California lawmakers have passed a bill restricting public officials’ involvement with memecoins, citing concerns over conflicts of interest and “pay-to-play arrangements.”

The California Senate approved Assembly Bill 2409 in a 40-0 vote on Wednesday, according to Legiscan data. The Assembly then voted 78-0 to concur with the Senate’s amendments. The bill has now entered the enrolled stage and awaits the governor’s signature.

Under the legislation, digital asset service providers would be prohibited from offering California residents memecoins issued on or after Jan. 1, 2027, that are offered by, or in partnership with, federal public officials or state or local public officers. The bill defines memecoins as digital assets whose value is derived primarily from public interest, speculation, or community engagement. By focusing on the point of issuance and on intermediaries serving California residents, the measure reflects a broader effort to address perceived conflicts before they reach retail markets, rather than after tokens are already trading.

The measure comes as investors in the US president-linked Official Trump (TRUMP) memecoin are estimated to be $3.2 billion underwater, with most of those losses unrealized, according to a Thursday report from the nonprofit consumer advocacy organization Public Citizen.

The TRUMP token ranks as the fifth-largest memecoin, with a market capitalization of $688 million, according to CoinMarketCap. The token rose 53% over the past week, recouping part of the losses from its 67% decline over the past year.

The Trump family’s crypto ventures have also created obstacles to passing the US crypto market structure bill known as the Digital Asset Market Clarity (CLARITY) Act. A bipartisan ethics addendum, which has not been made public, would reportedly allow Trump to defer capital gains taxes on any required divestitures, potentially resulting in tax savings in the millions.

Related: Most Americans say the Trump family’s crypto investments are not ‘appropriate’: Poll