New York Attorney General Letitia James recently submitted written testimony to Congress requesting amendments to the CLARITY Act. She argues that this cryptocurrency market structure bill could weaken states' powers to combat fraud and protect investors.

State-level law enforcement powers become the focus of controversy

James pointed out that if the bill proceeds according to its current text, it could put state and local law enforcement agencies under pressure from federal rules in digital asset-related cases. In her testimony, she wrote that state governments should not be excluded from enforcement in crypto fraud cases.

She also cited data showing that state and local law enforcement agencies handle approximately 98.8% of arrests in the United States, while federal agencies account for about 1.2%. In her view, this demonstrates that state-level law enforcement remains crucial in financial fraud cases.

Democrats are worried about excessive federal pre-allocation.

James's statement also reflects concerns within the Democratic Party. Some senators oppose transferring full enforcement power over matters involving public officials' digital assets to the Department of Justice, arguing that state prosecutors should also retain a role to play.

New York is particularly concerned about this. The state has its own independent financial regulations and has consistently maintained strong enforcement against crypto companies. If the federal bill's scope is too broad, existing rules in states like New York could be compressed.

The Senate has not yet resolved its differences.

The Clarity Act aims to establish a more comprehensive federal regulatory framework for digital assets and to delineate the responsibilities of the SEC and CFTC. The Senate Banking Committee passed the bill in May by a vote of 15 to 9, but this does not guarantee its passage through the full Senate.

Currently, Senate Republicans still need to secure enough votes to advance the procedural vote. Banking opposition to stablecoin yield terms is also continuing to slow down negotiations.