New York Attorney General Letitia James says she won't back the CLARITY Act in its current form, warning that its federal preemption language could still weaken states' power to register crypto firms and pursue fraud. Her bipartisan coalition of state regulators now stands against crypto industry groups pushing for a single national framework, complicating the Senate's September 15 procedural vote.
New York Attorney General Letitia James says she will not support the CLARITY Act in its current form, arguing its federal preemption provisions could weaken states' ability to register market participants and pursue crypto-related fraud.
Why James Says the Revised Bill Still Falls Short
Senators expanded the enforcement role of state attorneys general before the latest vote. The revised text gives state attorneys general authority to enforce new conflict-of-interest restrictions alongside the Justice Department, part of a compromise on concerns over crypto holdings by federal officials.
But that concession does not answer James's core objection. She says language in the bill would give the Securities and Exchange Commission discretion to determine how far federal rules override state registration authority, and her office warns the provision is broad enough to affect the state securities system beyond digital assets.
States Say Their Enforcement Record Is at Risk
James says states have brought more than 330 anti-fraud actions involving digital assets since 2017, including her own office's cases against Gemini, Genesis, KuCoin and Tether. Her office also cites FBI figures showing $11.4 billion in losses tied to cryptocurrency complaints in 2025, up 22% from 2024. James, a Democrat, is joined in the objection by Republican attorneys general Kris Kobach of Kansas and Andy Wilson of Ohio, making the pushback bipartisan.
Crypto Industry Wants the Opposite Direction
The Blockchain Association, Crypto Council for Innovation and The Digital Chamber have backed the CLARITY Act as a way to replace what they call a patchwork of state money-transmitter and licensing regimes with one federal framework. The industry argues overlapping state requirements raise compliance costs, while James's coalition says federal uniformity becomes a problem once it blocks states from pursuing misconduct themselves.
A Procedural Vote Now Carries an Added Fight
Senator Cynthia Lummis released updated bill text on September 10 covering changes to DeFi registration, Bank Secrecy Act requirements and credit-union digital asset powers. Senators still need 60 votes to advance the legislation. James's intervention shows those changes have not resolved every state-level concern about where federal preemption ends.
Source: Crypto News Flash
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