Bitwise Chief Investment Officer Matt Hougan says the crypto industry traded long-term legislative certainty for more favorable near-term rules when the Senate failed to advance the Clarity Act on September 15. "Crypto sacrificed long-term certainty and got better rules, faster," Hougan wrote in his latest weekly memo.

The Senate's procedural vote fell short of the 60 votes required to move the market structure bill forward, stalling one of the industry's biggest legislative priorities ahead of the midterm elections. Rather than sell off, the market rallied: Bitcoin gained roughly 8% and Ether 7% since the vote, while tokens including NEAR, Uniswap's UNI and Avalanche posted substantially larger gains, according to Hougan.

Why did the market rally on a legislative failure?

Hougan argues the price action makes sense once the bill's compromises are weighed against regulatory actions federal agencies took immediately afterward. Several provisions negotiated into the Clarity Act would have been less favorable to parts of the industry than what regulators subsequently did on their own.

Stablecoins are his first example. The GENIUS Act prohibits stablecoin issuers from paying interest or yield, but it does not impose the same explicit restriction on rewards offered by intermediaries such as exchanges. Clarity Act negotiations had sought to close that gap amid bank concerns over competition for deposits. Hougan argued the bill's failure therefore benefits platforms such as Coinbase that use stablecoin rewards to attract customers.

Incumbent exchanges form his second bucket. The Clarity Act was designed to create a comprehensive federal market structure for digital assets, which could have lowered some regulatory barriers facing new entrants. With the legislation stalled, Hougan says incumbents keep the advantages built through their existing state licenses and infrastructure.

How have regulators moved faster than Congress?

Two days after the Senate vote, on September 17, the SEC approved a five-year conditional "innovation exemption" allowing qualifying venues to trade tokenized US-listed stocks through permissioned automated market makers and liquidity pools without registering as traditional exchanges. Certain liquidity providers also received conditional relief from dealer registration.

Hougan argued that immediate experimentation under that exemption could prove more useful to tokenization companies than waiting years for the studies and subsequent rulemaking a statute would have contemplated. Tokenization is his third area where regulators have outpaced legislators.

Revenue-generating tokens form the fourth. SEC staff clarified on September 25 that when a crypto network is functional, announcing a buyback program for a non-security crypto asset does not by itself constitute a promise of the "essential managerial efforts" used in determining whether an investment contract exists under the Howey test. Hougan said that clarification reduces uncertainty for protocols including Hyperliquid, NEAR and Uniswap that use or have adopted mechanisms tied to protocol revenue and token supply.

The guidance carries caveats. It is SEC staff guidance rather than an SEC rule and does not carry the force of law.

What is the tradeoff?

Durability. Agency interpretations and exemptions can be changed by future regulators, while legislation would provide rules that are harder for a future administration to reverse. Hougan acknowledged this directly in his memo.

JPMorgan analysts raised the same concern after the Clarity vote. They said agency action could fill some of the regulatory gap but noted that SEC and CFTC rules are less durable than legislation because future administrations can modify them and courts can challenge them.

Hougan's counterargument rests on institutional adoption. Growing participation by major financial institutions, in his view, could make a broad regulatory reversal increasingly difficult over time as the industry's integration into mainstream markets deepens.

For now, the practical question is sequencing: whether the SEC's exemption framework and staff guidance survive long enough for tokenization platforms and buyback protocols to build compliant businesses before the next attempt at market structure legislation — or before a future commission revisits the relief.