Trump’s $1.4B haul comes back to haunt crypto industry

The crypto industry watched with a grim foreboding as its landmark bill detonated on the Senate floor Tuesday. Blame first fell on Democrats, none of whom voted to advance it. But some of the industry’s own supporters pointed elsewhere: at President Donald Trump and the roughly $1.4 billion in income he generated from crypto ventures last year.

Now the industry is confronting the other side of its embrace of Trump: The alliance brought major wins in Washington, only for the president’s own crypto dealings to become an obstacle to locking some of those gains into law.

Crypto spent hundreds of millions of dollars trying to reshape Washington, betting that a friendlier White House and Congress would finally give the industry the legal footing it had sought for a decade. In many ways, the bet worked. The Trump administration dismantled much of the enforcement regime crypto companies had fought under President Joe Biden, regulators began writing friendlier rules and Trump signed landmark stablecoin legislation.

The Clarity Act was supposed to be the bigger prize. At its core, the bill was meant to settle a question that has hung over crypto for years: who regulates what. It would have divided responsibility between the Securities and Exchange Commission and Commodity Futures Trading Commission and set rules for exchanges, brokers and other firms operating in the market. For digital-asset companies, that meant a clearer legal path for doing business in the U.S., rather than working it out case by case with regulators.

Then Trump’s business dealings became part of the perceived problem. Several people in the industry now say his financial ties to crypto helped turn an already difficult bill into an even harder sell.

“The failure of Clarity begins and ends with Donald Trump,” said Justin Slaughter, senior adviser at crypto and financial technology investment firm Paradigm. The memecoin that launched days before his inauguration “was the first brick in the road to this failing,” he said.

Since the collapse of FTX, crypto has spent years trying to move Washington’s attention beyond the industry’s controversies and toward the technology and the rules governing it. But after its most powerful political ally launched a lucrative memecoin and became one of crypto’s biggest beneficiaries while championing the laws and regulations governing the industry, his opponents in Washington seized on those ties.

A vote for Clarity is a vote “to bless Donald Trump’s corruption,” Massachusetts Sen. Elizabeth Warren said before Tuesday’s vote in comments to reporters.

Trump has consistently denied that his family’s business interests conflict with his duties as president. He has cast his support for crypto as part of a broader push to make the U.S. the world leader in digital assets and keep the industry from ceding ground to China.

“The only blame here belongs to Democrats, who continue to put stupid political games over doing what’s best for American technology and innovation,” a White House spokesperson said in a statement.

Crypto executives became familiar faces at Trump’s White House, posing alongside the president at meetings and industry events. The industry kept courting Democrats too, but those encounters rarely came with the same White House backdrop or visibility.

“This has become a partisan issue when it didn’t need to be,” said Carlos Domingo, CEO of Securitize.

Cory Klippsten, CEO of Swan Bitcoin, said the squabble over Trump’s ethics issues “helped turn crypto’s biggest legislative priority into a political fight they couldn’t win.”

Nic Carter, a partner at crypto investment firm Castle Island Ventures, had a similar view.

“Trump needlessly complicated this whole process by entwining himself and his family in crypto, which many of us saw from the start, including me,” he said. Carter has described himself as a Trump voter and supporter but has also been a vocal critic of World Liberty Financial, the crypto firm co-founded by Trump and his family.

While much of the early discussion of the bill focused on key technical points, such as whether companies like exchanges can pay yield on users’ stablecoin holdings, the ethics discussions ultimately drove the conversation away from such questions altogether. Republicans made a last-minute attempt to break the impasse with tougher restrictions on elected officials’ crypto holdings, including provisions that could require Trump to divest significant interests or put them in a blind trust, but Democrats remained unconvinced.

“My personal perspective is the bill became about ethics and had nothing to do with market structure,” said Arjun Sethi, co-CEO of Payward, the parent company of crypto exchange Kraken. “It’s not about safeguarding American people or American assets.”

There were plenty of other disagreements. Banks objected to stablecoin rewards, saying they risked drawing deposits out of the banking system. Another fight involved protections for software developers when their code is used for criminal activity. Those issues were still contentious when the bill came to the floor.

Austin Campbell, who runs consultancy Zero Knowledge Group, said the stablecoin-yield fight and some residual concerns from law enforcement groups “were enough to kill the bill” as well.

Cryptocurrencies rose on Friday as investors moved on from the Clarity Act’s struggles.

Some Republicans insist the bill isn’t dead yet, though its path back to the Senate floor is narrow. Regulators, meanwhile, aren’t waiting around. The SEC on Thursday cleared a path for qualifying venues to trade tokenized versions of U.S. stocks, moving forward with a plan that could reshape traditional market structure. But regulatory actions like these are less durable than legislation and can be revisited by future administrations.

There is plenty left to spend. Since 2024, Fairshake and its affiliates have spent $206 million to influence federal elections, Federal Election Commission records show. They had $123 million cash on hand through the end of July. The question now is where the industry puts it — into trying to win back Democrats or defeating lawmakers it blames for Clarity’s failure.

Voting down the industry’s cherished legislation weeks before the election “is a dangerous game to play given the effectiveness of the crypto lobbyists and donors in past elections,” warned Anthony Pompliano, CEO of ProCap Acquisition Corp.

With assistance from Bill Allison.