, you must have policies in place," and the implementation of taxes will drive clarity legislation. The day after the committee advanced the tax bill, the Senate market structure bill failed, indicating a mismatch in the pace of the two tracks.
In market mechanisms, this shifts regulation from "who regulates" to "how to tax": buying is about tax reporting standards, while selling involves licensing and spot definitions. Beneficiaries include accountants who need to confirm the timing of mining and staking income, and platforms that have made tax provisions; those under pressure are exchanges that have pinned all hopes on passing market structure within the year, as well as validators facing cash taxes as soon as rewards are received. The 49 votes indicate that lobbying has brought the bill to the floor, but the 60-vote threshold remains a division among parties and within the Republican Party.
Additionally, the prediction market had lowered the probability of the bill becoming law this year from about 29.5% to around 6.5%. O'Leary stated that policy "will definitely come," with the timing set for the first or second quarter after the elections.
Source: Public Information
ABAB AI Insight
O'Leary frames the failure as a timing issue rather than a directional one. The 49 votes are insufficient to initiate but sufficient to prove the topic has occupied the Senate floor. The tax bill's 38 to 5 advancement in committee represents another, more bipartisan angle: taxation does not require first addressing whether a token counts as a security. By stating "once taxes are imposed, there must be policy," he welds the two legislative tracks together, fearing the market might view the tax bill as a substitute, thereby delaying the division of responsibilities between securities and futures.
Capital will reprice lobbying according to the election calendar. Who controls the Senate after the midterms will determine whether the clarity bill is a minor revision or a complete rewrite. Treating staking as ordinary income without deferral means validators will pay taxes on unrealized tokens, putting pressure back on-chain yields from Washington. The wash sale rules on-chain reduce the space for using the same asset for tax losses, and spot trading behavior will be rewritten to resemble securities accounts more closely.
In contrast to the IRS treating virtual currency as property in 2014, the broker reporting in the 2021 Infrastructure Act, and the European order of MiCA issuing licenses before discussing taxes, the U.S. is prioritizing tax forms while lagging in market structure. The industry's phase has shifted lobbying from "give us a regulator" to "don't drain validators on taxes first." Exchange stocks are sensitive to the 60-vote threshold but not to the 38 to 5 tax bill, as the tax bill does not immediately open up national licenses for spot and staking.
The structure represents an inversion of legislative order within regulatory changes. Market structure determines who can legally make markets, while tax law determines when the coins earned from market-making become taxable events. The mechanism is: once the Treasury writes crypto into the tax base, lawmakers will need an industry map that explains "who to tax and on what activities"; the clarity bill is that map. Taxes are imposed first, and the map follows, leading validators and brokers to conservatively provision in a vacuum, with activities contracting first, then forcing the map to be produced.
ABAB News · Cognitive Law
- Taxing first will compel the drawing of a map of who should regulate.
- 49 votes are enough to prove the topic is present but not enough to cross the 60-vote threshold.
- Taxes will be imposed as soon as rewards are received, and yields will first be rewritten by tax forms.