Securities Regulation Daily Wrap Up, BLOCKCHAIN—Sen. Blumenthal, NY AG Letitia James call for stronger crypto market protections, (Jul 28, 2026)

By A. Bryan Gerepka

Blumenthal: President Trump’s power and willingness to take advantage of even his own supporters to secure profits are prime examples of why the current status quo of the crypto industry is unacceptable.

Senator Richard Blumenthal (D-Conn.) decried President Trump’s willingness to capitalize on an unregulated cryptocurrency market to reap profits at the expense of his supporters, while gutting protections for investors in the industry. Meanwhile, New York Attorney General Letitia James called on Congress to implement stronger regulations on the cryptocurrency market to protect consumers and investors from the flood of cryptocurrency scams that cost Americans billions of dollars every year. Senator Blumenthal is the Ranking Member of the U.S. Senate Permanent Subcommittee on Investigations (PSI).

Congress is considering the Digital Asset Market Clarity Act (Clarity Act), which would give oversight of digital assets to the Commodity Futures Trading Commission (CFTC) and override state regulation of digital markets. Both the Senator and the Attorney General want stronger investor protections to be included in the Act.

In written testimony delivered to the PSI, Attorney General James warned that the Clarity Act would restrict state and local law enforcement, making it harder for the Office of the Attorney General (OAG) to continue its crackdown on cryptocurrency scams and hold platforms accountable for violating the law. Senator Blumenthal is the Ranking Member of the committee.

Crypto Forum Highlights Victims. “When most presidents are going through personnel decisions and their vision for the future and helping to lead the country into a new administration, Donald Trump had a different priority, namely cashing in,” Senator Blumenthal stated, as he spoke alongside Senator Chris Van Hollen (D-MD) at a forum titled Trump’s Crypto Corruption that he convened to hear from victims of cryptocurrency scams. The forum included testimony from author and filmmaker Ben McKenzie; crypto scam victim Lori Flowers; John Reed Stark, former Chief of the Securities and Exchange Commission (SEC) Office of Internet Enforcement; Virginia Canter, Chief Counsel for Ethics and Anticorruption at Democracy Defenders Action; and Scott Greytak, Deputy Executive Director of Transparency International U.S. The forum also featured a PSI-sponsored report released July 27, 2026, and titled “BOUND TO FAIL: Stories from Inside the Price Collapse of $TRUMP Coin.”

During the forum, the Senator released the testimonies of three Americans who lost tens of thousands of dollars after investing in $TRUMP and $MELANIA coins: “In fact, we’ve spoken to three investors who bought the $TRUMP coin believing it was a worthwhile investment because it had the endorsement of the President of the United States…They told us about how his approval earned their trust, and they also told us about how quickly they lost almost everything they had invested,” the Senator stated.

“Trump launched and promoted what he called the ‘official Trump cryptocurrency,’ a meme coin. It had no inherent value,” Senator Blumenthal added. “It was his face and identity. $TRUMP coin was effectively a pump-and-dump scheme.” He continued, nearly a million retail investors lost a combined $3.8 billion as $TRUMP coin dropped 97 percent in value; two out of three buyers lost money. Meanwhile, President Trump and early insiders profited regardless of the coin's performance, with Trump earning $636 million in royalties from $TRUMP coin in 2025 alone, the Senator noted. Similar patterns occurred with $MELANIA coin, which lost 90 percent of its value and wiped out $1.4 billion in market value for shareholders, while insiders made significant profits by trading ahead of public announcements. This kind of exploitation took advantage of weaknesses in the current law, he stressed.

“The President is taking a strong stand against reforms that would eliminate the weaknesses and loopholes that he exploited—and others are doing right now—to perpetrate the same kind of fraud on the same kind of innocent victims across the United States,” Senator Blumenthal warned.

Reform the Clarity Act. The only way to prevent losses like those experienced by these individuals, and so many others, is to place real limits on the crypto industry, the Senator stated, as he called for reforms to the Clarity Act to protect consumers. He cited the written testimony received by PSI Minority staff, including testimony from Attorney General James. The Senator also highlighted the personal accounts relayed to the Subcommittee that portrayed the real-life impacts of the conflict of interest demonstrated by the President’s endorsement of a crypto token bearing his name. Such a project inevitably suggests legitimacy and stability. He continued, “when the very same project craters in value within days of its peak, those same retail investors who believed in it are left feeling betrayed, having lost nearly all the money they put into it.” They are right to feel betrayed, he added.

NY’s James Outlines Recommendations for Reforms. Attorney General James urged Congress to implement the following reforms as they consider the Clarity Act:

• Require cryptocurrency platforms to comply with anti-money laundering laws, know-your-customer regulations, and cybersecurity protocols to prevent the use of cryptocurrency to finance terrorism, adversarial regimes, and crime.

• Require a closed-loop market so noncompliant institutions, companies, and countries cannot participate.

• Prohibit cryptocurrency that cannot be fully traced, such as those going through money laundering mixers, from being converted to U.S. dollars.

• Not exempt cryptocurrency from existing money transmission, commodities, and securities laws.

• Require cryptocurrency platforms to engage in surveillance to identify anomalous patterns, ward off manipulation, and locate bad actors.

• Require platforms and intermediaries to protect Americans from fraud and scams and hold cryptocurrency companies financially liable for failing to do so, similar to the Electronic Funds Transfer Act.

LegislativeActivity: Blockchain FinancialIntermediaries NewYorkNews