Banking and Finance Law Daily Wrap Up, STATE BANKING LAWS—Better Markets urges states to ‘fill the void’ left by federal financial deregulation, (Sep 10, 2025)

By Steven Melendez

The group calls upon states to fill gaps in regulating securities, banks, insurance, and other aspects of the finance industry.

Better Markets argues states should fill gaps left by the Trump administration's "zealous deregulation" of finance by stepping in with their own laws and enforcement. "This perfect storm of federal deregulation in the face of mounting risks to investors and consumers requires a range of responses," wrote Better Markets CEO Dennis Kelleher and legal director Stephen Hall in a report. "Those responses include steadfast court challenges to the Administration’s lawless actions, more private actions by injured investors to recover damages and deter financial abuses, and improved investor education so investors and consumers are better equipped to protect themselves. And one of the most vital responses to the broad rollback of federal financial regulation is the strongest possible state regulation and enforcement in the areas of securities, banking, and insurance."

Already, according to the report, states have joined or backed lawsuits challenging federal deregulation and regulator firings, targeted regulation and enforcement at the cryptocurrency industry, limited credit reporting around medical debt, and worked toward curbs on credit card swipe fees. This role is consistent with traditions of federalism, the group argued, though it may face challenges from federal preemption.

Securities regulation. States have long played a role in regulating securities, even as their role in the national securities market has gradually diminished, according to the report. And they explicitly retain the right to investigate and enforce laws against "fraud" and "deceit" under current federal law.

That role is particularly important in light of a more lax approach by the federal Securities and Exchange Commission (SEC) and the rise of new opportunities for scams, including the growth of cryptocurrency and round-the-clock trading, as well as a push to expand access to "private," off-exchange offerings, according to the report. And already, states have taken steps to regulate crypto-related businesses operating within their borders.

"Beyond their regulatory initiatives, the states have for years been a major force in combatting crypto abuses through their enforcement actions," according to the report. "The states can and do consider many crypto offerings to be securities subject to their jurisdiction, and they bring enforcement actions for a range of crypto violations."

Artificial intelligence also heightens the risk of automated fraud, Better Markets warns.

Banking regulation. The Dodd-Frank Act made explicit some of states' roles in regulating banks, thrifts, and credit unions, according to the report.

"This expanded authority promises to be an important tool in financial regulation, as the current Administration is intent on abolishing the Consumer Financial Protection Bureau or rendering it powerless," according to the report.

States can also regulate nonbanks in the financial industry, including the right to enforce aspects of the Consumer Financial Protection Act and various other federal laws, as well as CFPB regulations, according to Better Markets. And states have established licensing authority over various nonbank companies, including buy-now-pay-later lenders, debt relief providers, and income-based advance businesses.

Better Markets suggests they can do still more to supervise nonbanks, empower consumers with private rights of action in court, adopt stronger regulations including bans on "abusive" tactics, create financial enforcement units, and coordinate with other states "and willing federal partners" in enforcement actions.

Insurance regulation. States have traditionally been the chief regulators of the insurance industry. But one challenge, according to the report, is regulating annuities, essentially investment vehicles sold by insurers and subject to a mix of federal and state regulation. They're often subject to regulation by insurance regulators, not securities regulators, but existing regulation is "notorious weak and must be strengthened," according to the report.

In general, Better Markets urged states to remain vigilant and pursue opportunities to protect residents from financial harm. "The states remain closest to the communities affected by financial misconduct and are therefore in the best position to act when those harms arise," according to the report. "As the federal government increasingly retreats from protecting consumers and investors, it is vital that states continue—and, where possible, strengthen—their important regulatory and enforcement roles in the financial markets."

Companies: Better Markets

RegulatoryActivity: BankingOperations CFPB ConsumerCredit DoddFrankAct EnforcementActions FinancialStability FinTech SecuritiesDerivatives StateBankingLaws