Cynthia Lummis warns lawsuits are hindering stablecoin efforts to fight illicit finance

Lummis made the comments on September 10 while responding to a lawsuit against Tether over the freezing of $42.4 million worth of USDT. She argued that the case exposes a gap in the current rules and pointed to Section 305 of the proposed Digital Asset Market CLARITY Act as a potential solution.

“This lawsuit highlights a dangerous gap in the fight against illicit finance in crypto,” Lummis said in a September 10 post on X.

She argued that exchanges and stablecoin issuers currently face the risk of civil litigation when they freeze assets they suspect are linked to criminal activity.

According to Lummis, Section 305 would give these companies clearer authority to act against suspicious transactions while protecting them from civil liability when acting within the provision.

Tether faces lawsuit over $42.4 million USDT freeze

The comments came after two Thai businessmen sued Tether in the U.S. District Court for the Southern District of New York over 42.4 million USDT held across 10 Ethereum addresses.

The plaintiffs allege that Tether froze the tokens on October 30, 2025, following an informal request from U.S. law enforcement. They claim there was no warrant or other legal process at the time. A seizure warrant was reportedly issued months later, on February 19, 2026.

The plaintiffs are seeking the removal of the addresses from Tether's blacklist and want the court to prevent the frozen USDT from being destroyed or replaced with tokens transferred to a government-controlled wallet.

The case also seeks damages and alleges conversion, trespass to chattels, and unjust enrichment.

Tether has rejected the lawsuit as baseless, saying its actions are part of its cooperation with global law enforcement to prevent the misuse of USDT.

The disputed funds have been linked to a wider U.S. Justice Department investigation involving more than $61 million in USDT that prosecutors said was stolen through so-called pig-butchering investment scams. Authorities have credited Tether with helping transfer seized assets.

CLARITY Act could provide a safe harbor

Lummis' argument comes as the CLARITY Act moves toward a crucial Senate vote. The bill passed the House in 2025 and is scheduled for a procedural Senate vote on September 15. It seeks to establish clearer federal rules for digital assets and divide regulatory responsibilities between the SEC and CFTC.

Section 305 is particularly relevant to stablecoin enforcement. The provision is designed to allow exchanges and stablecoin issuers to temporarily hold transactions suspected of involving illegal activity while providing protection from civil liability when they act in good faith. Under the provision, an official law enforcement request could allow a longer hold period.

For Lummis, the issue is not simply about giving crypto companies more power. She argues that without legal protection, companies could face a difficult choice between freezing potentially illicit funds and risking a lawsuit from the people whose assets were blocked.

The debate comes as lawmakers negotiate the final details of the CLARITY Act, with the legislation still needing enough Senate support to advance.

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