The U.S. Senate’s effort to create a broad regulatory framework for the cryptocurrency market has faced fresh criticism from New York Attorney General Letitia James and a group of other state attorneys general.
James led a bipartisan group of 18 state attorneys general that urged lawmakers to reject the Digital Asset Market CLARITY Act before a key Senate vote on September 15. The group said the bill, in its current form, could make it harder for states to take action against crypto scams and companies that break consumer protection laws.
In a letter to Senate leaders, the attorneys general argued that the CLARITY Act could reduce the power of state officials to protect investors. They raised concerns about provisions that could allow federal rules to override some state-level authority.
James said the changes could make it more difficult for state prosecutors to investigate cryptocurrency fraud and take action against firms that violate the law. Her office pointed to its previous enforcement work against several crypto companies as part of its argument for keeping strong state powers.
The concerns come as crypto-related fraud continues to cause large financial losses. The FBI reported $11.4 billion in losses from cryptocurrency-related complaints in 2025, up 22% from the previous year.
Supporters of the bill have argued that the CLARITY Act would provide clearer rules for the digital asset industry. The legislation would set out when the Securities and Exchange Commission and Commodity Futures Trading Commission would oversee different types of digital assets.
Before the September 15 vote, Senate Republicans released a revised version of the bill. They said it included 126 major changes requested by Democrats, along with new ethics rules and other measures.
The updated bill also gave state attorneys general a role in enforcing certain ethics rules involving federal officials.
However, James and other state attorneys general said the changes did not resolve their concerns about state enforcement powers.
The Senate ultimately failed to advance the CLARITY Act on September 15. The procedural vote was 50-49, short of the 60 votes required to move forward.
The vote means the bill is currently on hold, despite months of negotiations over cryptocurrency regulation.
The debate shows the main challenge facing the legislation. Supporters want clearer federal rules for digital assets, while state officials have raised concerns about how those rules could affect their ability to protect investors and investigate crypto fraud.