New York AG Letitia James Opposes CLARITY Act Ahead of Key Senate Vote

New York Attorney General Letitia James has urged lawmakers to reject the CLARITY Act, arguing that the proposed crypto market structure legislation would weaken state authority to combat cryptocurrency fraud. Her opposition comes as the U.S. Senate weighs whether to bring the bill to the floor before lawmakers leave for the August recess.

In written testimony submitted to a Senate committee, James warned that the CLARITY Act would override state investor protection laws and significantly reduce the ability of state attorneys general and local prosecutors to pursue fraudulent activity in the digital asset industry. She argued that limiting state enforcement would be a serious mistake, especially given the crucial role local authorities play in policing financial crimes.

James emphasized that state and local law enforcement agencies handle the overwhelming majority of criminal enforcement across the United States. According to her testimony, these agencies account for roughly 98.8% of arrests, while federal authorities are responsible for only about 1.2%. She contended that the legislation would prevent states from fully prosecuting cryptocurrency-related fraud and other legal violations, leaving enforcement largely in federal hands.

Her concerns echo those raised by several Democratic senators, who have argued that the Department of Justice should not be the sole authority responsible for enforcing the bill’s ethics provisions. They are pushing for state prosecutors to retain enforcement powers as bipartisan negotiations over the legislation continue.

Meanwhile, Senate Majority Leader John Thune has indicated that he may schedule floor consideration of the CLARITY Act before the August recess, even if support for invoking cloture remains uncertain. However, the crypto bill faces stiff competition for Senate floor time as lawmakers prioritize other measures, including the SAVE America Act and legislation imposing additional sanctions on Russia.

Thune also acknowledged that banking groups continue to lobby against the bill’s stablecoin yield provisions, adding another hurdle to negotiations. He suggested the legislation could face numerous amendments if it reaches the Senate floor.

Despite growing opposition from some lawmakers and regulators, major financial firms continue to support the CLARITY Act. Brokerage giant Charles Schwab recently endorsed the legislation, underscoring ongoing industry backing as Congress races to decide the future of U.S. crypto regulation.