Eighteen state attorneys general, led by New York's Letitia James, are urging the Senate to reject the CLARITY Act ahead of a key procedural vote, warning the crypto market-structure bill would weaken states' power to police fraud. The pushback comes even as President Trump has agreed to tougher ethics restrictions demanded by lawmakers on both sides of the aisle.
Eighteen state attorneys general, led by New York's Letitia James, are urging the US Senate to reject the CLARITY Act ahead of a procedural vote scheduled for Tuesday, arguing the crypto market-structure bill would weaken states' power to fight fraud. Their coalition spans states including Washington, California, Arizona, Massachusetts and New Jersey, among others.
States say fraud protections fall short
In a Sept. 14 letter to Senate Banking Committee Chairman Tim Scott and member Elizabeth Warren, James argues the bill's anti-fraud language is too vague and would let scammers exploit legal loopholes that stall state enforcement actions. She says the SEC's regulatory guidance under the bill could override state securities registration requirements, undercutting states' role as the first line of defense against fraud.
State regulators have brought 330 anti-fraud actions against scammers since 2017, James said. In a post on X, she wrote: "Innovation can't come at the expense of protecting Americans' wallets."
Trump's ethics concession fails to end opposition
The AGs weighed in even as President Trump agreed to about 80% of a bipartisan ethics proposal from Senators Thom Tillis and Ruben Gallego. The compromise would require officials with a "significant" financial interest in a crypto issuer to divest or place the interest in a blind trust, and would give state attorneys general a role in enforcing the new ethics restrictions.
But the revised draft still gives state AGs enforcement power only over the ethics provisions, not the broader market-structure rules the coalition says erode their fraud authority. Senate Majority Leader John Thune filed the cloture motion last month after lawmakers failed to advance the bill before their August recess.
Bitcoin awaits the vote
Bitcoin was trading around $77,000 as markets braced for both Tuesday's procedural vote and the Federal Reserve's interest-rate decision the following day.
Sources: Cointelegraph, Coinpedia
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