James submitted her objections to the Senate Banking Committee as the 616-page bill, known as the CLARITY Act (H.R. 3633), races toward that deadline, when Congress recesses for its state work period. The bill cleared the House 294 to 134 in July 2025 and passed the Senate Banking Committee 15 to 9 in May 2026. It still needs 60 Senate votes to clear a filibuster, and no floor vote is currently scheduled.

What the bill would do

The CLARITY Act is designed to resolve a decade-long turf dispute between the Securities and Exchange Commission and the Commodity Futures Trading Commission by formally designating most major crypto assets as "digital commodities" under CFTC jurisdiction. A March 2026 joint guidance from the SEC and CFTC already named 16 assets in that category, including Bitcoin, Ether, Solana, and Cardano. Under the bill, state investor protection laws would be subject to federal preemption, meaning they could be overridden by federal rules on the same subject.

James's core objection is that the current draft removed a provision that would have let state attorneys general bring enforcement cases when federal agencies chose not to act. Enforcement now falls entirely to the Department of Justice. "Congress must not interfere with states' investor protection laws," James stated in her submission to the Senate Banking Committee. "The legislation must not reduce enforcement efforts, and state anti-fraud and registration laws must be preserved."

The enforcement gap in numbers

James argues the DOJ simply does not have the ground-level presence to replace state enforcement. Her office noted that state and local agencies account for 99% of U.S. law enforcement bodies and 98.8% of all arrests. The FBI recorded $11.4 billion in crypto-related losses in 2025, a 22% increase year-on-year, while the FTC counted $1.78 billion in losses over the same period. The average victim lost $62,604.

New York alone received approximately $500 million in crypto complaints over five years, with the volume tripling in the last three years. James's office has cited recoveries of $2 billion from Genesis, $50 million from Gemini, and $5 million from Uphold HQ as examples of state-level enforcement in her congressional arguments. Her office has also separately recovered $45 million from Block, the company behind Cash App, in a state-level action.

"The CLARITY Act protects the anonymity of bad actors, enables a rigged market, and fails to provide substantial regulatory guardrails to prevent and prosecute fraud," James said in a 2025 hearing statement submitted to the House Financial Services Committee.

Ethics rules and the presidential stake problem

James also criticized a section of the bill that would allow sitting presidents to hold crypto assets through blind trusts, with a one-year delay before any conflict-of-interest restrictions take effect.

The Republican July 22 Senate draft includes a sunset clause on this provision that expires January 20, 2029, which coincides with the end of President Trump's current term.

Trump's mandatory 2025 federal financial disclosures showed approximately $1.4 billion in crypto-related income, including proceeds from the $TRUMP meme token and World Liberty Financial.

James flagged that Binance holds 87% of USD1, a stablecoin issued by World Liberty Financial, pointing to that concentration as a concrete example of why conflict-of-interest rules require teeth. "Officials should not regulate any industry they earn money from," James said.

A separate provision drew criticism from James and the National Sheriffs' Association alike: language that would exempt crypto mixer operators from money transmitter registration requirements. Mixers are software tools that pool and scramble transactions to obscure their origin, a function that James and the National Sheriffs' Association argue is routinely exploited for money laundering.

The stakes beyond U.S. borders

The enforcement debate is being watched closely in countries with their own federal-versus-central questions. Pakistan passed the Virtual Assets Act 2026 in March, creating a single national regulator (PVARA) with no provincial enforcement counterpart, a model that aligns more closely with the CLARITY Act's federal-primacy approach. India has no dedicated crypto legislation yet, leaving enforcement to financial crime statutes written before blockchain existed. An estimated ₹2,500 crore ($300 million or more) in crypto-linked losses has been reported through that regulatory vacuum. Courts and the Securities and Exchange Board of India have pushed for a comprehensive framework, but no bill has been tabled.

South Africa moved in the opposite direction. Its 2026 draft capital flow rules gave enforcement officers the power to compel individuals to hand over private keys, with penalties up to one million rand or five years in prison. If the CLARITY Act passes with mixer exemptions intact, critics argue it could create a pathway for U.S.-based infrastructure to route around these stricter African controls.

Globally, scam networks across Southeast Asia drove between $88 billion and $114 billion in victim losses in 2025, according to a United Nations report published July 22, with most of those losses moving through or ending as crypto.

Cross-border fraud of that scale depends on information-sharing between national and sub-national enforcement bodies. A U.S. framework that concentrates authority in one federal agency, critics including African financial intelligence units that rely on FinCEN referrals argue, narrows the channels through which those referrals can flow.

What comes next

Congress has less than two weeks before the August 10 recess. Three disputes remain unresolved in Senate negotiations: enforceable ethics rules, how broadly to define developer liability for DeFi platforms (with Democrats seeking to tighten the current "knowingly facilitate" standard they view as an illicit-finance loophole), and whether stablecoin yield programs should fall under the interest restrictions already applied to bank-issued stablecoins in the GENIUS Act, the federal stablecoin law signed in July 2025. That broader bill offers a cautionary precedent: the GENIUS Act's own first-year implementation remains incomplete, with the FDIC, OCC, and Treasury still finalizing rules, underscoring how slowly even narrower crypto legislation moves through the regulatory pipeline.

One source familiar with the talks told CoinDesk that "progress has slowed to a crawl." If the bill does not reach the Senate floor before the recess, negotiations will carry into the fall with no guarantee of a 2026 vote.