Eighteen AGs put preemption at the center of the Clarity Act

Eighteen state attorneys general put preemption at the center of the Digital Asset Market Clarity Act fight Monday, signing a letter that urges the Senate to reject the bill unless its text expressly preserves the states' ability to sue over online scams under the securities and commodities authorities they already enforce.

The signers are bipartisan and drawn from the largest state enforcement offices: Letitia James of New York and Rob Bonta of California appear alongside Kris Kobach and Andy Wilson, with the lead prosecutors from Arizona, Connecticut, Kansas and Ohio joined by a dozen other states and the District of Columbia — eighteen by the letter's own description, seventeen by CoinDesk's headline. The number they hang the argument on is the $11.4 billion the FBI found was stolen from investors last year through crypto, cited as proof that state enforcement reaches fraud a federal statute would otherwise foreclose.

Their objection is narrow: recent drafts reserve certain powers for states to prosecute fraud, the letter acknowledges, but it calls that language ambiguous enough for defendants to argue a state case is preempted, and it points to the bill's "qualified transaction" definition as the channel through which the SEC could displace state authority. They want the Senate to expressly preserve the states' police powers and leave them equipped to protect Americans from predatory scammers.

The Indian Gaming Association is pressing a parallel objection. Its chair, David Bean, called the bill the largest expansion of CFTC authority since the 2010 Dodd-Frank Act and wants text stating expressly that state and tribal gaming laws and the Indian Gaming Regulatory Act are not preempted by federal commodities law, and that designated contract markets may not list contracts on sports betting or casino games; his statement urges members to vote against the bill and calls enactment the greatest threat to tribal sovereignty in a generation.

Senator Cynthia Lummis, one of the bill's chief sponsors, posted on X that she met Bean in June and that he had not expressed opposition to the language, an account now set against a trade group asking for a no vote.

U.S. crypto market structure is being built on two rails, an SEC route and a CFTC route, and the fight over who polices event contracts is already making its way toward the Supreme Court. Preemption adds a third axis, and it is the one with the least room to negotiate. Buying off the tribes is a drafting exercise — carve out gaming, name the statute, done. Answering eighteen attorneys general means writing a savings clause that survives the bill's own definitions of which transactions fall under federal jurisdiction. The letter asks for a no vote on the current text rather than a redraft of one section.

If the Senate moves the bill unchanged, the first test is likely to be a state enforcement action and a defendant's motion arguing preemption, putting the disputed language in front of a judge long before a regulator gives it meaning.