Democrats Balk at Letting Trump’s DOJ Police His Own Crypto Ethics

Senate Democrats rejected a White House-backed crypto ethics provision this week, sending Sen. Ruben Gallego and Sen. Thom Tillis back to the table on a counterproposal. At issue is who enforces a rule restricting a president who has made roughly $1.4 billion selling crypto since returning to office.

The White House calls its offer historic. The Justice Department that would enforce it already shut down its own crypto crime unit once, while the man who ordered that shutdown personally held crypto.

Democrats Reject the White House’s Enforcement Fix

The updated Clarity Act text, released Wednesday, would bar senior federal officials, including the president, from issuing or sponsoring digital assets while in office. It hands the Department of Justice exclusive authority to police that ban.

Democrats said no. Sen. Ruben Gallego, an Arizona Democrat, called the proposal inadequate, arguing it failed to reflect months of bipartisan work between Democrats and Republicans on the issue.

The language itself came out of talks between the White House and Republican Sens. Cynthia Lummis and Bernie Moreno, without Democratic sign-off. Gallego said his own negotiations with Lummis, Moreno and White House officials broke down specifically over whether state attorneys general should share enforcement power. He is now drafting a counterproposal with Tillis and other Republican senators to bring back to the table.

Tillis, a North Carolina Republican, called the White House-backed draft a positive starting point but said more changes would likely be needed to find 60 votes on the floor. He added that lawmakers still have to check with the White House on whether revisions that satisfy Democrats would also satisfy Trump.

A DOJ Red Line for Both Parties

Sen. Cynthia Lummis, a Wyoming Republican and the bill’s lead negotiator, told CoinDesk that giving state attorneys general power to sue over ethics violations was a hard limit for her party. Republicans worry that 50 states’ worth of prosecutors could turn the ethics rule into a tool for politically motivated lawsuits against sitting officials.

Democrats see the opposite risk. Sen. Angela Alsobrooks, a Maryland Democrat, called the DOJ-only plan “wild and unserious and stone-cold crazy” at a briefing this week, arguing that an attorney general appointed by the president has no business being the sole judge of the president’s own conduct.

Under the current draft, violators face civil fines of up to $250,000 per day, and the DOJ could sue exchanges that knowingly list tokens issued by a covered official. That authority sits inside a merged, 616-page bill combining the Senate Banking and Agriculture Committees’ separate drafts.

Lummis has framed the sunset clause as a sign of good faith rather than a loophole, noting in a fact sheet that it reflects a standard Trump chose to hold himself to, not one Congress imposed on him.

The Same Justice Department Already Stood Down on Crypto Once

The DOJ now positioned as sole referee has a recent history worth weighing. In April 2025, Deputy Attorney General Todd Blanche, who has since been elevated to acting attorney general and sat in on the July 16 Oval Office meeting that produced this ethics language, disbanded the department’s National Cryptocurrency Enforcement Team.

The unit, created in 2021, had led the investigation that produced a $4.3 billion settlement with Binance and its founder, Changpeng Zhao, who admitted in 2023 to violating U.S. anti-money-laundering law. Blanche’s memo redirected prosecutors toward crimes like terrorism and trafficking, telling them to stop treating enforcement actions as a form of crypto regulation.

Six Senate Democrats, including Elizabeth Warren and Mazie Hirono, later revealed that Blanche personally held between $158,000 and $470,000 in crypto, mostly Bitcoin and Ethereum, at the time he made that call, and that he did not begin divesting until months afterward.

Your decisions give rise to concerns that President Trump’s interest in selling his cryptocurrency may be the reason for easing law enforcement scrutiny.

The senators wrote that line in a letter that urged the Justice Department to reverse its crypto enforcement rollback, sent through the Senate Judiciary Committee. When Blanche eventually did divest, he transferred the holdings to his adult children and a grandchild instead of selling them outright, a move ethics specialists have called legal but at odds with the spirit of conflict-of-interest law.

The episode is part of why Democrats do not want enforcement resting on the DOJ alone. Senate Democrats have separately pushed for formal probes into Trump’s $1.4 billion crypto haul, arguing the same department now writing the enforcement rules has already shown it can look away from crypto conflicts involving its own leadership.

Which Democrats Hold the Seven Votes Republicans Need?

Republicans control 53 Senate seats, seven short of the 60 needed to break a filibuster and pass the bill. That math puts a small group of Democrats in charge of whether the Clarity Act lives or dies this year.

• Ruben Gallego (D-Ariz.) – drafting the counterproposal with Tillis after talks broke down over state enforcement power
• Angela Alsobrooks (D-Md.) – voted to advance the bill in committee but has called the DOJ-only enforcement plan unserious
• Cory Booker (D-N.J.) – dismissed the revised draft outright, saying Democratic priorities are missing from the text
• Catherine Cortez Masto (D-Nev.) – among the Democrats still engaged in talks without committing to a yes vote
• John Hickenlooper (D-Colo.) – part of the same undecided bloc Republicans need to reach 60
• Mark Warner (D-Va.) – has continued negotiating rather than walking away from the bill entirely
• Raphael Warnock (D-Ga.) – rounds out the group of seven whose votes remain the real threshold

Sen. Kirsten Gillibrand, a New York Democrat and longtime crypto-policy co-author, has separately said enforceable limits on officials’ crypto holdings are a precondition for her own vote, adding another voice to the list Republicans have to satisfy.

Notably, Gallego was not in the room for the July 16 Oval Office meeting where Trump signed off on the ethics language with Lummis, Moreno, chief of staff Susie Wiles and Blanche. Every senator at that table was a Republican, even though Gallego’s vote is mathematically essential to passage. Ripple has separately flagged its own stake in the standoff, warning about the ethics fight’s collision with the Senate floor vote that could decide the bill’s fate this year.

How the Ethics Fight Reached This Point

The dispute over who polices crypto conflicts did not start this week. It has been building since early last year.

1. February 2025: Blanche signs an ethics agreement pledging to divest his personal crypto holdings within 90 days of joining the DOJ.
2. April 7, 2025: Blanche issues a memo disbanding the National Cryptocurrency Enforcement Team before completing that divestment.
3. January 28, 2026: Six Senate Democrats send Blanche a letter demanding records on the decision, with a February 11 deadline.
4. May 2026: The Senate Banking Committee advances the Clarity Act 15 to 9; a Van Hollen ethics amendment fails 13 to 11 along party lines.
5. June 2026: Republicans and the White House withdraw an earlier compromise that would have let state attorneys general sue the DOJ over non-enforcement.
6. July 16, 2026: Trump meets Lummis, Moreno, Wiles and Blanche in the Oval Office to finalize ethics language, without Gallego present.
7. July 22, 2026: Republicans release the merged, 616-page bill text; Democrats reject the DOJ-only enforcement section.
8. July 23, 2026: Gallego and Tillis begin drafting a bipartisan counterproposal, Politico first reported.

The Countdown to August Recess

Senate Majority Leader John Thune said this week he no longer expects the chamber to pass the bill before the August recess, though he still hopes to begin floor debate before lawmakers leave town.

History is not on the bill’s side. Historical data on Capitol Hill shows just 21 percent of bills that clear committee ever get enacted, and the Clarity Act still needs to clear a chamber where every Republican vote is not guaranteed either.

Markets are watching anyway. Bitcoin climbed above $66,000 in the days after the White House signaled Trump had accepted new ethics limits, its highest level in about a month, as traders read the movement as a sign regulatory uncertainty might finally ease. An analyst at Presto Research put the odds of the bill passing this year at roughly 47%, close to a coin flip.

Realistically, negotiators need a deal that holds through seven Democratic votes and every one of the 53 Republicans, and they need it before the Senate leaves for August recess in the coming weeks.

Frequently Asked Questions

What Is the Clarity Act?

The Clarity Act, formally the Digital Asset Market Clarity Act, is a market structure bill that would divide crypto oversight between the SEC and the Commodity Futures Trading Commission. The House already passed its own version as H.R. 3633 in 2025, and the Senate is now merging its Banking and Agriculture Committees’ separate drafts into one bill.

What Happens to Officials’ Crypto Holdings If the Bill Passes?

Covered officials, including the president, vice president, members of Congress, federal judges and their spouses, would have to sell crypto holdings or place them in a blind trust. The DOJ would gain authority to sue exchanges that knowingly list tokens issued by a covered official.

What Was the National Cryptocurrency Enforcement Team?

The NCET was a dedicated DOJ unit created in 2021 to investigate large-scale crypto crime. Its highest-profile case produced a $4.3 billion settlement with Binance before Deputy Attorney General Todd Blanche disbanded the unit in April 2025.

Disclaimer: This article covers pending legislation and does not constitute investment, legal or financial advice. Crypto markets are volatile and regulatory outcomes remain uncertain; consult a licensed professional before making financial decisions, and figures are accurate as of publication.