Law enforcement warns Clarity Act could weaken crypto oversight

Four law enforcement groups have raised concerns that safe harbor provisions and developer liability shields in the Digital Asset Market Clarity Act would undercut their ability to police financial crime in crypto. The National Sheriffs' Association was among the groups that sent letters to lawmakers in May 2026 outlining the objections.

The bill, H.R. 3633, cleared the Senate Banking Committee on May 14 with bipartisan support. It aims to draw clean jurisdictional lines between the SEC and the CFTC for digital assets. The law enforcement groups argue that shielding decentralized-finance developers from liability and creating safe harbors for certain crypto entities would leave critical gaps.

Rep. Tom Emmer dismissed the objections as “overstated red herrings” on May 22. The Blockchain Association pushed back on June 2 with a letter signed by 160 former national security and law enforcement officials. They argued that the CLARITY Act includes enhanced obligations under the Bank Secrecy Act and promotes information sharing, strengthening oversight rather than weakening it.

The legislation classifies Bitcoin and Ethereum as digital commodities under the CFTC. Assets that function more like securities – labeled “investment contract assets” in the bill – remain under SEC oversight. The bill also incorporates elements from the Blockchain Regulatory Certainty Act.

A White House meeting with law enforcement was scheduled for the week of June 9, suggesting the administration is treating the concerns seriously enough to engage directly.