Banking groups and state attorneys general challenge CLARITY Act

The banking associations, writing to Senate leaders John Thune and Chuck Schumer, warned that Section 10404 of the bill could allow crypto companies to offer stablecoin rewards that function as interest. They argue this would drain deposits from regulated banks, effectively hindering the industry’s ability to extend credit to households and small businesses. The groups specifically flagged the use of the word “solely” in the bill's language, contending it creates a loophole that allows providers to disguise interest payments as other types of rewards. They are urging Congress to adopt a “substantially similar” economic test to ensure that stablecoin incentives are scrutinized based on their actual effect rather than their chosen structure.

Simultaneously, a bipartisan coalition of 17 attorneys general, led by New York’s Letitia James, is pushing back against provisions they claim would preempt state authority. The officials fear that the bill could empower the Securities and Exchange Commission to override state registration requirements, complicating their ability to investigate crypto fraud. Citing FBI data showing $11.4 billion in cryptocurrency-related losses during 2025—a 22% increase over the previous year—the coalition argues that stripping states of their enforcement tools would embolden scammers and leave local investors vulnerable. As the Senate prepares for the procedural vote, the lack of a clear path to 60 votes underscores the volatility of the bill’s prospects, with analysts at Galaxy Digital recently slashing the likelihood of passage this year to roughly 10%.