Trump Accepted '80% of the Terms'—Why Did Democrats Still Reject the CLARITY Act?

Author: Zen, PANews

In the early hours of Sept. 16 Beijing time, the U.S. Senate held a key procedural vote on the CLARITY Act. The motion to end debate on the measure failed with 49 votes in favor, 50 against, and one senator not voting—far short of the 60 votes needed to advance the bill.

Just one day before the vote, Republican Senators Cynthia Lummis, John Boozman, and Tim Scott released a final draft spanning 635 pages.

Republicans said the new text incorporated 126 substantive changes proposed by Democrats. Earlier negotiation results also showed that Trump had accepted "about 80%" of the ethics package proposed by Republican Senator Thom Tillis and Democratic Senator Ruben Gallego.

These concessions were originally intended to clear the Senate's toughest hurdle. With Republicans holding only 53 seats, CLARITY needed at least some Democratic senators to join in order to reach the 60 votes required to end debate.

But when the actual vote came, the divisions masked by more than a year of negotiations were laid bare all at once. Not only did all participating Democratic and independent senators vote against it, but even the Republican camp was not fully unified. Tillis, who initially voted in favor and supported advancing the bill, later switched his vote to oppose in order to preserve the procedural right to reconsider.

In other words, even excluding Tillis's strategic vote change, Republicans were still about 10 votes short of the 60-vote threshold. This is no longer a problem that can be solved by winning over one or two swing senators; it means there remains a substantial political gap between the two parties.

The more pressing question is: If Trump has already accepted what Republicans claim is about 80% of the Democrats' ethics demands, why was the remaining 20% still enough to make every participating Democratic senator vote against it?

A Compromise That Looks Strict Enough

Compared with previous versions, the final version submitted by Republicans first expanded the scope of ethics restrictions on public officials' crypto activities.

The final draft not only prohibits covered individuals—including the president, vice president, members of Congress, senior federal officials, and federal judges—from personally creating, minting, or issuing digital assets, but also specifically defines "sponsor." If a public official provides support for the creation, issuance, or explicit promotion of a specific digital asset through licensing, revenue sharing, transaction fees, or similar agreements, or authorizes the use of their name, likeness, or position for promotion, they may likewise be subject to restrictions.

Second, the new version for the first time requires public officials to dispose of certain equity interests related to crypto companies. Under the draft, if a covered individual holds a qualifying "significant economic interest," they must sell the relevant interest or transfer it to a qualified blind trust.

The term "significant economic interest" here refers to a public official holding equity worth at least $15,000 in a company or its subsidiary, and that company, in at least one of the past three calendar years, derived its largest single source of revenue (plurality of revenues) from issuing or sponsoring digital assets. It does not require the relevant revenue to exceed 50% of the company's total revenue—only that it be higher than any other single revenue category.

Penalties were also significantly strengthened in the new version. If a public official knowingly and willfully violates the issuance or sponsorship ban, in addition to disgorging all profits from the relevant conduct, they must pay a civil penalty of "20% of the consideration received or $500,000, whichever is greater." If they continue to hold a significant economic interest that should have been disposed of, they likewise face a penalty of 20% of the value of the relevant interest or $500,000, whichever is greater. For digital assets issued in violation by a public official, digital asset intermediaries such as trading platforms may not continue to provide trading services, and violators may be fined up to $250,000 per violation per day.

Compared with the version released in July, this draft also addressed two prominent issues previously raised by Democrats.

The earlier version contained a sunset clause stipulating that the relevant ethics enforcement arrangements would expire after Trump left the presidency, meaning the next Department of Justice would have no authority to enforce any violations he committed. In the final text released by Republicans this time, that restriction has been removed. At the same time, the old version largely excluded state attorneys general and other parties from intervening in enforcement, while the new version for the first time adds a channel for state attorneys general to intervene.

Therefore, from banning the issuance and sponsorship of digital assets, to requiring disposal of certain crypto company interests, to profit disgorgement, civil penalties, and removal of the sunset clause, Republicans did make substantive adjustments in the final text. Trump and Republican negotiators accordingly emphasized that the new version has absorbed a considerable portion of the Democrats' ethics demands.

The problem, however, is that the focus of Democratic skepticism has shifted beyond whether the bill contains ethics provisions to whether these restrictions can actually be enforced in reality. Democrats, led by Elizabeth Warren, believe that even if these bans are ultimately written into law, Trump will not face any consequences for ignoring them.

Enforcement Power Behind Two Gates

The independent enforcement mechanism for state attorneys general has been a "red line" in negotiations over the CLARITY Act's ethics provisions. Tillis, Gallego, and other lawmakers had previously pushed to expand the role of state attorneys general, and Democratic Senator Angela Alsobrooks stated explicitly that if the Department of Justice refuses to enforce the law, state attorneys general should also have the power to intervene.

A key reason this issue has drawn such intense Democratic attention is their doubt about whether an attorney general appointed by Trump can independently enforce conflict-of-interest rules against Trump himself.

Current U.S. Attorney General Todd Blanche previously served for a long time as Trump's personal attorney. In July this year, during a congressional hearing, he even misspoke, saying "I am his lawyer," before correcting himself to say he "was his lawyer."

In May this year, the Department of Justice under Blanche also reached a settlement with Trump's side in his lawsuit against the IRS, planning to use $1.776 billion in Treasury funds to establish a so-called "anti-weaponization fund." The arrangement drew skepticism from some Republicans as well, and was subsequently blocked by a federal court's preliminary injunction; the Department of Justice later formally rescinded the order establishing the fund.

Democrats therefore have no trust that the attorney general will fulfill his duties. And while the final Republican version does add a channel for state attorneys general to intervene in ethics enforcement, it does not actually change the core of the enforcement structure: for covered officials such as the president, the U.S. attorney general remains the only party who can directly bring civil enforcement lawsuits under the act.

As for state attorneys general, the power they receive is far smaller. For example, in matters involving alleged violations by Trump, a state attorney general can neither sue Trump nor independently ask a court to impose fines, disgorge profits, or force asset disposal against him. They can only sue the attorney general to challenge federal non-enforcement and seek injunctive relief from a federal court.

This is the main reason Warren continued to fiercely criticize the new ethics provisions before the procedural vote. She described the Republican final package as a "weak fig leaf" and said bluntly in a Senate floor speech that state attorneys general cannot take direct enforcement action against the president—"all they can do is sue Trump's former personal lawyer, the attorney general, to try to get him to act."

And even if they get that far, state governments still face a second gate—the "supervising ethics office."

Under the final draft, if the supervising ethics office has already issued a legal opinion on a potential violation, determining that the relevant activity is not prohibited by the ethics provisions, a state attorney general can no longer bring suit under this mechanism. In cases involving a "significant economic interest," if the supervising ethics office publishes a notice confirming that the relevant interest has been sold or transferred to a qualified blind trust, the corresponding lawsuit likewise cannot be filed.

Under current U.S. law, the supervising ethics office for the president and other executive branch officials is the Office of Government Ethics (OGE). Senators, representatives, and federal judicial personnel are respectively overseen by the Senate Ethics Committee, the House Ethics Committee, and the Judicial Conference of the United States.

Thus, a mechanism that appears to increase state oversight capacity in fact creates two consecutive restrictions. This is also the core reason Warren and the Democratic camp on the Senate Banking Committee consider the new enforcement mechanism still inadequate—while the new version no longer completely excludes state governments, the direct enforcement power against public officials remains concentrated in the Department of Justice, and ethics offices within the executive branch retain the ability to block state lawsuits. In her Senate floor speech before the vote, Warren also described this arrangement as providing an "off switch" for enforcement.

At the same time, state attorneys general have grievances about the CLARITY Act beyond the president's conflict of interest. On Sept. 14, New York Attorney General Letitia James led 17 bipartisan state attorneys general in a letter to Congress urging senators to oppose the CLARITY Act. The letter, however, focused on whether federal regulatory reform would in turn weaken states' existing securities regulation and anti-fraud enforcement powers.

James and the others argued that the bill could allow the SEC to "preempt state registration authorities," and that the relevant language is not clear enough, increasing legal disputes for states in future efforts to combat fraud and hold lawbreaking companies accountable. They warned that this expansion of SEC federal preemption could affect not only digital assets but also grant the SEC broader discretionary authority, altering the long-standing boundary between federal and state securities regulation.

State governments have therefore raised two distinct lines of objection to CLARITY: one seeks expanded authority—genuinely independent direct enforcement power—while the other seeks to preserve existing authority, preventing the erosion of investor protection and securities enforcement powers that states already possess.

No Retroactive Recovery of Past Gains, and No Complete Severance of Existing Interests

Beyond the enforcement mechanism, another aspect of the final version that dissatisfied Democrats is that it does not require public officials to completely sever ties with existing crypto wealth.

The first issue is timing. The final text provides that the digital asset ethics chapter will in principle be implemented no later than 360 days after the act takes effect. If the relevant final rules are completed earlier, they may also take effect 60 days after formal publication.

More importantly, the draft explicitly provides that the ban on public officials issuing or sponsoring digital assets applies only to digital assets issued or sponsored on or after the effective date of the ethics chapter. This means that even if the current version of the bill becomes law, the new ethics rules cannot be used to retroactively pursue Trump's earlier issuance of $TRUMP or similar actions, nor can the profit disgorgement mechanism be used to claw back income already earned before the act takes effect.

However, non-retroactivity does not mean all of Trump's existing crypto interests will automatically be exempt. If they meet the definition of a "significant economic interest," they must be disposed of before the ethics chapter formally takes effect. But for Democrats, the problem is that "disposal" here does not mean forced sale—it can also be accomplished by transferring the interest to a qualified blind trust.

A blind trust severs asset management authority and information access. Once the relevant assets are handed over to an independent trustee, the covered public official can no longer participate in day-to-day investment decisions or freely learn about the trustee's trading activities. The Republican version of the CLARITY Act further provides that once an interest has been lawfully transferred to a blind trust, the subsequent actions of the trustee and the trust's investee companies—including continued issuance or sponsorship of digital assets—will in principle not be attributed to the public official.

But losing control does not affect economic benefit. Under current U.S. law, the Ethics in Government Act does not require the original owner of a qualified blind trust to give up ultimate beneficial rights. The public official, their spouse, or qualifying children may still be beneficiaries of the trust's principal and income. In other words, an official may not know how the trustee manages the assets, but can still benefit from the income and appreciation of those assets.

This is also a fundamental disagreement between Democrats and Republicans on the ethics provisions.

The Republican version focuses more on severing the president's direct control over private assets. They believe that as long as the president cannot personally manage businesses, make investment decisions, or access specific transaction information, the risk of actively using public power to grow private wealth has already been reduced.

What some hardline Democrats demand, however, is a more thorough divestment of economic interests. In their view, even if specific investment operations have been handed over to a third party, the president still has a potential economic interest connection when formulating policy for the entire crypto industry.

Moreover, not all crypto company equity will trigger the "significant economic interest" requirement.

Under the act's definition of "significant economic interest" mentioned above, a company may be highly dependent on crypto business yet still not fall within the scope. For example, if a company has diversified revenue streams such as token sales, stablecoin reserve income, transaction fees, lending, custody, and investment returns, as long as revenue from "issuing or sponsoring digital assets" is not the largest single revenue category, it cannot satisfy the precondition for "significant economic interest" regarding the company's revenue structure.

This also means that for companies like World Liberty Financial, which have relatively complex business and ownership structures, it is difficult to determine based solely on their crypto attributes whether the relevant interests are necessarily restricted. Whether the provisions ultimately apply still depends on the revenue composition of the specific legal entity, the interests actually held by Trump, and how different revenue streams are classified by regulators.

Those existing long-term licensing and revenue-sharing agreements are also largely an unaccountable mess. The bill explicitly does not apply retroactively to digital assets issued or sponsored before the effective date, but if a previously signed brand licensing, revenue-sharing, or promotion agreement continues to be performed after the act takes effect, whether it constitutes a completed "prior sponsorship" or an ongoing "sponsorship activity" is not fully clarified in the final text and will require further interpretation by the supervising ethics office.

In addition, there is a clear gap regarding family members. The final text explicitly covers the public official and their spouse, but does not include adult children among the restricted persons. That means President Trump's sons will not be subject to the bans on issuing coins, sponsoring, or holding "significant economic interests."

So even if they use their fame and business influence as members of the president's family to participate in crypto projects, as long as the relevant conduct does not further trigger Trump's own interest relationship, CLARITY's ethics provisions still cannot be applied.

This was also one of the final amendments Democrats proposed before the vote: expanding the family member scope of the ethics provisions to include Trump's adult children. Republicans, however, ultimately did not accept that demand.

The "Final 20%" of the CLARITY Act Fight

The crypto industry wants Congress to end the long-standing regulatory uncertainty and establish a more stable set of market rules for digital assets—itself an important reason CLARITY has received bipartisan support.

But at this critical crossroads, the legislation faces an extremely unusual reality.

A U.S. president with substantial crypto business interests also controls the Department of Justice, the appointment of heads of administrative regulatory agencies, and extensive policy execution power. Under these circumstances, the ethics provisions can hardly be treated as a marginal addendum to the CLARITY Act; they have become one of the core issues determining whether the law can secure sufficient political support.

What Democrats have consistently pressed is whether this system truly severs the interest connection between the president's private crypto wealth and public regulatory power.

If the ethics offices responsible for interpreting some of the rules remain within the president's executive branch, and the power to directly enforce against the president remains concentrated in the Department of Justice; if existing token income is not subject to retroactive recovery, and qualifying corporate interests can continue to retain beneficial rights through blind trusts; if adult children remain outside the direct coverage of the ethics provisions—then even if the bill includes coin issuance bans, interest disposal, and civil penalties, some Democrats will still consider the separation incomplete.

What CLARITY is ultimately fighting over, therefore, is a more fundamental question: when Congress prepares to rewrite the rules for the entire crypto industry, how much economic distance should the people who make and enforce those rules keep from the industry?

Republicans previously said Trump had accepted about 80% of the Tillis-Gallego ethics package. But the procedural vote on Sept. 15 ultimately failed to clear the 60-vote threshold, showing that the remaining differences are not a "20%" that can be easily ignored.

For this negotiation, what truly determines CLARITY's fate may well be precisely this final 20%.