State attorneys general warn CLARITY Act could weaken crypto fraud protections
Regulation & Gov ·
Eighteen state attorneys general, led by New York's Letitia James, are urging Congress to reject the Digital Asset Market Clarity Act before a Senate vote set for September 15.
The coalition, spanning both parties, sent a letter to Senators Tim Scott and Elizabeth Warren, the chair and ranking member of the Senate Banking Committee, arguing the bill as written would undercut states' capacity to police digital asset fraud, according to the official release. James's office contends the legislation would let the Securities and Exchange Commission preempt state registration authorities, a grant of discretion the attorneys general say could reach beyond digital assets and reshape the broader state securities regulatory regime.
The objection is grounded in New York's own enforcement record. The state's Attorney General's Office has previously pursued Tether over concealed financial losses and extracted refunds and fines from firms including Coin Café, Gemini, Genesis, and KuCoin, while also collaborating with federal authorities on cases against GTV, Nexo, and Blockfi. The letter frames this history as evidence that state-level authority has functioned as an early line of defense against fraud that federal preemption under the Clarity Act could dismantle.
The scale of the fraud problem underpins the coalition's argument. The FBI reported $11.4 billion in losses tied to cryptocurrency-related complaints in 2025, a 22 percent rise from 2024, with average reported losses of $62,604 per complaint. The FTC separately logged $1.78 billion in crypto-related complaint losses for 2025, up 25.6 percent year over year. Within New York specifically, complaints to the Attorney General's Office about crypto scams have tripled over three years, with reported losses nearing half a billion dollars over five years.
The attorneys general also point to a broader enforcement track record they say the bill would jeopardize: states have brought more than 330 anti-fraud actions related to crypto since 2017. Coverage of the letter, corroborated by wublockchain.xyz, frames the coalition's intervention as a direct challenge to the bill ahead of the scheduled vote.
What remains unresolved is how the Senate Banking Committee will respond to the coalition's objections before the September 15 vote, and whether any amendments might address the preemption concerns the attorneys general raised. It is also unclear whether additional states will join the opposition or whether industry groups will respond publicly before the vote proceeds.