Prediction Markets Favor Crypto Clarity Bill; Rates Stay High

Traders on Polymarket and Kalshi are pricing a high probability that the Digital Asset Market Clarity Act or similar crypto market-structure legislation will become law, as the Senate Banking Committee prepares to review the bill on May 14 and major banks push back expectations for Federal Reserve rate cuts.

Polymarket currently assigns about a 65% chance that the Clarity Act will pass in 2026, up from roughly 46% in early May. Kalshi places the probability at about 70% that some form of crypto market-structure law will be enacted before 2027. The committee will hold a hearing at the Dirksen Senate Office Building in Washington on Thursday, May 14. The White House is seeking to have the legislation signed by July 4.

Lawmakers have negotiated draft language for months addressing which authorities would oversee crypto activities, the rights of consumers and developers, and rules around stablecoins and incentives. Some industry participants reviewed portions of the draft prior to the committee meeting.

Industry figures welcomed the scheduled review. Cody Carbone called the hearing “a major step” toward clearer rules for the more than 70 million Americans who use or own digital assets. Ji Hun Kim added, “The momentum is real, and the time is now.” Kristin Smith described the hearing as “a make or break moment” for U.S. leadership in financial markets, and Summer Mersinger said that American consumers and innovators need clear regulations.

Not all stakeholders support the current draft. Several financial trade groups sent a letter to committee leaders Tim Scott and Elizabeth Warren requesting changes, and they expressed particular concern about a compromise on stablecoin payments proposed by Senators Thom Tillis and Angela Alsobrooks. Banking associations want tighter limits, including measures to prevent stablecoin issuers from offering interest or rewards to token holders.

Investor flows into cryptocurrency funds continued amid the policy debate. Last week saw $858 million of net inflows to crypto funds, marking a fifth straight week of purchases; $700 million of that went into Bitcoin funds, bringing year-to-date inflows into Bitcoin products to about $4.9 billion. James Butterfill, head of research at CoinShares, linked the inflows to growing investor interest in regulatory clarity offered by the Clarity Act. Grayscale said enactment could replace legal uncertainty with clearer principles and encourage innovation and capital formation.

Bitcoin recently traded near $81,000. Some analysts point to the 200-day simple moving average just above $82,000 as a technical level that would need to be cleared for a sustained advance.

On Wall Street, major research groups have lowered expectations for near-term Fed cuts. BofA Global Research now sees no cuts this year and forecasts two 25-basis-point reductions in July and September 2027. Goldman Sachs moved its first expected cut to December 2026. BofA analysts wrote that officials face persistent inflation driven by elevated energy prices and a stronger-than-expected labor market. U.S. Treasury yields have risen and the ongoing conflict in the Middle East has kept energy costs elevated. April’s jobs report exceeded expectations, reinforcing expectations that the Fed may keep policy tighter for longer.

Prediction markets and some crypto investors are placing larger bets on a regulatory outcome this year, while large financial firms have pushed back their timelines for rate cuts. Market participants and analysts continue to weigh how a change in policy or in interest rates would affect investor flows and sector activity.