Letitia James Tells Senate the CLARITY Act Would Weaken State Crypto Fraud Powers

New York Attorney General Letitia James has warned the US Senate that the CLARITY Act, the major crypto bill now moving through Congress, would strip states of much of their power to police cryptocurrency fraud.

Her argument#

In written testimony submitted to a Senate committee, James said the bill would override state investor-protection laws and hand most oversight of digital asset markets to a single federal regulator, the Commodity Futures Trading Commission. That shift, she argued, would undermine state and local enforcement. "This is a mistake," she wrote.

To make her point, she leaned on a striking figure: state and local agencies carry out roughly 98.8% of all arrests in the country, compared with about 1.2% by federal authorities. She said complaints about crypto scams reaching her office have tripled in three years, with reported losses of nearly $500 million over five years.

James urged Congress to add stronger safeguards, including tougher anti-money-laundering, identity-verification, and cybersecurity rules, and to require platforms to watch for market manipulation.

The other side#

Supporters of the CLARITY Act see the same preemption very differently. They argue that a single, consistent federal framework would give crypto companies clear rules to follow instead of a patchwork of conflicting state requirements, which they say has held the industry back.

Why it matters now#

The timing is critical. The bill passed the House in 2025 and cleared a key Senate committee in May, but it still needs 60 votes to reach a floor vote. Republican leaders want that vote before the Senate's August recess, which gives a handful of undecided Democrats real leverage. James's testimony adds fresh pressure on an already contested bill, alongside unresolved fights over ethics and enforcement.

Whether her warning reshapes the final text, or simply hardens the standoff, may become clear in the coming days.