NASAA Highlights Legal Scholars' Request to Protect State Securities Authority

The North American Securities Administrators Association ("NASAA") highlighted opposition by 28 securities and financial regulation scholars to provisions in the Responsible Financial Innovation Act of 2025 ("RFIA") that would "undermine the ... authority of state securities regulators to fight fraud."

NASAA forwarded their letter to Senate Banking Committee Chair Tim Scott and Ranking Member Elizabeth Warren. The scholars warned that several provisions of the RFIA would weaken investor protections and heighten the risk of fraud. They argued that while the bill seeks to create a federal framework for digital asset regulation—clarifying oversight between the SEC and CFTC and promoting innovation—it would, as drafted, erode core securities law principles.

The scholars urged the legislators to:

1. Remove Section 105 of the RFIA. The scholars argued that this section would redefine the "investment contract" test, creating loopholes and ambiguities that could be exploited by fraudsters in schemes such as "pig butchering," Ponzi schemes, and fraudulent real estate or oil and gas offerings. They explained that the change would impede regulators’ ability to combat new forms of fraud and undermine decades of established case law.
2. Maintain State Registration and Licensing Laws. The scholars asked to prevent the weakening of safeguards that govern state registration and licensing of securities firms and professionals. They said that these laws set professional standards, perform a gatekeeping function to screen out bad actors, and provide investors access to firms’ and individuals’ regulatory histories.
3. Explicitly Preserve State Anti-Fraud Authority. The scholars emphasized that Congress should explicitly protect states’ existing anti-fraud enforcement powers. They highlighted the states’ century-long role on the front lines of investor protection and their recent efforts to combat the growing "online scam epidemic."