Galvin Calls on Congress to Preserve State’s Ability to Protect Investors

Warning that legislation currently pending in the United States Senate would be a recipe for disaster for millions of savers, Secretary of the Commonwealth William F. Galvin urged key senators to reconsider any bills under consideration that would restrict a state's ability to protect investors from fraud or punish bad actors.

In a letter sent Tuesday to the Senate’s Committee on Banking, Housing, and Urban Affairs Chair Tim Scott and Ranking Member Elizabeth Warren, as well as Senator Edward Markey, Galvin warned that the "Responsible Financial Innovation Act of 2025" would, as currently written, pre-empt a state's authority to regulate certain securities, such as penny and microcap stocks.

This is not the first time Galvin has sounded alarm bells about the effect that this type of legislation could have on retail investors. In August, Galvin wrote to the same senators regarding the "CLARITY Act," passed by the U.S. House of Representatives in July. That bill, Galvin warned, would weaken securities laws and leave investors open to being harmed by fraudsters.

"If state enforcement authority is preempted, a regulatory 'black hole' will likely exist that would allow retail investors to be snared in small offering fraud. An investment of a few hundred or even thousands of dollars might constitute a person's entire life savings – and, at the very least, represent the hard-earned savings of millions of Massachusetts residents," Galvin wrote.

Galvin is asking the Committee to amend the bill to address critical concerns regarding the exemption of penny stocks from state regulation and confusion over state oversight of tokenized "real world assets" like real estate.