Cozen Currents: The Battle for the Soul of the Democratic Party

“Both President Donald Trump and the Democratic Party have plumbed their disapproval ratings recently. While the GOP’s midterm electoral fortunes are likely tied to the success of the president’s governing agenda, Democrats are using their time out of power to test novel political approaches.” – Howard Schweitzer, CEO, Cozen O’Connor Public Strategies

The Cozen Lens

• The Democratic Party is searching for a path out of the political wilderness after being locked out of power on the federal level in last year’s elections.
• The crypto industry notched its first major legislative victory with the passage of a federal regulatory framework for stablecoins. Now, both industry and lawmakers are turning their attention to the more expansive effort to create a regulatory framework for non-stablecoin digital assets.

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Democrats Choose Their Own Adventure

What’s Next? After President Trump’s comeback victory, Democrats are seeking new tactics to win back voters.

• Some potential 2028 Democratic presidential candidates are now challenging elements of the party’s positions after the Democrats’ approach to social issues was perceived as a political weakness. In a now well-known ad that former Vice President Kamala Harris declined to respond to, Trump’s campaign said, “Kamala is for they/them; President Trump is for you.” Last week, former US Ambassador to Japan Rahm Emanuel said a man could not become a woman in an interview with Megyn Kelly, while Governor Gavin Newsom (D-CA) has opposed trans athletes’ participation in women’s sports.
• Some Democrats are refocusing on the economy, which polling indicated was voters’ top issue last fall. New York City’s Democratic mayoral nominee, democratic socialist state Senator Zohran Mamdani, won in a crowded field with a campaign that emphasized affordability. While his proposed solutions may not necessarily catch on with the broader public, he tapped into economic concerns similar to Trump’s winning campaign. In fact, Mamdani found success in areas of the city where Trump performed well last year.
• It’s not just the left who remembers strategist James Carville’s famous adage: “It’s the economy, stupid.” The growing “abundance” movement within the Democratic Party seeks to reduce costs by slashing red tape and making it easier to build housing, infrastructure, and energy projects. Inspired by journalists Ezra Klein and Derek Thompson’s recent book Abundance, this agenda is attracting buzz in Democratic policy circles. Abundance Democrats will have an opportunity to put their beliefs into practice on the federal level when surface transportation programs come up for reauthorization next year.

Passing the Torch. Younger Democrats are revolting against the party establishment.

• Former President Biden’s age and fitness for office, which weighed down Democrats last year, has sparked a conversation in the party about transitions in leadership. A new generation of Democrats, who came of age politically in a more polarized era, are seeking to take the reins to lead the party in the more difficult era of Trump 2.0.
• Gen Z Democratic activist David Hogg, who first became involved in politics by speaking out in favor of gun control after surviving a Florida school shooting, embraced a bold strategy. After becoming a vice chair of the Democratic National Committee (DNC) earlier this year, Hogg announced that his political organization would intervene in primaries against Democratic incumbents. Challenging established power structures has its speed bumps, however. Hogg has departed the DNC and his group has reportedly spent little in support of candidates.
• The House Oversight Committee has been at the heart of Democrats’ generational struggle. Last year, Rep. Alexandria Ocasio-Cortez (D-NY) lost a contest for the top Democratic spot on the panel to the more senior (now former) Rep. Gerry Connolly (D-VA). After Connolly’s death this year, relatively young Rep. Robert Garcia (D-CA) leapfrogged more senior Rep. Stephen Lynch (D-MA) to win the position. The role offers the opportunity to be a high-profile messenger against the White House and, if Democrats win a House majority next year, to launch investigations of the Trump administration.

Putting Democrats to the Test. This year’s state and local elections allow Democrats to test out new approaches before the 2026 midterms and the 2028 presidential election and see what resonates most.

• The progressive and centrist wings of the Democratic Party are facing off in two big-city mayoral races. In the Big Apple, Mamdani faces independent mayoral campaigns from incumbent Mayor Eric Adams (D) and former Governor Andrew Cuomo (D-NY). In Minneapolis, fellow democratic socialist state Senator Omar Fateh (D) is challenging moderate Mayor Jacob Frey (D). Minnesota’s Democratic Party endorsed Fateh in the race, which will be determined via ranked-choice voting in November. Wins by Mamdani or Fateh would give the younger left a bigger platform in shaping the future of the party.
• On the other side of the spectrum, Democrats in Virginia and New Jersey nominated moderates, former Rep. Abigail Spanberger (D-VA) and Rep. Mikie Sherrill (D-NJ), respectively, for governor this year. If they win, they could aim to follow the model of a previous moderate Democratic governor who changed his party’s fortunes: Bill Clinton.

Crypto Week is the New Infrastructure Week

A Stable Genius. President Trump signed the GENIUS Act, the first ever bill establishing a federal regulatory framework for payment stablecoins, into law earlier this month.

• The signing of the GENIUS Act is set to boost the stablecoin market’s already $250 billion slice of the digital asset ecosystem, legitimizing the industry through the introduction of a bank-like regulatory framework. Under the provisions of the new law, stablecoins must be backed on a one-to-one basis by specified reserve assets, stablecoin issuers must register at the federal or state level and adhere to tailored capital, liquidity, and operational standards, and issuers are limited in the activities they can engage in to only those that relate to stablecoin issuance and management.
• The new regulatory framework is an immediate boon for crypto companies like Circle, which already issues a dollar-backed stablecoin that is largely compliant with the new law. The more interesting question is how the legislation will impact businesses outside of the immediate crypto universe. Bloomberg reports that large US banks are lining up to get involved in the crypto space as it becomes better regulated, with Bank of America, Citigroup, and JPMorgan all mulling opportunities to offer blockchain-related products and services. Opportunities range from issuing stablecoins to offering digital deposits, or, in the case of JPMorgan, lending against clients’ crypto assets.
• Companies beyond traditional deposit-taking institutions are similarly eyeing ways to cash in on the new stablecoin craze. Card networks and retailers, who’ve been locked in a years-long battle over swipe fees, are both positioning themselves to utilize stablecoins to gain the upper hand in their ongoing fight. Because stablecoin transactions don’t include interchange fees, retail merchants as large as Walmart are looking into whether they should issue their own stablecoins according to the Wall Street Journal. On the other side of the equation, Payments Dive reports that both Visa and Mastercard, the two major card networks, are working to expand their own stablecoin integration into their payment networks to ward off the coming competition.

The Real Crypto Legislative Battle. While passage of the GENIUS Act was a major win for the crypto industry, pro-crypto organizations and lawmakers are already turning their focus to a broader effort to regulate the vast majority of the digital asset ecosystem.

• Known colloquially as the “market structure bill,” House Financial Services Committee and House Agriculture Committee lawmakers have been working for several years on legislation that would divide regulatory authority over non-stablecoin digital assets between the Securities and Exchange Commission and the Commodity Futures Trading Commission. Such a bill is highly sought after by industry because it would provide clear pathways to registration with both agencies, a move that is seen as key to expanding regulated access to digital asset offerings and trading, among other things.
• The House passed its latest iteration of the market structure bill, known as the Digital Asset Market Clarity Act, by a wide bipartisan vote of 294 to 134 earlier this month. That sent the bill over to the Senate where progress on a market structure bill has been much slower; the Senate Banking Committee released its own, narrower, market structure draft bill just last week. The committee is soliciting feedback on the proposal with the intent to advance a final legislative product to the Senate floor by the end of September. Whether that bill can ultimately get to President Trump’s desk will depend on Senate Democrats’ interest in providing the votes needed to overcome the chamber’s 60-vote threshold, something many have expressed reservations about doing, at least along the GOP’s timeline.
• Beyond market structure, a separate effort in the House to put forward a crypto-related tax bill is moving forward at full steam. Politico reports that Rep. Max Miller (R-OH) plans to release a draft bill this summer that would exempt taxpayers with minor crypto transactions from capital gains taxes, among other things, although the bill’s pathway to becoming law is unclear.

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