The CLARITY Act has drawn opposition from an unexpected corner: the anti-human trafficking movement. The Alliance to End Human Trafficking, joined by Catholic Charities, sent a letter to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer this week arguing that Section 604 of the bill could weaken accountability for crypto platform developers whose technology ends up facilitating trafficking-related payments.
Katie Boller Gosewisch, executive director of the Alliance to End Human Trafficking, appeared on CoinDesk’s The Policy Protocol to elaborate on her organization’s concerns. Her primary target is specific statutory language: the provision stating that developers who do not control user funds are not money transmitters. On its face, that sounds like a technical clarification about regulatory classification. The Alliance worries it could become something else entirely in a courtroom.
The Liability Gap Argument
Boller Gosewisch’s concern isn’t that Section 604 explicitly legalizes trafficking. Nobody is arguing that. Her argument is more subtle and, depending on your view of statutory interpretation, either prescient or premature.
The worry goes like this: sophisticated criminal enterprises employ sophisticated lawyers. If a platform developer creates software that bad actors use to move trafficking proceeds, and the developer’s defense team can point to Section 604’s language clarifying that non-custodial developers aren’t money transmitters, that statutory text might create reasonable doubt in a jury’s mind. Even if other criminal statutes technically still apply, the explicit carve-out could muddy prosecutions.
“She argued the provision could allow some third-party platform developers to ‘hide behind’ a lack of liability if their software is used to facilitate trafficking-related payments,” according to the CoinDesk report. Boller Gosewisch acknowledged she is not an attorney, but argued Congress should anticipate how bad actors may exploit statutory language over time.
The comparison she drew was to civil litigation involving hotels. Hospitality companies have faced lawsuits alleging they should have known trafficking was occurring on their premises. The legal theory invokes a “duty of care” that exists even when the entity doesn’t directly participate in criminal conduct. Whether that duty should extend to software developers who never meet their users and never touch their funds is the crux of the disagreement.
Industry Response: Codification, Not Innovation
Rebecca Rettig, appearing on the same CoinDesk program, pushed back on the premise that Section 604 creates new protections. Her argument: this is what existing law already says.
The provision, according to Rettig, “simply clarifies that developers who do not control customer assets are not considered money transmitters, consistent with existing Bank Secrecy Act and FinCEN guidance.” In other words, Section 604 isn’t carving out a new exception; it’s writing into statute what the Financial Crimes Enforcement Network has already indicated through administrative guidance.
This matters because administrative guidance can change. A new Treasury secretary, a new FinCEN director, shifting political priorities: any of these could alter the regulatory posture toward non-custodial developers. Statutory codification locks in the current interpretation (at least until Congress revisits it).
Rettig also pointed to 18 U.S.C. § 1956, the federal money laundering statute, as a tool prosecutors retain regardless of money transmitter classification. That statute targets anyone who “conducts or attempts to conduct a financial transaction” knowing the funds are proceeds of specified unlawful activity, or intending to promote that activity. A developer who knowingly builds infrastructure for trafficking payments could face charges under this statute even if they’re not classified as a money transmitter.
The question is whether “knowingly” does enough work. Proving knowledge is hard. Proving that a developer knew their general-purpose software would be used for trafficking is even harder, especially when the same software has thousands of legitimate users.
A Familiar Tension in a New Package
This debate isn’t new to crypto policy. It’s the same tension that’s animated fights over end-to-end encryption, Section 230 of the Communications Decency Act, and liability for peer-to-peer file sharing networks. The pattern repeats: a technology enables both legitimate and illegitimate uses, and policymakers argue over whether the technology’s creators should bear responsibility for the illegitimate ones.
The crypto-specific wrinkle is that Bitcoin and other decentralized protocols were designed precisely to remove intermediaries who could be pressured, regulated, or held liable. That’s a feature if you’re worried about financial censorship or authoritarian overreach. It’s a bug if you’re trying to disrupt trafficking networks that rely on pseudonymous payments.
The CLARITY Act has already faced opposition from law enforcement groups, though that fight has centered on different provisions. The Blockchain Association marshaled 160 former law enforcement officials to support the bill, while critics accused the industry of astroturfing. The Alliance to End Human Trafficking represents a different constituency: not current or former cops, but advocacy organizations focused on victim protection.
That distinction might matter politically. Law enforcement opposition to crypto-friendly legislation can be framed as regulatory turf protection. Anti-trafficking opposition is harder to dismiss that way. Members of Congress who might wave off complaints from FinCEN about enforcement tools are going to have a harder time brushing aside concerns from Catholic Charities about trafficking victims.
The Statutory Interpretation Problem
Boller Gosewisch’s argument ultimately rests on a prediction about how courts and defense attorneys will interpret Section 604’s language in the future. That prediction might be right or wrong, but it’s impossible to falsify in advance.
Consider the scenario she’s worried about: A developer creates a non-custodial protocol. Years later, investigators discover that protocol was used to launder trafficking proceeds. Prosecutors bring charges under 18 U.S.C. § 1956. The defense argues their client never knew how the software was being used, never touched the funds, and under Section 604 of the CLARITY Act, isn’t even a money transmitter. The statutory language Congress passed, the defense argues, reflects a legislative judgment that non-custodial developers shouldn’t bear responsibility for how their software is used.
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Would that argument succeed? Impossible to say without knowing the specific facts, the specific judge, and the specific jury. But Boller Gosewisch’s point is that Congress shouldn’t create statutory language that could even plausibly support such an argument. The cost of being wrong, in her view, is too high.
Rettig’s counterargument is essentially that this door is already open. FinCEN guidance already indicates non-custodial developers aren’t money transmitters. Courts already have to grapple with knowledge requirements in money laundering cases. Section 604 doesn’t change the landscape; it just makes the current landscape official.
Blockchain Transparency as Investigative Tool
One point of agreement between both sides: blockchain’s transparency has become a genuine investigative asset. Unlike cash, which leaves no trail, or traditional bank transfers, which require subpoenas to trace, transactions on public blockchains like Ethereum and Bitcoin are visible to anyone with an internet connection.
Rettig argued this transparency has “become an important investigative tool for law enforcement because transactions can often be traced on public ledgers.” That’s not hypothetical. The Department of Justice has successfully traced and seized crypto assets in multiple high-profile cases, including the Colonial Pipeline ransomware recovery and the Bitfinex hack prosecution.
But transparency isn’t a complete answer to the enforcement problem. Tracing funds is one thing; actually recovering them is another. And sophisticated users can employ mixing services, privacy coins, or chain-hopping to obscure their trails. The debate over Section 604 isn’t really about whether blockchain analysis works. It’s about whether statutory language should make it easier or harder to hold developers responsible when their tools are misused.
Enforcement Proposals Beyond the Bill
Boller Gosewisch offered some concrete suggestions for what Congress could do alongside, or instead of, the CLARITY Act as currently drafted. She called for restoring a federal human trafficking coordinator (a position that has existed at various points but isn’t currently active) and increasing financial crimes prosecutions specifically focused on trafficking.
These proposals sidestep the developer liability question entirely. A trafficking coordinator doesn’t require any particular view on whether non-custodial developers should be money transmitters. More financial crimes prosecutions could target the traffickers themselves, the people who receive trafficking proceeds, or the money launderers who help convert those proceeds, without ever reaching the software developer question.
Whether Congress has any appetite for standalone anti-trafficking measures, separate from the broader CLARITY Act debate, is an open question. The bill has significant momentum, and amendments that carve out Section 604 or add new enforcement provisions would need to find sponsors and survive committee markup.
The Alliance’s letter to Thune and Schumer is, in one sense, a Hail Mary. The CLARITY Act has already advanced significantly, and opponents who want to modify it face the usual legislative challenge: it’s easier to kill a bill than to amend it, but killing this bill entirely seems unlikely given industry support and the current makeup of the Senate.
The Broader Developer Liability Debate
This particular fight over Section 604 is one front in a larger war over developer liability that’s playing out across multiple jurisdictions and multiple legal contexts. The Tornado Cash sanctions raised similar questions: to what extent can the developers of privacy-preserving software be held responsible for how that software is used? The criminal prosecution of Tornado Cash developer Alexey Pertsev in the Netherlands, and the ongoing legal battles over OFAC’s sanctions, have forced courts to grapple with these issues in real time.
CoinDesk’s report notes that “the broader debate over developer liability continues as lawmakers consider the Clarity Act and as courts weigh cases involving developers of decentralized crypto protocols.” The outcomes of those court cases could influence how Congress approaches these questions, and vice versa.
If courts consistently hold that developers of general-purpose software can’t be held liable for user behavior absent specific knowledge and intent, Congress might feel less pressure to write explicit carve-outs into legislation. If courts go the other way, developers and their industry backers might seek even stronger statutory protections.
For anti-trafficking advocates, the stakes aren’t abstract. Their concern is that statutory language written today will be interpreted in ways that make prosecutions harder years from now, when the specific legislative intent has faded from memory and only the text remains. That’s a reasonable concern. It’s also a concern that could be raised about almost any statutory provision, and at some point legislators have to write something down.
The question for Congress is whether Section 604’s current language strikes the right balance, whether it should be modified to address the Alliance’s concerns, or whether those concerns are better addressed through enforcement measures rather than statutory drafting. The letter has been sent. The hearing testimony is on the record. Now it’s a matter of whether anyone in the Senate is listening.
Meanwhile, the bill’s DeFi provisions have already stirred industry alarm from a different direction, suggesting that the final version of the CLARITY Act, if it passes, may look quite different from any current draft. Every stakeholder has their own red line. The Alliance to End Human Trafficking has drawn theirs at Section 604.
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