Banks and state attorneys general challenge CLARITY Act ahead of vote

Eight banking associations and 17 state attorneys general have challenged parts of the CLARITY Act before a Sep. 15 procedural vote that requires 60 Senate votes.

Eight banking associations wrote to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer on Sep. 14, requesting changes to the CLARITY Act before the Senate considers whether to advance it.

Although the associations supported creating lasting rules for digital assets, they argued that the current language could let crypto companies offer stablecoin rewards that function like interest on bank deposits. Their requests center on Section 10404, which covers payments and incentives linked to payment stablecoins.

The banking letter adds another dispute to the Senate negotiations as lawmakers try to gather the 60 votes needed to proceed. Separately, a coalition led by New York Attorney General Letitia James has warned that federal preemption provisions could restrict state securities enforcement and make it harder to pursue crypto fraud.

Banks say stablecoin rewards could drain deposits

Bank deposits fund lending to households, farmers, small businesses, and local communities, the associations said. In their view, stablecoins that offer incentives similar to deposit interest could encourage customers to move money out of regulated banks.

“Deposits are the foundation of the banking system,” the groups said, arguing that deposit losses could “hinder the ability of depository institutions to extend credit to their customers.”

Section 10404 prohibits certain interest and yield payments, but the associations said its wording could leave room for rewards calculated from a customer’s stablecoin holdings. In particular, they objected to the word “solely” in subsection (c)(1)(A), saying the restriction might not cover incentives tied partly to a user’s balance.

The groups asked Congress to remove “solely” and revise references to “a payment stablecoin balance” and “an interest-bearing bank deposit.” Their proposal would target reward programs that resemble deposit interest, even if providers attach another condition to the payment.

Seeking a test based on economic effect, the associations also requested a “substantially similar” standard for stablecoin incentives. Such a test would allow regulators to examine whether a reward acts like bank interest instead of relying only on the name or structure chosen by its provider.

Another request concerns Section 10404(3)(B), which the banking groups want Congress to remove. They said the provision could permit companies to calculate rewards according to a stablecoin balance, the length of time an asset is held, or a customer’s tenure with a platform.

The latest Republican proposal would give the Treasury secretary authority to impose an 18-month circuit breaker on stablecoin rewards if payment stablecoins cause substantial deposit outflows from community banks. According to the revised Senate proposal, the 635-page draft contains 126 changes requested by Democratic negotiators.

Banking organizations, however, are asking lawmakers to prevent interest-like rewards through the bill itself instead of relying only on a temporary Treasury intervention after deposit losses occur.

State attorneys general want enforcement powers preserved

While banks have focused on deposits and lending, the state officials have objected to provisions governing the division of authority between federal and state regulators.

James led a bipartisan coalition of 17 attorneys general in urging the Senate to reject the current bill. The group said the legislation could let the Securities and Exchange Commission override parts of state securities regulation, including registration requirements used to oversee businesses selling investments to local residents.

“As written, the Clarity Act would embolden scammers and potentially strip attorneys general of our authority to protect our states’ investors and their wallets,” James said.

According to the coalition, granting the SEC power to preempt state registration authorities could create uncertainty over the cases that state officials may bring against crypto businesses. The concern applies directly to American investors because state securities agencies and attorneys general often investigate local complaints, seek restitution, and enforce state consumer-protection laws.

The officials also asked Congress to retain state registration systems and the existing federal-state enforcement partnership. Their position does not oppose federal crypto rules outright; instead, the coalition argued that a national framework should not remove state tools already used against fraud.

As previously covered by crypto.news, the revised bill would allow state attorneys general to enforce conflict-of-interest restrictions for public officials. James and the other officials said that the addition did not settle their separate concerns about securities registration and fraud enforcement.

Crypto losses support states’ fraud concerns

The attorneys general tied their warning to the amount of money Americans have lost through crypto-related schemes. According to figures cited by the coalition, complaints submitted to the FBI during 2025 involved $11.4 billion in cryptocurrency losses, up 22% from the previous year.

Such complaints can include several types of crime, and a complaint does not by itself establish that a violation occurred. Still, the coalition used the FBI total to argue that states need to retain their authority while digital-asset fraud continues to affect U.S. residents.

State regulators can pursue conduct under local securities, consumer-protection, and fraud laws, depending on the facts and the law in each jurisdiction. The attorneys general fear that unclear preemption language could lead defendants to challenge state cases by arguing that federal law has displaced local authority.

James raised similar objections in July, when she asked lawmakers to preserve state enforcement powers while strengthening provisions related to money laundering, ethics and investor protection. Monday’s coalition included officials from states such as California, Illinois, Arizona, Kansas, Ohio and Wisconsin.

The bipartisan membership gives the opposition a different character from the party negotiations taking place in the Senate. Rather than focusing on whether Democrats or Republicans control the final text, the attorneys general have framed their dispute around the powers their offices would retain after enactment.

CLARITY Act faces a 60-vote procedural test

The Senate is scheduled to hold its initial procedural vote on Sep. 15. The action would determine whether senators begin debating the legislation; it would not enact the CLARITY Act or send it to the president.

Republicans hold 53 Senate seats, meaning supporters need votes from at least seven members of the Democratic caucus if every Republican backs the motion. No Democratic leader had announced enough support to clear that threshold as of Sep. 14.

Lawmakers have negotiated disputes involving government ethics, stablecoin rewards, financial crime rules and protections for developers of noncustodial software. The latest draft also addresses the roles of the SEC and the Commodity Futures Trading Commission in supervising digital assets and crypto intermediaries.

The House passed its version of the CLARITY Act by a 294–134 vote in July 2025, while the Senate Banking Committee advanced its proposal 15–9 in May 2026. Senators did not hold a floor vote before the August recess as disagreements continued over several parts of the bill.

Earlier coverage of the scheduled procedural vote noted that Senate Majority Leader Thune filed cloture on Aug. 8. Treasury Secretary Scott Bessent has urged senators to approve the market-structure measure, while Galaxy Digital lowered its estimated chance of passage in 2026 from about 75% in May to roughly 10% in September.