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A bipartisan group of state attorneys general called on the U.S. Senate to protect states' ability to police crypto in the Digital Asset Market Clarity Act in a new letter Monday, and the state officials urged lawmakers to vote no on the bill without any changes.
The letter, signed by 18 attorneys general from states and the District of Columbia, expressed concerns that if the Clarity Act were to pass, it would restrict states from bringing lawsuits against online scams under their existing securities and commodities authorities.
"We write to urge the Senate to expressly preserve the police powers of the states and ensure that the states remain armed with the tools necessary to protect the American people from predatory scammers," the letter said. "As the epidemic of online scams continues to grow, we remain firmly opposed to any federal statutory changes that would displace states’ authority to oversee the securities and commodities markets to protect everyday Americans."
The letter cited the FBI's finding that $11.4 billion had been stolen from investors last year through crypto.
The language in recent drafts of the Clarity Act "reserves certain powers for states to prosecute fraud" but the language is "ambiguous" and vague in a way that might allow defendants to block states from bringing enforcement actions, the letter said.
As it stands, the Clarity Act would let the U.S. Securities and Exchange Commission preempt state authority through the "qualified transaction" definition, the letter said.
The letter was signed by the lead prosecutors from New York, Arizona, Connecticut, California, Kansas, Ohio and a dozen other states. And, suggesting the breadth of this concern, the signers represent both Republicans and Democrats, with Kris Kobach and Andy Wilson joining Letitia James and Rob Bonta on the letter.
Other groups have also come out with opposition to the latest draft. The Indian Gaming Association, which has had issues with the Commodity Futures Trading Commission's endorsement of prediction markets, said it was concerned with "the largest expansion of CFTC authority since the 2010 Dodd-Frank bill" in a statement.
"Until text is added to expressly provide that state, tribal gaming laws and the Indian Gaming Regulatory Act are not preempted by federal commodities law, and that [designated contract markets] are not permitted to list contracts on sports betting or casino games, Indian County will continue to urge members to vote against the Clarity Act and view its enactment as the greatest threat to tribal sovereignty in a generation," the statement by IGA Chair David Bean said.
