NASAA Calls for State Role in Digital Asset Oversight
Commentary by Steven Lofchie
The North American Securities Administrators Association ("NASAA") recommended changes to the House bill on digital asset market structure to ensure that state securities regulators continue to play their "critical" role in the "dual system of securities regulation in the United States."
NASAA's comment letter was directed at the prior Discussion Draft version of the bill. House Agriculture Committee Chair Glenn Thompson and House Financial Services Chair French Hill formally submitted to Congress the final version - the Digital Asset Market Clarity Act of 2025 (the "CLARITY Act" or the "Act") on May 29th. (See recent coverage).
NASAA expressed concern that the Discussion Draft’s "silence" on state enforcement authority would hinder states’ ability to protect investors in the evolving digital asset market.
NASAA recommended inserting text into the bill to: (i) "preserve state securities enforcement against fraud;" (ii) "make evident the role of state securities regulation in the registration and regulation of brokers, dealers, investment advisers and their associated persons;" and (iii) "establish a single federal regulator for investment contract assets."
NASAA warned that excluding state oversight would undermine regulatory consistency and called for inserting a "Clarification of State Anti-fraud Authority" into the Securities Act of 1933. NASAA also urged Congress to direct the SEC and CFTC to enter into memoranda of understanding with state regulators "to facilitate the implementation of the authorities of the States." NASAA's recommendation, to establish a federal exemptive framework for "investment contract assets" under the securities laws, would vest oversight solely with the SEC. NASAA said this would serve to avoid redundant infrastructure, reduce jurisdictional disputes, and leverage existing state-federal systems.
Commentary
Between the publication of the Discussion Draft on May 5 and the subsequent release of the Digital Asset Market Clarity Act of 2025 on May 29, language was added that addressed at least one of NASAA's concerns - preserving certain State antifraud authority of "general applicability."
One of the more significant recommendations that NASAA makes is that jurisdiction of all digital product assets be provided to the SEC, rather than split with the CFTC. The letter proposes to do this by defining all such assets as "securities." This is not actually necessary; the SEC could be given jurisdiction by simply expanding its authority to all digital assets, rather than by expanding the definition of securities. Given the overt hostility of the SEC under the reign of Chair Gensler to crypto, it is not surprising that most in the industry would prefer regulation by the CFTC. However, as a regulatory policy matter, it is not obvious that is the better result; the SEC is probably better resourced to undertake the task. The important thing is to create a workable scheme of regulation for those crypto assets that are not "securities."
By NASAA's ordinary standards, its comments on the Discussion Draft were fairly mild. Ordinarily, the Association roundly condemns any action that might diminish the enforcement authority of state securities regulators.