Crypto Bill Seen Hindering Fraud Prosecutions, States Warn

Just as federal enforcement against digital-asset companies has dropped precipitously, state authorities are voicing concern that their ability to prosecute crypto criminals will soon be vastly diminished.

Regulators from Alabama to Montana are warning that crypto market-structure legislation currently before Congress could diminish their ability to pursue wrongdoers. The timing couldn’t be more perilous, with crypto fraud and criminal activity heating up worldwide as bad actors seek to take advantage of soaring investor demand for digital asset with prices back near all-time highs.

The draft of the US Senate’s market-structure bill — the Responsible Financial Innovation Act — doesn’t give ...