Multiple state authorities shared concerns about the upcoming crypto market structure legislation and its impact on their ability to prosecute fraudsters in crimes related to digital assets.
Amanda Senn, director of the Alabama Securities Commission, told the news media outlet that the Senate’s draft of the legislation, the Responsible Financial Innovation Act, does not give state-level regulatory agencies implicit authority to supervise digital asset companies.
This oversight could mean that these authorities may not be able to prosecute offenders for fraud. Meanwhile, Federal enforcement against crypto companies has significantly decreased since the Trump administration took office in January.
According to Cornerstone Research data cited by Bloomberg, the SEC had initiated nine crypto-related enforcement actions by the end of August, a significant drop from the 47and 33 actions taken in 2023 and 2024, respectively. At this pace, 2025 could see the lowest crypto-related enforcement actions since 2017.
“The dam is going to break,” Senn argued. “If you don’t have the states paying attention and prosecuting fraud, nobody is looking out.”
The association argued that “it is critical that the resulting framework preserve state anti-fraud protections,” as they protect investors and are “essential in the ongoing fight against online scams.” To achieve this, NASAA offered two recommendations to the lawmakers.
First, they suggested that lawmakers reject provisions that redefine the investment contract test, explaining that “upending decades of securities law as contemplated in Section 105 will have devastating effects on anti-fraud efforts by adding so many elements and conditions to the investment contract analysis that form, not substance, will determine whether regulators can take action.”
Second, they recommended that Congress enact the Support Anti-Fraud Enforcement (SAFE) Act to ensure states have the anti-fraud authority necessary to respond to residents’ complaints involving digital assets.
“I do understand why a state would be worried about it, in particular if the federal system doesn’t engage in any enforcement,” Mauro Wolfe, leading partner of Duane Morris’s Digital Assets and Blockchain Group, told Bloomberg. “I do think this will be an area where defense lawyers will say the states can’t do it, and it will be litigated,” he concluded.
