Eighteen attorneys general object to the part of the Clarity Act that did not change

What happened

Eighteen state attorneys general wrote to Senators Tim Scott and Elizabeth Warren, the chair and ranking member of the Senate Committee on Banking, Housing, and Urban Affairs, urging the Senate to vote against the Digital Asset Market Clarity Act in its current form. The letter is on New York Office of the Attorney General letterhead, dated 14 September 2026, runs to six pages including two pages of signatures, and is published by the New York Attorney General at a file named 2026.9.13-clarity-act-letter-with-signatures.pdf. It opens 'On behalf of New York, Arizona, California, Connecticut, Delaware, Illinois, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, Ohio, Virginia, Washington, Wisconsin and the District of Columbia, ("Multi-State Coalition"), in connection with the CLARITY Act (H.R. 3633 R.S.), we write to urge the Senate to expressly preserve the police powers of the states'. Section A sets out the scale of the problem with sourced figures: the FBI reported $11.4bn in losses from complaints involving cryptocurrencies in 2025, up 22 per cent on 2024 with an average reported loss of $62,604; the FTC reported $1.78bn, up 25.6 per cent; and TRM Labs estimated $158bn of illicit cryptocurrency volume in 2025, 'an increase of nearly 145% from 2024'. It says the states have brought 'over 330 anti-fraud enforcement actions against scammers in the cryptocurrency ecosystem' since 2017, citing an appendix to a letter from the North American Securities Administrators Association. Its complaint about the drafting is that 'While the current draft of the CLARITY Act reserves certain powers for states to prosecute fraud, the language is often ambiguous, unclear, or confined in ways that either create the opportunity to challenge state police powers or outright deprive the states of their ability to continue to combat the scam epidemic', and that 'the benefit of litigation and delay caused by ambiguity accrues to bad actors'. Section B is about registration: state licensing and registration regimes 'remain important frontline investor protection tools', they fund the programmes that fight investment fraud, and 'To the extent registration exemptions are necessary, they should be narrowly tailored'. Section D names the mechanism. The bill 'disrespects that balance by attempting to give the U.S. Securities and Exchange Commission ("SEC") preemption authority indirectly through a new "qualified transaction" loophole in the Securities Act of 1933', and in doing so 'the bill would render meaningless the "covered security" designations in Section 18 of the Securities Act', a designation otherwise reserved for offerings carrying heightened investor protections or limited to accredited investors. 'In CLARITY's current form, no such investor protections exist.' The conclusion is unambiguous: 'The Senate should vote NO on the current version of the CLARITY Act unless and until the states' powers to police the market and protect investors are fully preserved.' The accompanying press release lists four things the coalition wants: enforcement preserved for tokenized and non-tokenized securities alike, federal and state cooperation preserved, the states' role as regulators codified with their registration regimes intact, and ambiguous language clarified.

Why it matters

The letter arrived roughly eight hours after the sponsors published a final text they say contains 126 changes made at Democrats' request, and the two documents do not meet. The concession the sponsors lead with on this subject is a role for state attorneys general in enforcing the ethics ban on officials issuing or sponsoring digital assets. The letter does not mention it. It contains no occurrence of the word ethics, no reference to the sections that create that right of action, and no acknowledgement that anything on the subject has moved. What it objects to is section 10108 of the securities division, and both texts were read side by side here: subsections (e) and (f) are identical in the 10 September and 14 September versions. So the states are objecting to a provision that 126 changes did not touch, which explains why a bill described by its sponsors as finished still has eighteen attorneys general against it. Read the provision and the objection is exact rather than rhetorical. Section 18 of the Securities Act of 1933 is the statute that tells a state when it may not require registration, and the bill amends it in two ways. It inserts the phrase 'in a qualified transaction or' at four points and directs the Commission to define 'qualified transaction' alongside 'qualified purchaser', extending the definitional power to 'categories of transactions, including secondary transactions' and requiring 'due regard to the facilitation of capital formation and the promotion of innovation'. And it adds a new subparagraph (H) making 'Commission rules or regulations issued under section 28' a category of covered security, prospectively only. Taken together those hand the Commission a rule-writing power to decide, transaction type by transaction type, where state registration stops applying. The states' point is that Congress has always drawn that line itself by naming what qualifies, and that the trade has been a real one: a state gives up registration over an offering that is exchange-listed or confined to accredited investors, and gets federal protections in exchange. The bill takes the first half without specifying the second. Beside that, the bill's own savings clause is what the sponsors will point to, and it is narrower than it sounds. Section 10108(d) preserves 'any State consumer protection law, including common law, or a remedy available under any such law', and the Agriculture division adds its own clarification of state consumer protection law. Consumer protection law is not securities registration law. An attorney general can still sue a scammer for deception; what is at issue is whether the state can require the platform to register with it first, which is the tool that catches a firm before there is a victim to deprive. The composition of the coalition is the other thing to notice. Five of the eighteen offices are already in this register because they have been litigating against onchain venues: New York, New Jersey, Michigan, Washington and Wisconsin have all brought or defended actions this corpus carries, mostly against prediction markets, and mostly on the question of whether a federal designation displaces state law. Those are the offices that have just spent a year finding out what federal preemption feels like in practice, and they are the ones writing.

What is not settled

Whether the letter changes a vote is unknowable and the timing suggests it is not meant to; a procedural vote scheduled for the following afternoon leaves no drafting time. The counts do not agree and the primary settles them: the New York release says James 'led a bipartisan coalition of 17 other attorneys general', the signature block carries eighteen names across two pages, the Washington Examiner and Crypto Briefing's body text both say eighteen, and Crypto Briefing's headline says seventeen. The letter itself states no party affiliations; the Washington Examiner identifies the Kansas and Ohio attorneys general as the only Republicans, and that attribution is the outlet's rather than the document's. One report misdescribes the letter. The Washington Examiner writes that it 'notes that while the current draft of the Clarity Act includes a "meaningful role" for state attorneys general to sue if federal officials break the law, the language does not establish clear guidelines that preserve state investigative authority'. The phrase 'meaningful role' is the sponsors', from the release published the same weekend, and it appears nowhere in the letter; nor does the subject. What the letter does not do is propose text. It says that NASAA 'has proposed language to expressly preserve state enforcement authority' and cites a NASAA letter of February 2026, but sets out no wording of its own, so there is nothing for a drafter to accept. Its own citations are not perfectly kept either: footnote 5 dates the NASAA letter it relies on for the 330 enforcement actions to 7 July 2025 while the document it links is titled and dated 5 August 2025, and the two NASAA letters cited are signed by different presidents of that association. It is also unstated what the coalition would accept. Section B asks that registration exemptions be 'narrowly tailored', which concedes that some are appropriate, without saying which. And the deepest question the letter raises is left open by it: if the Commission may designate covered securities by rule, nothing in the bill says whether a future Commission could narrow the designation again, or what a state would be able to do in the interval.