Eight banking associations and 17 state attorneys general have publicly challenged key parts of the CLARITY Act ahead of a Sept. 15 procedural vote in the U.S. Senate, setting up the most serious opposition yet to a bill that would create the country’s first comprehensive market-structure framework for digital assets. The procedural motion requires 60 votes to open debate, a threshold that has already forced negotiators into a flurry of last-minute changes. With Republicans holding 53 seats, supporters must pull at least seven Democrats to advance the legislation, and as of Sept. 14 no leader had rounded up the necessary commitments. The Banks State AGs CLARITY Act opposition now spans two distinct fronts: deposit economics and federal preemption, and the two coalitions are pressing lawmakers from different angles in the same short window.
Banks State AGs CLARITY Act opposition takes aim at rewards and fraud enforcement
The eight banking groups, writing to Senate Majority Leader John Thune and Minority Leader Chuck Schumer on Sept. 14, said they support a lasting federal framework for digital assets but warned that the current language could let crypto firms pay stablecoin holders rewards that behave like interest on bank deposits. In their view, deposit accounts are the fuel that keeps lending flowing to households, farmers, small businesses and local communities, and any product that mimics interest without being subject to the same rules risks pulling that fuel out of the system. The associations warned that deposit losses could “hinder the ability of depository institutions to extend credit to their customers.”
Much of the dispute centers on Section 10404, which governs payments and incentives tied to payment stablecoins. The section already prohibits some interest and yield payments, but the banks argue that wording in subsection (c)(1)(A), particularly the word “solely,” could leave a loophole for rewards calculated from a user’s stablecoin balance. They have asked Congress to strip “solely” from the provision and revise references to “a payment stablecoin balance” and “an interest-bearing bank deposit,” a change that would make the prohibition track the economic effect of a reward rather than its label.
The banks also want a “substantially similar” standard so regulators can decide whether a stablecoin reward functions like bank interest regardless of how the provider describes it. Separately, they are asking lawmakers to delete Section 10404(3)(B), which they say could allow rewards tied to balance, holding period or customer tenure. Banking organizations have made clear they would rather block interest-like rewards in the statute itself than rely on a temporary Treasury intervention after deposits have already drained away.
Where state attorneys general draw the line
While the banks have focused on deposits, a bipartisan coalition of 17 state attorneys general led by New York Attorney General Letitia James has objected to the federal preemption provisions embedded in the bill. The coalition warned that the Securities and Exchange Commission could use those provisions to override parts of state securities regulation, including registration requirements that states rely on to police investment offerings sold to local residents. James said the Clarity Act “would embolden scammers and potentially strip attorneys general of our authority to protect our states’ investors and their wallets.”
The officials are not opposing federal crypto rules across the board. Their narrower request is that any national framework preserve state registration systems and the existing federal-state enforcement partnership. State securities agencies and attorneys general typically investigate local complaints, seek restitution and enforce consumer-protection laws, and the coalition argues that ambiguous preemption language would give defendants a fresh argument that federal law has displaced state authority. The bipartisan character of the group, which includes officials from California, Illinois, Arizona, Kansas, Ohio and Wisconsin, gives the Banks State AGs CLARITY Act opposition a cross-aisle flavor that cuts against the usual partisan framing on Capitol Hill.
The attorneys general also pointed to the scale of the problem. According to figures cited by the coalition, complaints filed with the FBI in 2025 involved $11.4 billion in cryptocurrency losses, a 22% increase over the previous year, although such complaints do not by themselves establish that any violation occurred. James raised similar concerns in July, urging lawmakers to keep state enforcement powers intact even as they strengthen anti-money-laundering, ethics and investor-protection rules. The revised bill does allow state attorneys general to enforce conflict-of-interest restrictions for public officials, but the coalition said that concession does not resolve their core concerns about securities registration and fraud enforcement.
The 60-vote math and the path forward
The Senate’s Sept. 15 cloture vote will only decide whether debate begins; it will not pass the bill or send it to the president. The House cleared its version of the CLARITY Act 294 to 134 in July 2025, and the Senate Banking Committee advanced its proposal 15 to 9 in May 2026, but disagreements over stablecoin rewards, financial crime rules, ethics and protections for noncustodial software developers kept the measure off the floor before the August recess. Majority Leader Thune filed cloture on Aug. 8, and the 635-page draft now contains 126 changes requested by Democratic negotiators.
The latest Republican proposal would give the Treasury secretary authority to impose an 18-month circuit breaker on stablecoin rewards if payment stablecoins trigger substantial deposit outflows from community banks. Banking groups, however, have signaled that a post-hoc safety valve is not enough, and the attorneys general remain unconvinced that the bill protects their ability to chase fraud. Treasury Secretary Scott Bessent has urged senators to approve the market-structure measure, while Galaxy Digital has lowered its estimated chance of passage in 2026 from about 75% in May to roughly 10% in September, underscoring how steep the climb has become for a bill that must clear the Banks State AGs CLARITY Act opposition before it can move.
Source: https://crypto.news/banks-and-state-attorney-general-challenge-clarity-act/