Crypto Chaos: States Panic Over Fraud-Free Future 😱

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So, apparently, state regulators are having a collective meltdown over the upcoming crypto market structure bill, worrying it might turn them into glorified paperweights in the fight against digital asset fraud. 🚨

State Regulators Sound The Alarm Over Crypto Bill

Regulators from Alabama to Montana have hit the panic button, warning that the bill could “diminish their ability to pursue wrongdoers.” Amanda Senn, director of the Alabama Securities Commission, pointed out that the bill doesn’t grant state regulators the power to supervise digital asset companies. Meanwhile, federal enforcement against crypto companies has been practically nonexistent since Trump took office in January. 📉

The SEC, DOJ, and CFTC have either shut down or downsized their crypto enforcement units, dismissing most cases against crypto firms. According to Cornerstone Research, the SEC had initiated only nine crypto-related enforcement actions by the end of August, a far cry from the 47 and 33 actions taken in 2023 and 2024, respectively. At this rate, 2025 could be the year crypto fraudsters throw a massive party-uninvited, of course. 🎉

“The dam is going to break,” Senn warned. “If you don’t have the states paying attention and prosecuting fraud, nobody is looking out.” Montana State Auditor James Brown chimed in, saying the bill’s changes to the definition of an investment contract could let criminals “wiggle out of being prosecuted.”

State Anti-Fraud Protections In Danger?

State regulators are now proposing changes to the bill, which is expected to go into markup after late October. One major gripe is that the bill doesn’t require crypto businesses to register with states or respond to their inquiries. Also, the bill changes the federal definition of an investment contract, adding more hoops for regulators to jump through. 🏀

In September, the North American Securities Administrators Association (NASAA) sent a letter to Senators, warning that Congress must preserve state anti-fraud enforcement authorities in the crypto bill. They argued that these protections are “essential in the ongoing fight against online scams.” NASAA offered two recommendations: reject provisions that redefine the investment contract test and enact the Support Anti-Fraud Enforcement (SAFE) Act. 🛡️

Not everyone agrees, though. Some industry players think regulators will still be able to pursue criminals “in the name of consumer protection.” Mauro Wolfe, a partner at Duane Morris, told Bloomberg that defense lawyers will likely argue states can’t enforce these laws, and it’ll end up in court. 🧑‍⚖️

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2025-10-04 06:13