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New York Attorney General Letitia James went to Washington and basically told Congress to back off. In testimony before the Senate Permanent Subcommittee on Investigations, she warned that the proposed Digital Asset Market Clarity Act could gut state-level crypto enforcement — and she came with numbers.
Crypto scam complaints to her office have tripled over the past three years. Reported losses tied to those scams hit nearly $500 million over five years. Those aren’t abstract figures. They’re real consumers in New York who lost real money, and James’s argument is pretty much built on that foundation: states caught these problems first, states responded fastest, and a federal power grab could make things worse. The CLARITY Act, as written, would move oversight of digital asset markets from state regulators to the Commodity Futures Trading Commission. James thinks that’s a mistake.
State enforcement isn’t just redundant paperwork.
She made that point hard. New York has been one of the few jurisdictions that’s actually held crypto platforms accountable — not just issued guidance and hoped for the best. Shifting primary oversight to the CFTC, she said, would undermine the ability of states to investigate fraud, pursue bad actors, and move quickly when new scams emerge. Federal agencies are slower. State AGs can act. That flexibility matters when the market changes as fast as crypto does.
What James Wants Congress to Mandate
Her testimony wasn’t just a complaint. She brought a list. James wants Congress to require crypto platforms to follow anti-money laundering rules, know-your-customer protocols, and cybersecurity standards. She also wants active monitoring for suspicious activity and market manipulation — not passive compliance, but real-time attention. And if a platform fails to protect customers from fraud, she wants it held financially liable. That’s a big ask. It would create a direct financial incentive for platforms to actually prioritize security instead of treating compliance as a box-checking exercise.
She went further. James wants Congress to ban the conversion of mixer-linked or untraceable cryptocurrencies into US dollars. Mixers are tools that obscure the origin of funds — they’re widely used in money laundering schemes — and cutting off the conversion pathway would make it significantly harder to clean dirty crypto through legitimate on-ramps. It’s not a perfect solution, but it’s a targeted one. The goal is to make the laundering pipeline harder to use, not to ban crypto outright.
She also pushed hard to preserve existing state laws covering money transmission, commodities, and securities. Those aren’t legacy rules that need replacing. They’re the tools state regulators actually use. Strip them away and you don’t get a cleaner federal framework — you probably get a gap that bad actors walk right through.
The Conflict-of-Interest Problem
One piece of James’s testimony that’s gotten less attention: she wants to bar elected officials and former government officials from regulating crypto if they hold financial interests in it. No details were given on exactly how that would be enforced, and it’s unclear whether Congress has appetite for it. But the concern is real. Crypto has become a political issue, and the line between policy and personal financial interest can get murky fast. James wants guardrails.
And she’s not wrong that the risk exists. When regulators or lawmakers have skin in the game, the incentive to look the other way on enforcement gets stronger. Her proposal aims to keep oversight clean. Whether it goes anywhere is a different question.
The broader tension here is jurisdictional. State regulators and federal agencies have been circling each other over crypto for years. The CLARITY Act would tilt the balance decisively toward Washington. James is arguing that’s the wrong move — not because federal oversight is bad in principle, but because state-level enforcement has actually worked. New York’s track record on crypto accountability is probably the strongest in the country. Giving that up for a federal framework that’s still being built seems like a bad trade, at least from her perspective.
She’s also pointing to something the industry sometimes glosses over: the market is still changing fast, and regulations need to keep pace. A centralized federal structure might be slower to adapt than a patchwork of state regulators who can move independently. That’s a feature, not a bug, when you’re dealing with a sector that invents new financial instruments on a monthly basis.
No official comments from the parties named in the legislation were available at the time of her testimony. The debate over the CLARITY Act continues in the Senate.
James’s written testimony preserved her call to keep existing state laws intact — money transmission, commodities, securities — as the baseline for any new federal framework that emerges.
Frequently Asked Questions
What does the Digital Asset Market Clarity Act propose?
The CLARITY Act would shift oversight of digital asset markets away from state regulators and hand primary authority to the Commodity Futures Trading Commission.
How much have crypto scam losses totaled in New York?
Per Attorney General Letitia James, reported losses from crypto scams reached nearly $500 million over five years, with complaints to her office tripling in the past three years.
What did James say about mixer-linked crypto?
James wants Congress to ban the conversion of mixer-linked or untraceable cryptocurrencies into US dollars, targeting a key pathway used to launder money through digital assets.
