CLARITY Act Sparks Fears of Weakened State Crypto Enforcement

New York Attorney General Letitia James has expressed concerns over the CLARITY Act, warning that it could limit the state's power to fight cryptocurrency fraud. In written testimony before a Senate committee, James argued that the bill would supplant investor protection measures put into place by states and diminish their power to prosecute fraud.

According to James, state and local law enforcement departments conduct about 98.8% of arrests nationwide, while federal authorities account for around 1.2%. She claimed that the CLARITY Act would restrict state and local governments' ability to prosecute misconduct in cryptocurrency markets.

The ethics provision of the bill has raised concerns among Democratic senators, who do not agree that only the Department of Justice should enforce it. Negotiations between Democrats and Republicans are ongoing as the legislative window closes.