AGs Block Senate Crypto Bill Over Federal Preemption Fears
New York Attorney General Letitia James and a bipartisan coalition of 17 state attorneys general have thrown a major wrench into the Senate's plans for the Digital Asset Market Clarity Act. Just hours before a critical floor vote, they demanded Congress kill the bill.
The legislation aimed to split digital asset oversight between federal agencies and establish market rules for the industry. To pass the bill, Senate Republicans added a concession granting state prosecutors authority to enforce crypto ethics rules against federal officials. However, the attorneys general read the fine print and walked away.
The problem lies in the concept of federal preemption. The Clarity Act contains a provision regarding qualified transactions that gives the Securities and Exchange Commission broad power to override state registration systems. This would push local law enforcement out of commodities fraud cases and limit their ability to police basic scams happening in their own backyards.
The FBI tracked an astonishing $11.4 billion in cryptocurrency complaint losses in 2025, with an average loss of over $62,000 per victim. James issued a blunt public warning: 'Innovation can't come at the expense of protecting Americans' wallets.'