Criptor

Wednesday’s Senate hearing on digital assets veered off course when Senator John Kennedy lashed out at former White House ethics lawyer Richard Painter over a BeInCrypto report on crypto-linked campaign donations to a key backer of the GENIUS Act.

However, Painter says the real concern isn’t personal attacks— it’s how legislation like the CLARITY Act risks being shaped by political influence, financial lobbying, and legal maneuvers that could weaken independent oversight over crypto markets.

A Senate Hearing Fallout

Commotion struck the US Senate floor on Wednesday when, halfway through a hearing, Kennedy shockingly referred to Painter as a “whack-job”. 

Painter, invited to deliver expert testimony during a Banking Senate Committee hearing on digital assets, was receiving questions from the congresspeople in attendance about the key testimony he had provided minutes before.

When it was Kennedy’s turn to ask, the Republican Senator from Louisiana referenced an exclusive article BeInCrypto published in May on the $217,000 Senator Kirsten Gillibrand received in campaign contributions from major crypto firms for her Senatorial re-election race in 2024. 

The article was published in the context of the greater congressional push for the passage of the GENIUS Act. Instead of focusing on the headline itself, Kennedy accused Painter of calling Gillibrand a “crook,” without any evidence.

From there, the rest of the interaction escalated on its own.

Though neither Kennedy nor Gillibrand immediately responded to BeInCrypto’s media request, Painter spoke on the topic. 

“I don’t think anybody answered the questions about the impact of campaign contributions on the decisions that are being made in Congress and the massive influence of the crypto industry,” Painter told BeInCrypto. 

As the House moves forward with a market structure bill that aims to regulate the entire crypto industry, this becomes more important than ever. For Painter, Congress has already started on the wrong foot.

Legal Loopholes in the CLARITY Act

The main theme of Wednesday’s Senate hearing was to discuss the CLARITY Act, which aims to define a structure for regulating digital assets-related markets. The full House of Representatives has yet to vote on the legislation. 

Tim Massad, an Obama-era chair of the Commodity Futures Trading Commission (CFTC), noted in his testimony that day that the act currently presents legal loopholes that could further deregulate rather than regulate crypto markets.

The current version of the CLARITY Act presents a tokenization carve‑out and waiver authority that could allow centralized platforms and large corporations to escape oversight from the Securities and Exchange Commission (SEC).

In such a context, tokenized public companies like Meta or Tesla could convert traditional stocks into blockchain-based tokens and list them on CFTC-regulated platforms instead of SEC exchanges.

This would effectively remove them from strict SEC rules on disclosure, audited financials, and investor protections.

“Tesla stock is, of course, a security, and if I want to trade it, I trade it on an exchange that’s regulated by the SEC. But if I issue a token that is a stablecoin that’s tied to a share of Tesla stock, is that going to be exempt from regulation?” Painter described. 

During the Senate hearing, there was a general consensus that the SEC and CFTC should work together to regulate crypto markets effectively. A provision enabling this collaboration was also proposed to be included in the final draft of the CLARITY Act.

Painter supported this principle. However, he cautioned that the outcome of a recent Supreme Court ruling could undermine the autonomy of these key institutions.

Could a Trump Court Challenge Weaken Regulator Independence?

In May, the Trump administration won a favorable Supreme Court ruling that grants the President authority to remove members of independent commissions, including the SEC and CFTC. 

This ruling lifted a lower court’s injunction and permits the President to dismiss certain appointees at will, reshaping the control over key regulatory bodies.

“They’ve already fired a member of the National Labor Relations Board and several other independent commissions. It has been understood since the 1930s that the President cannot do that,” Painter told BeInCrypto. 

Such a decision now gives the President unprecedented powers over critical appointments. 

“He already has the power to nominate the chairman of those regulators, and the majority of the commissioners. But if he can just fire the Democrats who are commissioners so that he has a unanimous commission, that could be  even more control,” Painter said, adding, “It’s already very clear the president has enormous power over regulators, but he may have even more if his approach of just firing people he doesn’t like is upheld by the Supreme Court.”

While the ruling expands the President’s authority to remove certain officials, it does not grant unlimited power. The Supreme Court has indicated that certain agencies, like the Federal Reserve, may retain protections against arbitrary dismissal due to their unique structure and function.

Nonetheless, increased executive control over independent commissions could overshadow any stipulations in the CLARITY Act, rendering the regulatory framework less effective.

Trekking Forward on an Uncertain Path

As the CLARITY Act progresses, its grey areas, compounded by increasingly blurry lines between crypto lobbying and politics, create uncertainty in effective digital asset regulation. 

The coming months will determine how lawmakers and regulators navigate these intricate legal and political challenges.

In the end, however, the future of digital assets won’t solely depend on laws like the CLARITY Act. External factors that can change how political influence shapes financial oversight will also be at play.

The post How a Senate Outburst Derailed Meaningful Conversation On the CLARITY Act appeared first on BeInCrypto.