New York AG Letitia James told a Senate committee the CLARITY Act would prevent states from prosecuting crypto fraud. Charles Schwab backed the bill. Thune may force a floor vote before recess.
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New York Attorney General Letitia James told a Senate committee the CLARITY Act would strip states of their power to prosecute crypto fraud, calling the bill "a mistake" in written testimony released ahead of a potential floor vote.
James said the legislation preempts state investor protection laws and dilutes local authorities' ability to go after bad actors in the digital asset space. State and local law enforcement handle roughly 98.8% of all arrests in the country, she noted, while federal authorities account for about 1.2%.
"Despite this, CLARITY would neuter state and local law enforcement by preempting states and preventing them from fully prosecuting rampant fraud and violations of law by actors in the cryptocurrency marketplace," James said.
Democratic senators have echoed the concern, arguing the Department of Justice cannot be the sole enforcer of ethics provisions in the crypto market. State prosecutors need parallel authority, they said.
Senate Majority Leader John Thune has signaled he may set floor time for the CLARITY Act before the August recess, with or without the votes to invoke cloture. But the bill is competing for floor space with the SAVE America Act and Russia sanctions legislation, both of which may take priority.
Thune told reporters today that banking groups have raised concerns about the stablecoin yield provision in the bill, and that their lobbying is affecting negotiations. He predicted "lots of amendments" if the Senate files cloture.
Charles Schwab, the brokerage giant with $13 trillion in client assets, backed the bill over the weekend. The firm joins a list of institutional supporters pushing for passage before the recess deadline.
James's opposition adds a political dimension to a bill that has drawn support from major financial firms and criticism from state-level Democratic officials. The question of who enforces crypto regulation – federal agencies, state attorneys general, or both – remains the central fault line as Thune weighs whether to force a vote.
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