Illinois Senate Passes Landmark Crypto Bill to Combat Fraud and Rug Pulls

In a significant move toward tightening cryptocurrency oversight, the Illinois Senate has passed a bill aimed at protecting investors from fraud, rug pulls, and misleading practices in the rapidly evolving digital asset space.

On April 10, the Senate approved Senate Bill 1797 (SB1797) — also known as the Digital Assets and Consumer Protection Act — in a 39-17 vote. The bill, introduced in February by Senator Mark Walker, empowers the Illinois Department of Financial and Professional Regulation (IDFPR) to oversee and regulate digital asset businesses operating within the state.

“The rise of digital assets has opened the door for financial opportunity, but also for bankruptcy, fraud and deceptive practices,” Walker wrote in an April 4 post on X. “We must set standards for those who have evolved in the crypto business to ensure they are credible, honest actors.”

Under SB1797, any business or entity engaging in digital asset-related services for Illinois residents must register with the IDFPR. It also mandates that crypto service providers disclose all user fees and charges in advance, a move designed to increase transparency and prevent exploitative pricing practices.

A Response to Memecoin Chaos

The bill comes in response to a string of high-profile cryptocurrency scams and memecoin collapses that have drawn national attention. Illinois lawmakers are following in the footsteps of New York, which introduced its own crypto fraud prevention bill (A06515) in March, seeking criminal penalties for deceptive practices like rug pulls.

Bill SB1797. Source: Ilga.gov

One of the most notorious recent cases was the meltdown of the Libra token, a memecoin allegedly endorsed by Argentine President Javier Milei. In March, insiders reportedly withdrew over $107 million in liquidity, causing a 94%

crash in price and erasing approximately $4 billion in market value.

Another incident involved Hayden Davis, co-creator of the Libra token and the Official Melania Meme (MELANIA). On March 16, Davis launched a new memecoin called WOLF, inspired by The Wolf of Wall Street. Over 82% of the token supply was allegedly held by a single entity. Once the token peaked at a $42 million market cap, the price crashed by 99%, devastating investors.

Argentine lawyer Gregorio Dalbon has since called for an Interpol Red Notice against Davis, citing a “procedural risk” due to the possibility of him fleeing the U.S. or going into hiding with access to large sums of money.

Industry Experts Support Regulatory Crackdown

Anastasija Plotnikova, CEO of blockchain compliance firm Fideum, believes more robust enforcement is long overdue.

Libra token crash. Source: Kobeissi Letter

“Insider scams and outright fraudulent activities like rug pulls are not only unethical but also clearly illegal, with case law to support enforcement,” Plotnikova told Cointelegraph. “In my view, these activities should fall firmly within the jurisdiction of law enforcement agencies.”

What’s Next?

If enacted, Illinois’ Digital Assets and Consumer Protection Act could become a model for other U.S. states seeking to regulate digital asset activity more effectively. The bill marks a growing trend of policymakers stepping in to provide safeguards as retail participation in crypto markets grows — particularly in the often volatile and unregulated world of memecoins.

The legislation will now move forward for final consideration and possible enactment.