New York AG opposes CLARITY Act over state fraud enforcement
Regulation & Gov ·
Letitia James warns the federal market-structure bill would strip states of power to pursue crypto fraud cases.
New York Attorney General Letitia James has come out against the CLARITY Act, arguing the bill would weaken states' ability to prosecute fraud in digital asset markets, according to The Block. James is urging Congress to instead strengthen anti-money-laundering rules, tighten ethics requirements and expand investor protections before advancing the legislation.
The CLARITY Act, formally the Digital Asset Market Structure and Investor Protection Act, is the current session's central attempt to draw a federal line between which tokens fall under SEC jurisdiction as securities and which fall under CFTC oversight as commodities, while setting disclosure, custody and exchange registration standards. Treasury Secretary Scott Bessent has pushed Congress to pass the bill as a way to bring digital asset activity onshore and give U.S. developers and exchanges regulatory certainty. James's objection cuts against that federal-preemption framing, contending that state attorneys general need retained authority to act against fraud independently of whatever jurisdictional lines Congress draws between the SEC and CFTC.
The dispute sits inside a broader congressional fight over the bill's scope. Gaming groups, tribes and unions are separately pressing lawmakers to block sports prediction markets from being folded into the crypto market-structure bill, another sign that CLARITY's reach beyond core token classification is contested. Meanwhile Senator Elizabeth Warren has accused SEC Chair Paul Atkins of misleading Congress about declining enforcement actions, a claim that feeds the same investor-protection concerns James is raising from the state level.
Two distinct sources have now reported on James's opposition, indicating the objection is drawing wider notice as the bill moves through Congress. What remains unresolved is whether James's specific demands — stronger AML provisions, tighter ethics rules, expanded investor protections — will be incorporated into the bill's text, or whether the current preemption structure will hold as written. Also unclear is how state attorneys general more broadly, beyond New York, will weigh in as the legislative calendar advances, and whether the prediction-markets carve-out fight will further slow the bill's progress before any floor vote.