Bitwise Chief Investment Officer Matt Hougan: Clarity's Failure is Just a Speed Bump
Bitwise Chief Investment Officer Matt Hougan stated in a client memo on September 16 that the Senate's failure to advance the Clarity Act is a "speed bump, not a roadblock." He previously compared the bill to a crypto version of Groundhog Day and warned that its failure could lead to six more weeks of difficult market conditions; however, he reversed his stance the day after the vote, stating that a bull market does not need Washington legislation to commence.
The bill only received 49 votes on September 15, falling short of the 60 votes needed to initiate debate. Hougan provided evidence of a divergence between price and odds: Bitcoin's low on July 1 was about $57,950, and it surpassed $80,000 on September 4; during the same period, Polymarket's probability of the bill passing in 2026 dropped from about 39% to 18% (some sources noted it as low as 14%). He wrote that if the bull market depended on the bill, the drop in odds should have led to a price drop, but the opposite occurred. After the vote, Bitcoin fell about 4%, Ethereum about 5.2%, and XRP about 7.3%, with Hougan attributing some short-term pressure to interest rates and oil prices.
Wall Street has not stopped working: Robinhood launched its own chain, Morgan Stanley introduced a Solana ETF, and DTCC completed its first tokenized stock settlement. Hougan noted that these institutions are banking on the SEC and CFTC, which could serve until 2029. SEC Chairman Paul Atkins stated in July that institutions are "willing and able" to use rules to cover issues similar to the bill, and in August proposed regulation for crypto assets; CFTC Chairman Mike Selig stated they have locked in and are ready to launch "new financial frontier" rules. The memo still leaves three restrictions: institutional rules can be revoked by the next government; only Congress can expand the CFTC's authority over spot crypto; and the bill could have provided a more stable framework than institutional rules.
Bitwise itself sells spot Bitcoin and thematic products, and its CIO memo will be forwarded by asset management firms. Hougan also mentioned that there has been no core market legislation in the first 17 years of crypto, which has grown from fringe ideas into an asset class of about $2.5 trillion. Bernstein analysts expect the two agencies to quickly fill the legislative gap.
Mechanically, buyers are continuing to treat crypto as an asset allocation in Wall Street product lines, while sellers are treating the Senate calendar as the only switch. The event-driven narrative is the CIO changing the story after the vote, shifting the pricing anchor from legislative probability to institutional rules and product rollout. Funds are shifting from short positions betting on the bill's passage to ETFs, tokenization, and on-chain settlements; benefiting are brokers, trusts, and ETF issuers that have already launched products, while under pressure are those needing Congress to expand powers for spot regulation and those predicting the Clarity Act as a cycle switch. Rules can open the floodgates, but they can also close them during a transition.
Source: Public Information
ABAB AI Insight
Hougan referred to the Clarity Act as a Groundhog Day for the 2026 bull market in January, and after the vote failed on September 15, he revised his memo on the 16th, using the "odds drop, prices rise" from July to September to correct himself. This is not a matter of predictive accuracy; it is about the buy-side institutions needing to provide clients with a reason to maintain their positions. Bitwise sells crypto beta, and the CIO cannot maintain a framework of "another six weeks of bear market" after the bill's demise. The new framework hands the keys to Atkins and Selig: with terms until 2029, they can use existing authority to issue rules without needing to buy votes from Democrats on DeFi and anti-money laundering provisions. The cost is noted at the end of the memo—rules are reversible, and spot authority still requires Congress.
The capital path is that products precede legislation. Robinhood's chain, Morgan Stanley's Solana ETF, and DTCC's tokenized settlements were all launched before the 49 votes. Institutions believe in the chair appointments, not the 60-vote threshold. The prediction market halved the probability of the bill, yet spot crypto is showing an independent trend, indicating that marginal buyers are ETFs and treasuries, not contract traders betting on Washington. The 4% pullback after the vote washed out legislative traders and shifted the narrative to the bet that "the regulatory environment is friendlier than the bill."
This is analogous to the ICO boom in 2017 without securities laws and the approval of spot Bitcoin ETFs in 2024 amid a legislative vacuum: both instances saw administrative paths ahead of legislation. The difference this time is that both party chairs are clearly pro-crypto, and the legislative failure is being framed as potentially accelerating rules rather than creating a vacuum. The industry phase has shifted from "waiting for a law" to "using the chair's term as a window." Whoever can embed products into clearing and brokerage accounts before 2029 will not rely on the next 60 votes.
Structural judgments belong to regulatory changes. Pricing power has shifted from congressional text to committee rule calendars. The mechanism is that the constraints of the U.S. crypto market have never been about whether there is a law, but who has the authority to interpret the boundaries between spot and derivatives; the bill's failure leaves the interpretive power with the SEC and CFTC, while also leaving the revocation power to the next White House. If the bull market continues, it will rely on product channels, not Senate roll calls.