A bipartisan group of 18 attorneys general is urging Congress to reject a major cryptocurrency bill, warning that it could make it harder for states to pursue crypto fraud and protect investors. New York Attorney General Letitia James is leading the coalition opposing the Digital Asset Market Clarity Act, commonly known as the CLARITY Act.
In a September 14 letter to Senate Banking Committee Chairman Tim Scott and Ranking Member Elizabeth Warren, the attorneys general argued that the legislation, as currently written, could weaken state enforcement authority and give the Securities and Exchange Commission significant new power to preempt state securities registration requirements.
The warning arrives at a critical point for the legislation, with the Senate scheduled to hold a key procedural vote on the CLARITY Act on September 15.
Attorneys General Say States Need to Remain a ‘First Line of Defense’
The CLARITY Act is intended to establish a clearer federal regulatory framework for digital assets, an area where lawmakers, regulators and the cryptocurrency industry have spent years debating which rules and agencies should apply. The attorneys general aren’t arguing that cryptocurrency should remain without federal regulation. Instead, they contend that new federal rules shouldn’t come at the expense of states’ existing ability to investigate fraud, bring enforcement actions and require cryptocurrency businesses to comply with applicable state registration systems.
“My office has proudly led the fight to protect New Yorkers and all Americans from rampant cryptocurrency fraud,” AG James said. “As written, the Clarity Act would embolden scammers and potentially strip attorneys general of our authority to protect our states’ investors and their wallets. Together with my attorney general colleagues, I urge Congress not to pass the Clarity Act.”
According to the New York Attorney General’s Office, states have brought more than 330 anti-fraud enforcement actions involving the cryptocurrency ecosystem since 2017. The coalition wants Congress to preserve state enforcement authority for both tokenized and non-tokenized securities and maintain cooperation between federal and state regulators.
The Coalition Is Particularly Concerned About SEC Preemption
One of the attorneys general’s biggest objections involves the Securities and Exchange Commission. According to the coalition, the current legislation would give the SEC authority to preempt certain state registration requirements.
The AGs argue that the provision could have consequences extending beyond digital assets because of the discretion it could give the SEC over the boundaries between federal and state securities regulation. They are asking Congress to clarify the bill and preserve states’ existing roles in registering and regulating cryptocurrency platforms.
Supporters of federal crypto legislation, meanwhile, have argued that the United States needs clearer and more consistent rules governing digital assets. Senate Banking Committee Chairman Tim Scott has characterized the legislation as an effort to establish clearer “rules of the road” for the industry.
Crypto Fraud Has Cost Consumers Billions
The dispute comes as cryptocurrency-related fraud remains a major financial threat. The FBI’s 2025 Internet Crime Report found that Americans reported more than $20 billion in total internet-crime losses during the year. Cryptocurrency investment fraud alone produced more than $7.2 billion in reported losses in 2025, according to the FBI, up 24% from the previous year.
The New York Attorney General’s Office cites an even broader FBI cryptocurrency-related loss figure of approximately $11.4 billion for 2025. New York officials say complaints about cryptocurrency scams received by the Attorney General’s Office have tripled over the past three years, with reported losses approaching half a billion dollars over five years.
Those figures help explain why state regulators are particularly concerned about preserving enforcement authority as Congress develops a new federal framework for digital assets.
Older Americans Can Be Hit Especially Hard by Investment Fraud
The debate also has implications for older consumers, who can suffer especially severe losses when investment and cryptocurrency scams drain retirement savings. The FBI reported that Americans age 60 and older suffered approximately $7.7 billion in overall internet-crime losses in 2025, up 37% from the previous year. The FBI has also described cryptocurrency investment fraud as one of the most financially damaging fraud schemes currently targeting Americans.
In these schemes, criminals may spend weeks or months building trust through social media, dating apps, text messages or other online communication before steering a victim toward a fraudulent cryptocurrency investment platform. Victims may see fabricated account balances showing impressive returns and be encouraged to invest increasingly large amounts before eventually discovering they can’t withdraw their money.
New York Points to Its Own Crypto Enforcement Record
Attorney General James argues that state enforcement has already produced significant results for consumers and investors. Her office has pursued actions involving cryptocurrency companies including Coin Café, Gemini, Genesis and KuCoin. New York has also worked alongside federal regulators in cryptocurrency matters involving companies including Nexo and BlockFi.
The Attorney General’s Office says state regulators have been particularly important in cases where victims lacked another federal or private remedy. That enforcement history is one reason the coalition is urging Congress to explicitly preserve state authority as lawmakers establish new national digital-asset rules.
The CLARITY Act Is Still Being Debated
The attorneys general’s objections don’t mean the CLARITY Act has become law or that state crypto protections have already disappeared. Congress is still considering the legislation, and negotiations over the measure have continued. Supporters say federal legislation could resolve regulatory uncertainty that has complicated cryptocurrency oversight in the United States, while critics are raising concerns about issues ranging from state enforcement authority to other provisions of the emerging regulatory framework.
The September 14 letter asks Congress to preserve state enforcement of securities laws, maintain federal-state cooperation, protect state cryptocurrency registration systems and clarify language the attorneys general believe could lead to enforcement disputes. Joining New York are attorneys general representing Arizona, California, Connecticut, Delaware, Illinois, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, Ohio, Virginia, Washington, Wisconsin and the District of Columbia.
For consumers, the immediate takeaway is that current fraud protections haven’t vanished because of this legislative debate. Anyone who believes they’ve been targeted by cryptocurrency fraud should stop sending money, preserve transaction and communication records, and report the incident promptly to appropriate state and federal authorities.
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