A bipartisan group of 17 state attorneys general has urged the U.S. Senate to reject the CLARITY Act ahead of a key procedural vote, arguing that the crypto market structure bill could restrict states\u2019 ability to pursue fraud and enforce investor protection laws.<\/p>\n
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A bipartisan group of 17 state attorneys general urged senators to reject the CLARITY Act, arguing it could weaken their authority to pursue crypto fraud and protect investors.<\/p>\n
New York Attorney General Letitia James said the bill could give the SEC new authority to preempt state registration powers and create uncertainty around state securities enforcement.<\/p>\n
Senate Republicans released a revised version of the bill ahead of Tuesday\u2019s procedural vote, adding a state role in enforcing conflict of interest rules for public officials.<\/p>\n
The revised legislation would let the Treasury secretary impose an 18 month circuit breaker on stablecoin rewards if payment stablecoins cause substantial deposit outflows from community banks.<\/p>\n
The bill changes protections for certain software developers and clarifies state consumer protection rules, but the attorneys general said the revisions did not resolve their enforcement concerns.<\/p>\n
New York Attorney General Letitia James led the group in a letter sent Monday to Senate Banking Committee Chair Tim Scott and ranking Democrat Elizabeth Warren, warning that provisions in the legislation could give federal regulators new authority to override parts of state securities regulation.<\/p>\n
\u201cAs written, the Clarity Act would embolden scammers and potentially strip attorneys general of our authority to protect our states\u2019 investors and their wallets,\u201d James said in a statement<\/a>. \u201cTogether with my attorney general colleagues, I urge Congress not to pass the Clarity Act.\u201d<\/p>\n The intervention comes one day before the Senate is expected to hold an initial procedural vote on the legislation, with Republicans needing 60 votes to advance it.<\/p>\n Attorneys general say CLARITY Act could restrict state powers<\/p>\n James and the other attorneys general focused much of their objection on language governing the relationship between federal securities rules and state enforcement.<\/p>\n Their letter argued that the Securities and Exchange Commission could gain the ability to \u201cpreempt state registration authorities,\u201d creating uncertainty over how far states could go when regulating digital assets or pursuing companies accused of violating securities laws.<\/p>\n \u201cThis unprecedented grant of authority would not only apply to digital assets but would also broadly grant unilateral discretion to SEC to reset the scope of federal preemption, potentially upending the state securities regulatory regime,\u201d the New York attorney general\u2019s office said.<\/p>\n James raised similar concerns in July, when she warned that the legislation<\/a> could weaken state investor protections and limit local authorities\u2019 ability to pursue crypto fraud. As crypto.news previously reported, she called for changes that would preserve state enforcement powers while strengthening anti-money laundering and ethics provisions.<\/p>\n Monday\u2019s letter was signed by attorneys general from states including California, Illinois, Arizona, Kansas, Ohio and Wisconsin, giving the opposition a bipartisan group of state officials.<\/p>\n The latest challenge comes as senators prepare to decide whether the bill can clear the procedural threshold needed for further consideration. Republicans cannot reach the required 60 votes on their own, leaving the outcome dependent on Democratic support.<\/p>\n Revised CLARITY Act adds public official enforcement rules<\/p>\n Senate Republicans released a revised version of the more than 600-page legislation on Sunday as negotiations continued over provisions sought by Democrats.<\/p>\n One change gives state attorneys general a role in enforcing conflict-of-interest restrictions covering public officials, replacing an earlier approach that would have placed enforcement primarily with the federal Justice Department.<\/p>\n Ethics rules have remained one of the main disputes surrounding the legislation because of President Donald Trump\u2019s crypto interests, including his involvement with World Liberty Financial and the TRUMP memecoin.<\/p>\n The issue has complicated Senate negotiations for months. A June examination of the ethics dispute<\/a> detailed how Trump\u2019s crypto businesses had become a sticking point for lawmakers seeking restrictions on elected officials\u2019 digital asset interests.<\/p>\n By August, the disagreement remained unresolved. Senate Banking Committee Chair Tim Scott said negotiations had stalled as Republicans and Democrats remained divided over ethics rules, stablecoin rewards and financial crime provisions. The Senate had been preparing for a Sept. 15 procedural vote requiring 60 senators to move forward, with Democratic support needed<\/a> for the legislation to advance.<\/p>\n The bill has already traveled through several stages in Congress. The House passed its version 294 to 134 in July 2025, while the Senate Banking Committee advanced its proposal 15 to 9 in May 2026.<\/p>\n Stablecoin rewards face an 18-month circuit breaker<\/p>\n Sunday\u2019s revision addresses another dispute that has followed the legislation through Senate negotiations: rewards paid on payment stablecoins.<\/p>\n The updated language would give the Treasury secretary authority to impose an 18-month \u201ccircuit breaker\u201d on stablecoin rewards when payment stablecoins cause substantial deposit outflows from community banks.<\/p>\n Under the proposal, the temporary restriction could be used when withdrawals linked to stablecoins put pressure on smaller banking institutions.<\/p>\n Stablecoin rewards had already emerged as one of the major unresolved issues during earlier negotiations. Banks have raised concerns that interest or rewards attached to stablecoins could draw deposits away from traditional financial institutions, while crypto companies have pushed to preserve rewards tied to certain customer activities.<\/p>\n