17 State Attorneys General Jointly Oppose Clarity Bill
According to The Block, New York Attorney General Letitia James led a coalition of 17 bipartisan state attorneys general in a letter to Congress, urging the Senate to reject the Clarity bill before a key procedural vote on Tuesday.
The letter sharply criticizes the bill, stating it would "muddy the waters," making it harder for state attorneys general to combat cryptocurrency fraud and hold violating companies accountable, directly targeting the bill's substantial weakening of state enforcement authority.
James stated that under the current text, the Clarity bill would objectively enable fraudsters and could strip state attorneys general of their power to protect investors and their assets (wallets) in their states, which is the core controversial statement of this joint action.
The letter further accuses the bill of allowing the SEC to "preemptively seize" regulatory powers that rightfully belong to state registration agencies, and the bill's wording is considered vague, posing risks of being broadly interpreted and systematically weakening states' ability to combat fraud.
Crucially, the joint attorneys general believe the bill would grant the SEC unilateral discretion to reset the scope of federal preemption, meaning the SEC could decide to what extent it replaces state-level regulation without further congressional authorization.
The signatories span across party lines and regions, including California, Illinois, Arizona, Kansas, Ohio, Wisconsin, and others, covering multiple states governed by both Democrats and Republicans.
Mechanically, this represents a clear event-driven political game: the cryptocurrency industry has long lobbied for the Clarity bill to secure a unified, relatively lenient federal regulatory framework, thereby escaping the compliance costs of 50 states acting independently; while the collective opposition from state attorneys general represents local regulatory forces wishing to retain state enforcement discretion and jurisdiction. If the bill is blocked in the Senate procedural vote, it would benefit investors relying on active involvement from state attorneys general, while introducing new uncertainties for cryptocurrency companies and lobbyists already preparing for "federal unified regulation."
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Letitia James is not a new face in cryptocurrency regulation but one of the most active figures in state-level enforcement over the past few years: her office investigated Bitfinex and Tether as early as 2019, leading to a settlement of about $18.5 million in 2021; after the collapse of FTX in 2023, she sued Digital Currency Group, Genesis, and Gemini, and filed state fraud charges against Terraform Labs founder Do Kwon, often intervening in sync with or even earlier than SEC's federal enforcement actions. This background indicates that her opposition to the Clarity bill is essentially a continuation of her state enforcement path over the past few years—she has relied on state law provisions for securities fraud to hold cryptocurrency companies accountable, and this bill could potentially cut off that enforcement path.
On the capital front, the Clarity bill is backed by years of heavy lobbying from the cryptocurrency industry, notably represented by the super PAC Fairshake, funded by Coinbase, a16z, Ripple, among others, which has invested hundreds of millions in recent congressional elections to push for unified, predictable legislative structures for the cryptocurrency market at the federal level, allowing companies to comply with a single set of federal rules instead of navigating 50 state regulations. This joint letter from the attorneys general represents direct resistance to the legislative outcomes that this lobbying money seeks to leverage—once federal preemption covers state law, the enforcement cases and channels for fines and settlement revenues that state attorneys general have built over the past few years will also be compressed.
This scenario is highly reminiscent of multiple historical confrontations between "federal preemption vs. state regulatory authority" in U.S. financial regulation, such as the "national bank charter" initiative pushed by the Office of the Comptroller of the Currency (OCC) over the years, which similarly aimed to allow fintech companies to bypass the cumbersome process of applying for licenses in each state. Between 2017 and 2018, several state attorneys general, including New York, jointly sued the OCC, citing concerns that federal charters would erode state protections for consumers and investors. The current cryptocurrency industry is at a critical juncture, transitioning from "fragmented regulatory battles" to "consolidated regulatory jurisdiction," and this vote is one of the pivotal nodes determining which direction that window will swing.
Essentially, this represents a regulatory shift: enforcement jurisdiction is consolidating from state to federal levels. The mechanism behind this is that larger national and even multinational cryptocurrency companies prefer a single, predictable federal rule, as the compliance costs of navigating 50 different state laws far exceed those of adhering to a single federal framework, driving them to continuously lobby Congress for federal preemption legislation; while state attorneys general strongly resist because once federal preemption fully covers state law, their past enforcement capabilities and political leverage, which relied on state law provisions to actively pursue cases and obtain fines and settlement revenues, will be weakened. This is also why the opposition crosses party lines and forms a cross-state coalition.
ABAB News · Cognitive Law
- Who defines jurisdiction defines who can be prosecuted.
- Unified rules liberate large companies but disarm local enforcement.
- Lobbying money does not buy laws but the boundaries of jurisdiction.