The Senate hearing on digital assets on Wednesday went off track when Senator John Kennedy criticized former White House ethics lawyer Richard Painter about a BeInCrypto report related to cryptocurrency campaign contributions for a key supporter of the GENIUS Act.
However, Painter argued that the real concern was not personal attacks—but how laws like the CLARITY Act risk being influenced by political influence, financial lobbying, and legal moves that could undermine independent oversight of the cryptocurrency market.
Consequences from the Senate Hearing
Chaos erupted on the US Senate floor on Wednesday when, midway through the hearing, Kennedy suddenly called Painter a "crazy person".
Painter, invited to provide expert testimony in a Senate Banking Committee hearing on digital assets, was answering questions from attending senators about the important testimony he had provided just minutes earlier.
When it was Kennedy's turn to ask questions, the Republican Senator from Louisiana referenced an exclusive article that BeInCrypto had published in May about $217,000 that Senator Kirsten Gillibrand received from major cryptocurrency companies for her 2024 Senate re-election campaign.
The article was published in the context of a larger Congressional push for passing the GENIUS Act. Instead of focusing on the main headline, Kennedy accused Painter of calling Gillibrand a "fraud," without any evidence.
From there, the rest of the interaction escalated.
Although neither Kennedy nor Gillibrand immediately responded to BeInCrypto's media request, Painter spoke out on the topic.
"I don't think anyone has answered questions about the impact of campaign contributions on decisions being made in Congress and the significant influence of the cryptocurrency industry," Painter told BeInCrypto.
As the House moves forward with a market structure bill aimed at regulating the entire cryptocurrency industry, this becomes more important than ever. For Painter, Congress has already begun incorrectly.
Legal Loopholes in the CLARITY Act
The main topic of Wednesday's Senate hearing was discussing the CLARITY Act, aimed at defining a structure to regulate digital asset-related markets. The entire House has not yet voted on this law.
Tim Massad, an Obama-era Commodity Futures Trading Commission (CFTC) chair, noted in his testimony that day that the current act has legal loopholes that could reduce regulation instead of regulating the cryptocurrency market.
The current version of the CLARITY Act introduces a tokenization exception and exemption that could allow centralized platforms and large corporations to escape Securities and Exchange Commission (SEC) oversight.
In that context, publicly traded 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 remove them from SEC's strict rules about disclosure, audited finances, and investor protection.
"Tesla stock is certainly a security, and if I want to trade it, I trade it on an SEC-regulated exchange. But if I issue a token that is a stablecoin tied to a Tesla stock, would that be exempt from regulation?" Painter described.
In the Senate hearing, there was a general consensus that the SEC and CFTC should cooperate to effectively regulate the cryptocurrency market. A provision allowing this cooperation was also proposed to be included in the final draft of the CLARITY Act.
Painter supports this principle. However, he warns that the result of a recent Supreme Court ruling could undermine the autonomy of these important institutions.
Could a Trump Court Challenge Weaken Regulatory Independence?
In May, the Trump administration won a favorable ruling from the Supreme Court allowing the President to remove members of independent commissions, including the SEC and CFTC.
This ruling overturned a lower court's ban and allowed the President to dismiss some appointees at will, reshaping control over important regulatory agencies.
"They dismissed a member of the National Labor Relations Board and several other independent commissions. Since the 1930s, it has been understood that the President cannot do that," Painter told BeInCrypto.
Such a decision now grants the President unprecedented power over important appointments.
"He already had the right to nominate chairs of those regulatory agencies, and the majority of commissioners. But if he can dismiss Democratic commissioners to have a unanimous commission, that could provide even greater control," Painter said, adding that, "Clearly the president already has significant power over regulatory agencies, but he could have even more power if his approach to dismissing people he doesn't like is supported by the Supreme Court."
Although the ruling expands the President's power to remove certain officials, it does not grant unlimited power. The Supreme Court indicated that some agencies, like the Federal Reserve, may retain protection against arbitrary dismissal due to their special structure and function.
However, the increase in executive control over independent committees may blur any regulations in the CLARITY Act, making the legal framework less effective.
Moving forward on an uncertain path
As the CLARITY Act progresses, its gray areas, along with the increasingly blurred boundaries between cryptocurrency lobbying and politics, create uncertainty in effectively regulating digital assets.
The coming months will determine how legislators and regulators navigate these complex legal and political challenges.
However, ultimately, the future of digital assets will not depend solely on laws like the CLARITY Act. External factors that may change how political influence shapes financial oversight will also play a crucial role.
