New York Attorney General Letitia James has opposed the CLARITY Act ahead of a possible Senate vote, arguing that the bill would weaken state efforts to combat cryptocurrency fraud. Lawmakers could consider the measure before their August recess.

James laid out her objections in written testimony submitted to a Senate committee. In that testimony, she said the CLARITY Act would replace investor protection measures established by the states and reduce their ability to prosecute fraud. Her opposition adds to a broader debate over how much authority should remain with state regulators versus federal agencies as Congress works on crypto market structure legislation.

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What James Says About State Crypto Enforcement

James’ testimony cited research from state and local law enforcement agencies. She said those agencies handle most law enforcement activity in the United States and play a significant role in addressing cryptocurrency-related crimes.

According to James, state and local agencies conduct about 98.8% of arrests nationwide, while federal authorities account for about 1.2%. She included those figures to support her argument for preserving state enforcement authority.

James said the CLARITY Act would constrain state and local governments and that federal preemption would make it harder to prosecute fraud and other violations. Her criticism focused on misconduct by participants in cryptocurrency markets.

The bill’s ethics provision has also drawn concern from Democratic senators. They do not agree that only the Department of Justice should enforce it and want state prosecutors to have enforcement authority as well. That dispute underscores one of the central questions in the Senate review: how enforcement powers would be divided if the bill advances.

Democrats and Republicans are continuing negotiations as the legislative window narrows. Both parties are seeking agreement on the CLARITY Act, but the question of state authority remains under discussion in the Senate.

Why the CLARITY Act Faces Senate Hurdles

Senate Majority Leader John Thune may reserve floor time before the August recess, which would allow the chamber to move forward with the bill without having enough votes to invoke cloture. Cloture would limit debate on the measure.

The proposal is also competing with other legislation that has yet to be considered in the Senate. One example is the SAVE America Act. A sanctions proposal related to Russia may also take precedence over the crypto bill.

Thune said lobbying from the banking sector has affected negotiations around the CLARITY Act. Banking groups have raised concerns about the bill’s stablecoin yield provision, adding another issue for senators trying to reach a final agreement.

Thune said it was likely that cloture would eventually be invoked on the crypto proposal. He added that such a move would likely lead senators to file many amendments afterward.

Despite the remaining disputes, major industry players continue to back the CLARITY Act ahead of the August recess. Charles Schwab endorsed the proposal over the weekend, joining other industry participants calling for passage of the crypto market structure bill.

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