Leading academics urge Congress to reject provisions in the Responsible Financial Innovation Act that would weaken current investor protections under state law
WASHINGTON, D.C. (October 8, 2025) – Twenty-eight academic leaders in securities and financial regulation are calling on Congress to reject provisions in the Responsible Financial Innovation Act of 2025 (RFIA) that would undermine the ability of state securities regulators to protect investors and combat fraud.
In a letter to Senate Banking Committee Chairman Tim Scott and Ranking Member Elizabeth Warren, the scholars urged lawmakers to preserve the critical role that states play in protecting investors as Congress considers new frameworks for digital asset regulation.
Read the letter here.
“The provisions currently in RFIA would weaken well-settled principles of securities regulation, making it more difficult for regulators to stop online scams and other investment frauds,” the letter states. “They would remove important guardrails designed to screen out bad actors from the securities marketplace and leave investors more vulnerable.”
The scholars, writing on behalf of the North American Securities Administrators Association (NASAA), outlined three key areas of concern with the RFIA:
Redefining Investment Contracts (Section 105)
The scholars strongly oppose Section 105, which would redefine the investment contract test both federal and state regulators rely on to combat emerging frauds. They warn that the proposed changes would create loopholes that fraudsters could exploit, including new thresholds for investor losses, limitations on what constitutes an “enterprise or venture,” and exclusions for “ministerial, technical, or administrative” activities. These changes, they argue, would hinder regulators’ ability to act swiftly and effectively against schemes such as pig butchering scams, Ponzi schemes, promissory note frauds, real estate swindles, and fraudulent oil and gas offerings.
Weakening State Registration and Licensing Safeguards
The experts emphasize the importance of state registration and licensing laws, which set professional standards, empower regulators to screen out unscrupulous actors, and give investors critical access to background information on securities professionals. Undermining these safeguards, they warn, would erode trust in capital markets and expose more Americans to harm.
Threatening State Anti-Fraud Authority
For more than a century, state securities regulators have been on the front lines protecting retail investors. In recent years, they have dedicated significant resources to combating a surge in online scams, which have cost Americans billions of dollars. The scholars caution that any weakening of state anti-fraud authority would jeopardize these efforts. They urge Congress to explicitly preserve states’ existing anti-fraud powers to ensure scammers face a united and robust enforcement response.
“Given the epidemic of fraud being perpetrated against American investors, especially older investors, Congress should not pursue policies that make it easier for scam artists to get away with their crimes and harder for regulators to act,” the letter concludes.
The scholars call on Congress to abandon efforts to redefine investment contracts, maintain the critical guardrails provided through state registration and licensing laws, and protect existing state anti-fraud authority.
“As Congress considers laws to regulate the offer and sale of digital assets, it must ensure the vital protections under state securities laws remain in place,” NASAA President Marni Rock Gibson said. “Investors deserve no less.”
– NASAA–
About NASAA:
Organized in 1919, the North American Securities Administrators Association (NASAA) is the oldest international organization devoted to investor protection. NASAA is a voluntary association whose membership consists of the securities regulators in the 50 states, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, the 13 provincial and territorial securities regulators in Canada, and the securities regulator in México. For more information, visit www.nasaa.org.
For More Information:
Fred Baldassaro, Director of Communications
fbaldassaro@nasaa.org | 202-737-0900
Karen Grajales, Manager, Communications and Investor Outreach
kgrajales@nasaa.org | 202-737-0900
