New York Attorney General Letitia James is leading a bipartisan group of 18 state attorneys general calling on the US Senate to reject the Digital Asset Market Clarity Act just hours before a crucial vote.
The intervention threatens to derail the legislation, which Republicans hope will establish the first comprehensive federal framework for the cryptocurrency industry. The Senate is expected to vote on Tuesday, but Republicans face a difficult path because they hold 53 seats and need 60 votes to overcome a filibuster.
The attorneys general are resisting a bill that would also give state prosecutors unprecedented nationwide authority to enforce cryptocurrency ethics rules against federal officials, including presidential crypto holdings.
That concession had been presented as a significant expansion of state power. However, James and the other officials say another provision would have a damaging effect on their ability to pursue fraud cases at state level.
Their objection centres on federal pre-emption, the legal principle under which federal law can override state rules. They argue the CLARITY Act’s language on “qualified transactions” would give the Securities and Exchange Commission broad power to supersede state registration systems.
The attorneys general believe that could prevent state authorities from taking action in commodities fraud cases. In their view, accepting new national powers would come at the cost of losing tools used to tackle everyday scams affecting residents in their own states.
The dispute comes amid major losses for cryptocurrency users. The FBI recorded $11.4 billion in cryptocurrency complaint losses in 2025, with the average victim losing more than $62,000.
State officials say local authorities are often the first to respond when individuals and families lose their savings. The source of those losses is not necessarily connected to the CLARITY Act, but James and her colleagues regard the proposed changes to enforcement powers as directly relevant to consumer protection.
The conflict exposes a wider disagreement over how financial innovation should be regulated. The cryptocurrency industry wants a single federal rulebook to replace the current patchwork of state regulations.
State prosecutors, however, warn that replacing local enforcement with a federal system could leave consumers more vulnerable if the national response is slower when problems emerge.
James has long been hostile towards the cryptocurrency industry, and her critics may view the latest intervention as consistent with her previous position rather than a sudden break with it.
The bill’s prospects now appear uncertain. The Senate Republicans released an updated draft of the CLARITY Act on Sunday night, including changes to the ethics and other… provisions.
Lawmakers must decide whether the benefits of a centralised regulatory system justify reducing the powers of state officials to pursue cryptocurrency fraud. Whether the late challenge will change the position of the Democratic senators whose support Republicans need remains unclear.
