NY prosecutors raise alarm over GENIUS Act on fraud

New York state prosecutors have issued a formal warning regarding the potential crippling effects of the proposed federal legislation known as the Greater Enforcement Neutralization of Innovative Unethical Schemes Act (GENIUS Act). While the bill is framed as a necessary measure to modernize regulation for emerging technologies and digital assets, prosecutors argue that key provisions within the Act would create dangerous loopholes, severely undermining current efforts to combat complex financial fraud.

The alarm was formally raised by the New York State District Attorneys Association (DAA), which focused its criticism on two main areas. Firstly, the GENIUS Act introduces a stringent federal standard for proving ‘intent to defraud’ in cases involving decentralized autonomous organizations (DAOs) and certain blockchain technologies. Prosecutors contend this new standard, which mandates ‘conclusive documented communication’ of malicious intent, is virtually impossible to meet in fast-moving, digitally obscured scams, effectively granting safe harbor to sophisticated fraudsters.

Secondly, the bill proposes sweeping changes to jurisdictional requirements, potentially forcing state-level fraud cases involving over a threshold value to be moved to federal courts. Manhattan District Attorney Alvin Bragg reportedly noted that this transfer would not only overload federal dockets but would also disqualify specialized state investigative units already deeply involved in complex crypto and AI-driven fraud schemes.

The DAA estimates that the passage of the GENIUS Act in its current form could necessitate the immediate review and potential dismissal of hundreds of pending state financial crime prosecutions, leaving victims without timely legal redress. Prosecutors are now lobbying Congressional members, urging immediate amendments to ensure that the pursuit of technological innovation does not inadvertently result in the decriminalization of large-scale consumer fraud.

Source: NY prosecutors raise alarm over GENIUS Act on fraud: Report