CLARITY Act Faces New Fight Over 'Vertical Integration' In Crypto

The CLARITY Act faces a new fight over whether crypto companies must separate their conflicting businesses ahead of next week’s Senate vote.

Politico reported Thursday that vertical integration has become the latest sticking point in CLARITY Act negotiations.

In simple terms, it means crypto companies often run exchanges, brokerages, and trading firms all under one roof without the walls between them that traditional finance requires.

FTX’s 2022 collapse showed exactly why that matters, with the lack of separation between its exchange and a Bankman-Fried-controlled trading firm helping bring the whole thing down.

Democrats want the bill to force regulators to set minimum standards for these vertically integrated crypto companies, pointing out that Republicans backed similar language earlier this year.

Republicans say they support conflict of interest rules in principle but draw the line at the Democratic version, warning it could hand a future administration the tools to break up crypto companies entirely.

What the Key Players Are Saying

Politico quoted Duke University lecturing fellow and former Federal Reserve official Lee Reiners, who called vertical integration “the whole ballgame,” arguing the crypto industry wants legal certainty without changing a single thing about how it operates.