CLARITY Act Faces State Opposition Over Crypto Enforcement Powers
The CLARITY Act faced opposition from a bipartisan group of 18 state attorneys general over concerns that parts of the proposed U.S. crypto market structure law could restrict state authority to pursue fraud and enforce securities laws.
New York Attorney General Letitia James led the coalition, which sent a Sept. 14 letter to Senate Banking Committee Chair Tim Scott and Ranking Member Elizabeth Warren urging lawmakers to preserve state regulatory and enforcement powers.
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| Source: Xpost |
The concerns emerged ahead of the Senate’s planned procedural vote on the legislation. The vote was held on Sept. 15, but the bill failed to secure the 60 votes required to advance. The Senate vote was procedural and did not constitute final passage of the CLARITY Act.
State Attorneys General Raise Crypto Enforcement Concerns
The 18 attorneys general objected to provisions they said could affect state investigations and prosecutions involving cryptocurrency fraud.
Although the legislation retained certain state enforcement powers, the officials argued that unclear limits could create opportunities for defendants to challenge state actions on the grounds that federal law preempts existing securities rules.
Such disputes could potentially delay investigations or prosecutions while courts determine which level of government has jurisdiction, according to the concerns outlined by the coalition.
The issue carries significance given the scale of reported cryptocurrency-related fraud. The FBI’s 2025 Internet Crime Report recorded more than 181,000 complaints involving cryptocurrency, with reported losses exceeding $11 billion.
The state attorneys general therefore called for clearer protections for state authority rather than provisions they believe could create uncertainty over enforcement responsibilities.
Banks Challenge Stablecoin Yield Provisions
The CLARITY Act also faced resistance from banking organizations over a separate issue involving stablecoin rewards and deposits.
The American Bankers Association and other banking groups have argued that stablecoin products offering yield could encourage customers to move funds away from traditional bank accounts. They contend that a shift of deposits could reduce the funding available to banks, including community institutions that rely on deposits to support lending and small-business credit.
The latest legislative language sought to address that concern by giving the Treasury secretary authority to intervene if stablecoin activity produced a detrimental impact on banks with less than $10 billion in assets.
Banking groups, however, argued that intervention after significant deposit movement would not constitute sufficient protection and that the potential risk should be addressed before damage occurs.
Money Market Funds Provide a Historical Comparison
The debate has drawn comparisons with concerns raised by the banking industry over money market mutual funds during the late 1970s and early 1980s.
According to historical documents cited in the source material, the Independent Bankers Association of America warned in a January 1980 letter to then-Sen. Alan Cranston that money market funds could pull deposits away from banks, weaken lending capacity and place pressure on smaller institutions.
The number of publicly offered money market funds rose from one in 1972 to 78 by mid-1979. Their combined assets reached approximately $50 billion as investors sought market-based returns that were not available through restricted bank accounts.
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| Source: Xpost |
Money market fund assets subsequently expanded into the trillions without eliminating traditional bank deposits. Federal Reserve research placed bank deposits at roughly $18 trillion in 2022.
The comparison does not establish that stablecoins and money market funds carry identical risks. Their structures, protections and liquidity characteristics differ. Instead, the historical example provides context for the disagreement over whether competing yield-bearing products necessarily threaten the traditional banking deposit base.
CLARITY Act Now Stalled in Senate
The state enforcement dispute and the stablecoin banking debate were among several issues surrounding the legislation as senators considered whether to move it forward.
Senate Republicans had released a revised version containing 126 substantive changes requested by Democrats, including provisions addressing state attorneys general and other regulatory concerns.
Despite those revisions, the Senate ultimately did not reach the 60 votes required for the procedural motion on Sept. 15. Reuters reported that the measure received 49 votes in favor and 50 against, leaving the legislation short of the threshold needed to advance.
The result leaves the CLARITY Act without advancement through that Senate procedural step. The vote did not itself enact or finally dispose of the legislation, but it prevents the Senate from moving into the next stage of consideration through that vote.
Writer: Marcus RenfieldCrypto Market Analyst & Onchain WriterMarcus Renfield covers cryptocurrency markets with a focus on onchain data, Bitcoin price action, and emerging market narratives. His writing examines how capital flows, network activity, and broader market structure influence short- and medium-term trends.He aims to provide clear, data-informed analysis for readers seeking a deeper understanding of crypto market dynamics.