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On October 20, 2025, 20 Republican state attorneys general, led by Iowa's Brenna Bird, wrote a letter to SEC Commissioner Hester M. Peirce, urging the SEC to provide "clear, narrowly tailored definitions regarding when a digital asset or related transaction constitutes a security under federal securities laws." The letter, sent in response to the SEC's solicitation of public input on issues relating to cryptocurrency and digital assets, states that clarity is essential to prevent federal overreach which could negatively impact the AGs' ability to enforce consumer protection laws in their states.
The AGs contend that the federal government has only limited powers to protect consumers, and that the states have primary responsibility over consumer protection and economic regulation. In the absence of clear definitions, they argue, there is a risk of federal overreach, which could lead to preemption of important state laws that are specifically tailored to digital assets. The AGs point out that at least 40 states have introduced or enacted legislation on digital assets–laws that provide regulatory certainty for businesses, allowing them to innovate, invest, and create jobs in their states. The AGs argue that federal overreach could also preempt state money transmitter statutes, criminal laws, and consumer protection laws.
The AGs also argue that states' unfair and deceptive acts and practices (UDAP) laws are better suited to protect consumers in the digital assets space than any federal law. State UDAP statutes are broader than federal securities laws, they claim, allowing states to capture practices that may not qualify as securities violations. Finally, the AGs argue that clear definitions are necessary for states to determine whether it is lawful for them to enforce their unclaimed-property statutes. Many states have laws that treat abandoned virtual currency as escheatable property that must be remitted to the state. Because many states do not have digital wallets, they require the holder of unclaimed digital assets to "liquidate" those assets and then remit the cash to the state. The AGs are concerned that such a transaction could constitute the unlawful sale of unregistered securities.
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