On October 20, a coalition of 21 state attorneys general submitted a joint comment letter to the SEC in response to the agency’s request for information on cryptoassets regulation. The letter urged the SEC to provide “narrowly tailored definitions regarding when a digital asset or related transaction constitutes a security under federal securities laws” to avoid preempting state authorities like money transmission laws, undermining state consumer protection efforts, and hindering state operations such as administering unclaimed property laws. The letter argued that state law is often better suited to address fraud and consumer harm in the crypto sector and that ambiguity in federal definitions around digital assets risked downstream consequences for state enforcement.

The attorneys general emphasized that states had primary responsibility for consumer protection and economic regulation, and highlighted that many states had enacted money transmission laws that specifically covered virtual currencies and required licensing, bonding and compliance with anti-fraud and anti-money laundering standards. The coalition argued that federal overreach could disrupt existing state regulatory frameworks, and limit states’ ability to address fraud and other risks in the digital asset market. The letter urged the SEC to adopt clear and narrow definitions for cryptoassets and transactions, and to avoid duplicating or overriding state laws to ensure robust consumer protections remain.