Leaving state securities regulators out of crypto enforcement in potential legislation spelling out the structure of the crypto market would “be a decision with net-negative, significant consequences for Americans,” according to the North American State Securities Regulators Association.
In a letter to U.S. Sens. Tim Scott (R-S.C.) and Elizabeth Warren (D-Mass.), the respective chairman and ranking member of the Senate Banking Committee, NASAA President and Wisconsin Securities Division Administrator Leslie Van Buskirk warned senators about the necessity of state regulators in protecting investors from crypto fraud, noting they had brought over 330 enforcement actions involving digital assets since 2017.
“Our record demonstrates the good work we have done and the value we bring to the state-federal regulation of the capital markets,” Buskirk wrote. “I have no reason to believe our federal partners would come close to making up the difference if my state colleagues and I were denied the opportunity to pursue and address fraud.”
Crypto legislation has progressed in fits and starts since the Senate passed the GENIUS Act earlier this year, which introduced a stablecoins framework. House GOP leaders are calling next week “Crypto Week,” hoping to make headway on a more expansive market structure bill detailing regulators’ roles.
While House Financial Services Committee Chairman French Hill (R-Ark.) is pushing for Congress to take up his market structure bill, GOP senators claim they won’t address the issue until September. Meanwhile, Democrats are holding out for restrictions on President Donald Trump’s encroachment in the crypto space. (In addition, the crypto platform Coinbase is spending six figures on a D.C. ad campaign lobbying lawmakers to pass market structure legislation.)
However, as policymakers debate the bill, Alabama Securities Commission Director Amanda Senn told WealthManagement.com that legislators need to understand “that without clear authority to investigate and prosecute frauds in the crypto industry, many investors in our states will have no recourse when it comes to cryptocurrency frauds.”
Senn has been with Alabama’s securities commission since 2008 and is NASAA’s 2024-2025 Enforcement Section Co-Chair. Senn and other state regulators worry that if more crypto-related enforcement authority is placed under the purview of federal regulators as opposed to state partners, many cases will go unscrutinized due to the sheer volume of fraud schemes.
Senn recalled a recent case where several “pig butchering” scammers victimized Alabama residents through crypto. (Pig butchering involves a scammer’s attempt to slowly siphon funds from their victim to avoid suspicion.)
According to Alabama regulators, the victims met the fraudsters through social media apps (including Bumble and WhatsApp); in one case, the fraudster purported to be a crypto expert teaching victims how to invest in cryptocurrency, while in another case, the fraudster conned a victim into joining a fake online crypto trading platform, falsely claiming it was SEC-registered and associated with Charles Schwab.
In each case, the victimized families lost about $185,000 and $395,000 (with the securities commission able to recover some of the funds). While Senn noted those sums were significant funds for the investors victimized in these cases, it can be difficult for a larger regulator to handle the volume of cases involving losses of that magnitude.
“These are our friends and family,” she said. “They’re people in our communities, and nobody wants to be helpless when it comes to helping a victim of fraud or crime.”
State securities regulators (and state attorneys general) are also mulling their options as the SEC continues changing its approach to regulating crypto under the Trump administration.
In April, Oregon Attorney General Dan Rayfield sued Coinbase, accusing it of committing “ongoing and widespread violations” of state securities laws and encouraging other states to fill the “enforcement vacuum” purportedly left by federal regulators in the crypto space.
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