Montana State Auditor James Brown Urges Congress to Protect Investment Contract Law and Pass the Support Anti-Fraud Enforcement Act

Helena, Mont. — Montana State Auditor and Commissioner of Securities and Insurance James Brown has joined regulators across the country in a hard-hitting call for Congress to scrap a dangerous federal proposal that would tie the hands of state fraud enforcers and embolden financial criminals.

In a letter organized by the North American Securities Administrators Association (NASAA) and sent to Senate Banking Committee leaders on September 5, Auditor Brown and other top regulators demanded the immediate removal of Section 105 from the proposed federal market structure legislation — a provision that Brown warns would cripple states’ ability to go after crypto scammers, Ponzi schemers, and financial predators. Montana State Auditor James Brown is highly supportive of the efforts to create a market framework for digital assets, but not without the ability to protect Montanans from bad actors.

“Congress needs to know: Section 105 is a gift to fraudsters,” said Auditor Brown. “It would gut the legal tools we use to investigate, charge, and convict those who prey on hardworking Montanans. I won’t stand by when we have a federal statute that enables the fraud that I am working every day to prosecute here in Montana.

Over the past decade, state regulators have led the charge in shutting down complex digital asset frauds, often where no federal action was taken. Brown emphasized that Montana’s state-level enforcement authority has been critical to holding bad actors accountable and trying to ensure restitution to victims. Montana has been an example to the rest of the country in this effort with fulltime public awareness campaigns, aggressive prosecutions of fraudsters, and ensure Montana victims have access to restitution through the restitution fund. This is a fund that Montana and only a small number of states have that help victims piece their lives back together. That power helps Montanans. This power must not be diluted by Washington.

Section 105 attempts to rewrite the definition of “investment contract,” a key legal standard used since the 1940s to identify and prosecute securities fraud. Brown and NASAA argue the proposed changes would allow bad actors to rebrand their scams and slip through legal loopholes, making prosecutions far more difficult — if not impossible.

“’I have shut down real schemes, with real victims, using the very legal standards that this provision is now threatening to destroy,” Brown said. “The scammers are getting smarter every day. We need to get smarter as they do and that means having better tools for prosecution.”

To safeguard enforcement powers, Brown is calling for Congress to adopt the Support Anti-Fraud Enforcement (SAFE) Act, which would:
– Cement states’ authority to investigate and prosecute fraud involving securities, commodities, and digital assets.
– Prevent federal laws from overriding critical state powers.
– Maintain the flexible legal tests that have proven effective in court.

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840 Helena Avenue, Helena, Montana 59601
(main fax) 406.444.3413  I  (securities fax) 406.444.5558
(insurance consumer services fax) 406.444.1980  I  (legal fax) 406.444.3499
(phone) 800.332.6148 or 406.444.2040  I  (email) csi@mt.gov  I  (web) www.csimt.gov

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