The "Normandy Moment" of Crypto Regulation: On the Eve of the 2026 Market Structure Act Decisive Battle, Is Industry Consensus Falling Apart?

As the 2026 US midterm elections approach, the so-called “Ultimate Holy Grail” of the crypto industry—the Market Structure Act—is facing a severe legislative dilemma. Despite the industry’s unexpected regulatory victories over the past year, multiple insiders in Washington have revealed that this bill, aimed at providing a permanent legal framework for US cryptocurrencies, is unlikely to pass before Congress adjourns due to its complexity and political sensitivity.

An ironic twist is that a series of recent industry-friendly moves by the SEC and CFTC have actually diminished the urgency for legislation, leading to rare disagreements within the industry about “whether immediate legislation is necessary.” The debate over the 2026 legislative path not only concerns short-term compliance costs but will also determine whether cryptocurrencies in the US are recognized as legally protected innovative assets or remain in a state of long-term administrative discretion under a “temporary license.”

From Victory to Deadlock: Why 2026 Is the “Turning Point” for Crypto Legislation

Looking back over the past two years, the crypto industry has charted a dramatic course from near-collapse to a desperate counterattack. However, as a seasoned policy observer noted, “Winning battles does not mean winning the war.” Despite a series of key victories in courts and regulatory agencies, consolidating these scattered, case law- or administrative exemption-based achievements into a comprehensive, permanent national law remains a looming “Damocles’ sword” over the industry. The Market Structure Act is the core legislation tasked with this mission, aiming to clearly delineate SEC and CFTC regulatory authority, providing legal certainty for most token issuers and intermediaries, and ending years of regulatory ambiguity.

However, by the second half of 2025, a cautious pessimism began to spread among Washington’s crypto lobbying circles. According to interviews with several insiders deeply involved in the legislative process, despite positive public opinion and some lawmakers’ statements, the bill’s technical complexity and political sensitivities—such as challenges to traditional securities definitions and the reallocation of state versus federal powers—make its passage in the Senate fraught with obstacles. More importantly, the uncontrollable political cycle in the US is creating significant resistance: as the 2026 midterm election season heats up after spring, Congress’s focus will rapidly shift to campaigning, often leading to legislative stagnation. This means the “effective legislative window” for this ambitious bill is closing quickly.

This situation has created a peculiar political dynamic. On one hand, the industry has never been closer to obtaining a tailored legal framework; on the other, political realities are pushing this possibility further away. Some industry leaders have begun openly discussing a “Plan B,” accepting a potentially imperfect or compromised version to secure passage before the window closes. Others remain firmly opposed to compromise, believing that a flawed law could be worse than no law at all, as it might lock in a faulty regulatory framework for decades. The debate over “timing versus perfection” is pushing the crypto industry toward a critical strategic crossroads.

2026 Legislative Timeline: Key Milestones and Obstacles

To better understand the legislative challenges, here are the core political and legislative nodes around 2026:

Fall 2025: Congress reconvenes, and the bill enters a phase of intensive discussion and revision, with lobbying efforts reaching their peak.

January - April 2026: The so-called “Golden Legislative Window,” during which bipartisan cooperation on cross-party issues remains possible.

May - August 2026: As primaries unfold, legislative efficiency in Congress sharply declines, with political posturing replacing pragmatic negotiations.

November 2026: Midterm elections, potentially changing control of Congress and drastically altering the legislative outlook.

Potential variables: Any major market turmoil or security incident could accelerate the bill’s progress or lead to its permanent shelving.

The Regulatory Agencies’ “Proactive Moves”: Does SEC’s Exemption Power Reduce Legislative Urgency?

The most dramatic turning point in the current debate is the role shift of regulatory agencies—especially the SEC, long viewed by the industry as an adversary. SEC Chair Gary Gensler’s recent statement that the agency already possesses “broad exemption authority” has caused a ripple effect. He cited the foundational Securities Act of 1933 and Securities Exchange Act of 1934, emphasizing that Congress has already granted the SEC sufficient flexibility to address new asset classes, implying that waiting for new specific legislation is unnecessary. This “we have our own way” stance is subtly shifting the balance of power in the legislative game.

In fact, the SEC’s anticipated issuance of a “Token Safe Harbor” framework in early 2025 exemplifies this exemption authority. The framework aims to provide temporary relief for certain crypto projects, exempting them from some securities law registration requirements. A crypto policy leader bluntly stated, “Once we get the Token Safe Harbor, the urgency for the Market Structure (Bill) is over.” This view reflects a pragmatic faction within the industry: since administrative regulatory pathways are already open and generally favorable, why risk significant political opposition by pushing a potentially compromised bill? They believe that incremental reforms through regulatory agencies can similarly achieve market compliance and innovation, possibly more swiftly.

The CFTC’s active expansion into crypto derivatives—through enforcement actions and policy statements—further reinforces this “regulatory alternative to legislation” narrative. By consolidating its role as the primary regulator for crypto markets outside spot trading (such as futures and leveraged trading), the CFTC is effectively creating operational space for many crypto businesses. The seemingly competitive yet parallel efforts of these two agencies are, in practice, providing a workable environment for many projects. Consequently, some industry insiders question whether the industry’s fixation on the Market Structure Bill is suffering from a “market structure disorder syndrome,” overly focused on a grand ultimate solution while neglecting ongoing, effective regulatory progress.

However, this reliance on administrative discretion has a fundamental weakness: its stability depends entirely on the will of current policymakers. The leadership of SEC and CFTC are presidential appointees, and their policies can change dramatically with a new administration. The exemptions granted today could be revoked tomorrow; the friendly interpretations could be tightened again. A senior policy leader with dissenting views warned that missing the 2026 legislative window exposes the industry to future political volatility, making it impossible to secure the legal certainty and predictability necessary for long-term investments and innovation. In his view, while regulatory agency victories are welcome, only laws passed by Congress can provide a truly solid “breakwater.”

Perfectionism vs. Pragmatism: Internal Industry Divisions and Strategic Disagreements

The crypto industry’s disagreements over legislative strategy are increasingly moving from behind the scenes to the forefront, forming an open “soul-searching” debate. One camp is the “Perfectionists,” advocating either not to act or to do it right. They believe that the current friendly stance of regulators has created a rare breathing space and negotiation window, and the industry should use this time to craft a foundational law that can withstand decades, rather than rushing into a “half-baked” solution. Their reasoning is that a poorly drafted law could entrench flawed rules, making correction far more difficult than starting anew, so waiting a few years is a worthwhile investment.

The other camp is the “Pragmatists,” who draw lessons from the early development of the internet, arguing that “having a framework first, then improving it” is a more realistic approach. They worry that missing the 2026 window could mean legislative inaction for years or even longer. During this period, despite regulatory exemptions, mainstream public and traditional financial institutions will still view crypto as a “legitimacy-doubting” fringe asset. This perception could severely hinder large-scale institutional capital and retail investor participation. As a policy advocate put it, one of the most important roles of the bill is to reverse the common perception that crypto is a “dark casino,” a goal that administrative regulation alone cannot fully achieve.

The core of this disagreement lies in different perceptions of the source of “legitimacy.” Is it the temporary, revocable “license” granted by regulators, or the permanent “law” passed by Congress and signed by the President? The former is flexible but fragile; the latter is difficult but stable. For infrastructure projects with long-term capital needs—such as Layer 1 blockchains and institutional custody services—legal certainty is crucial; whereas for more flexible, shorter-lifecycle applications, rapid iteration within existing regulatory space may be preferred. These differing business models and their regulatory needs further deepen internal industry divisions.

A broader impact concerns the global competitive landscape. The EU’s MiCA framework has fully come into effect, providing a unified set of rules for crypto assets across 27 member states. Singapore, Hong Kong, and other Asian jurisdictions have also introduced clear regulatory regimes. If the US remains mired in internal disputes and fails to establish a clear federal law, its leadership in innovation could gradually erode, with projects and capital flowing to jurisdictions with clearer regulation. This strategic loss is a significant external pressure that both sides of the debate must weigh carefully. Therefore, the 2026 legislative effort is not just a domestic political contest but a crucial test of whether the US can maintain its leadership in the next wave of digital financial innovation.

What if Legislation Fails? Long-term Risks and Market Confidence

If the most pessimistic scenario materializes—namely, that the Market Structure Bill stalls substantially after the 2026 window—what future awaits the crypto industry? In the short term, markets may not react violently, as SEC policies like the “Token Safe Harbor” will still provide some operational space. However, this “suspended state” will breed a series of long-term, structural risks. The foremost is the “regulatory boomerang” risk: a future administration with a different regulatory philosophy could swiftly reverse current friendly policies through executive orders, guideline revisions, or intensified enforcement. The industry would once again fall into cyclical legal uncertainty and litigation battles, which would undoubtedly stifle long-term investments and innovation planning.

Second, public trust and mainstream adoption will face significant hurdles. Despite technological advances within the industry, the failure of Congress to pass a dedicated law will be interpreted by ordinary Americans as a clear signal that “this industry is still not legal or safe.” Conservative institutional investors—pension funds, endowments, large asset managers—will find it difficult to approve substantial allocations to crypto assets without clear federal legal backing. This will keep crypto confined to a “high-risk, high-reward” niche, preventing it from making the leap to a mainstream asset class.

From a market structure perspective, regulatory ambiguity will continue to favor well-capitalized, resource-rich large institutions capable of navigating complex gray areas and engaging directly with regulators. Meanwhile, startups and smaller innovative projects will face disproportionately high compliance costs and legal risks, effectively suppressing competition and innovation, leading to market centralization. This runs counter to the original ethos of decentralization and financial inclusion that crypto aims to promote. A market governed by administrative discretion rather than law could ultimately resemble the traditional Wall Street financial landscape, rather than truly disrupting it.

Therefore, regardless of whether the 2026 legislative push succeeds or fails, this debate has already revealed the deep contradictions in the US crypto industry: it both seeks recognition and protection from the traditional system and carries the mission to disrupt it. The legislative dilemma is a concentrated reflection of this identity tension at the political level. For market participants, understanding the complexity and consequences of this legislative contest is more important than short-term price predictions. It concerns the fundamental nature of the asset class and will determine, over the coming years or decades, how capital enters this still-innovative field—with what confidence and in what form.