Letitia James, the Attorney General of New York, spearheaded a coalition of 17 bipartisan attorneys general to appeal to lawmakers to reject major cryptocurrency legislation, cautioning that the measure would jeopardize their capacity to defend investors against deceptive practices.
Through a Monday missive issued ahead of an essential procedural ballot in Washington, James along with her peers argued that the Clarity Act would cause confusion and hinder state prosecutors from pursuing fraudulent schemes and penalizing unlawful enterprises.
In an official release, James stated that the Clarity Act in its current form would empower fraudsters and potentially divest attorneys general of their mandate to safeguard investors and their finances within their respective states, urging Congress alongside her colleagues not to approve it.
The correspondence, delivered to Senate Banking Committee Republican Chairman Tim Scott and ranking Democrat Elizabeth Warren, arrives during a crucial juncture as the complete Senate prepares for an initial procedural ballot regarding the Clarity Act on Tuesday. On Sunday evening, Senate Republicans published the updated draft of the massive bill exceeding 600 pages, incorporating select Democratic demands to secure the requisite 60 votes to push the measure forward.
Among these modifications, the updated text assigns state attorneys general a responsibility in overseeing conflict-of-interest regulations for public officials, which had previously emerged as a significant point of contention among Democrats considering President Donald Trump’s extensive cryptocurrency holdings. These holdings have expanded to hundreds of millions of dollars associated with World Liberty Financial and his TRUMP memecoin, whereas initial drafts assigned this responsibility to the federal Department of Justice.
Furthermore, the amended legislation grants the Treasury secretary the power to enact an 18-month pause on stablecoin incentives if payment stablecoins prompt significant deposit reductions at community banks, aiming to furnish the Treasury secretary with a short-term mechanism to mitigate the effects of massive withdrawals on smaller financial institutions.
Additionally, the bill amends the Blockchain Regulatory Certainty Act to restrict money-transmission registration requirements for specific software developers while incorporating a civil safe harbor, establishing Agriculture Committee oversight regarding affiliate trading and conflicts of interest, and defining the scope and application of state-level consumer protection statutes.
Nevertheless, James and her fellow signatories contend that the proposal would still empower the Securities and Exchange Commission to override state registration powers, arguing that ambiguous wording in the Clarity Act could provoke subsequent legal challenges against the states’ enforcement capabilities against fraud.
The New York Attorney General’s office noted that this unprecedented delegation of power would extend beyond digital assets to broadly confer unilateral authority onto the SEC to redefine federal preemption boundaries, which could disrupt the established state securities regulatory framework.
Previously, James had called on Congress to refine the provisions within the Clarity Act, asserting that it would diminish the authority of states to regulate the sector while advocating for the inclusion of more robust anti-money-laundering and ethical protections.
The letter issued on Monday also received signatures from state attorneys general representing California, Illinois, Arizona, Kansas, Ohio, Wisconsin, and additional jurisdictions.
Originally published at https://www.theblock.co/news/regulation/2026-09-14-ny-attorney-general-james-bipartisan-push-against-clarity-act-initial-senate-vote-414635.
