Morrison Foerster’s State and Local Government Task Force is pleased to provide our bimonthly newsletter summarizing some of the most important and interesting developments from state attorneys general (“State AGs”) across the country and local government agencies and legislative bodies, with links to primary resources. This month’s topics include the following:
- State AGs and Local DAs Continue to Focus on Deceptive Practices and Financial Fraud
- State AGs Seek to Regulate Betting Platform
- Local DA and State AG Work Together on Cryptocurrency Matters
- State AGs Battle over Environmental Justice Efforts
- Texas Enacts New AI Legislation, with Texas AG Enforcement Beginning January 2026
1. State AGs and Local DAs Continue to Focus on Deceptive Practices and Financial Fraud
On July 8, 2025, the Washington State AG secured $7.4 million in penalties and awarded $850,000 in consumer restitution following a trial against a company that sent deceptive mass mailing solicitations, convincing business owners to purchase workplace posters they were not obligated to buy. The King County Superior Court found the Michigan-based company liable for violating a 2016 injunction and sending nearly 600,000 deceptive solicitations to small businesses across Washington. The ruling marks the state’s third enforcement action against the same actors and reinforces Washington State AG’s ongoing focus on protecting small businesses from predatory marketing practices.
On June 24, 2025, the Louisiana AG announced three lawsuits filed against a national pharmacy chain and its affiliated entities—including its pharmacy benefit management arm—alleging a range of unfair and deceptive practices. The complaints assert that the pharmacy chain misused customer health data to influence legislation, manipulated drug pricing through vertically integrated systems, and imposed coercive contractual terms on independent pharmacies. The Louisiana AG seeks injunctive relief, civil penalties, and restitution under the state’s Unfair Trade Practices Act, reflecting growing state-level scrutiny of pharmacy benefit managers and vertically consolidated healthcare entities.
At the local level, on June 26, 2025, the Manhattan District Attorney announced a 162-count indictment against five individuals allegedly involved in overlapping financial fraud conspiracies that generated nearly $1 million in illicit proceeds. The defendants are accused of forging and depositing stolen checks and robbing victims of their unlocked cell phones to access online money transfer apps, transfer funds, and make unauthorized purchases. The indictment follows the Manhattan District Attorney’s previous call for online money transfer apps to implement stronger security measures to protect consumers from fraud, such as through multifactor authentication, lower limits on total daily transfers, and enhanced monitoring of suspicious transfer activities.
These enforcement actions highlight the State AGs’ continued focus on a wide range of business and marketing practices as well as foreshadowing increased attention from prosecutors on the adequacy of fraud protection measures by online money transfer platforms.
2. State AGs Seek to Regulate Betting Platform
On June 17, 2025, 36 State AGs (including Washington, D.C. and the Northern Mariana Islands)[1] filed an amicus brief urging the Third Circuit to allow New Jersey to regulate Kalshi, a trading platform that is alleged to facilitate unregulated sports gambling. The coalition contends that a federal court decision improperly preempts state authority, thereby undermining traditional state powers to regulate gambling and potentially exacerbating issues related to gambling addiction. In April, U.S. District Court Judge Kiel granted a temporary restraining order and preliminary injunction against state regulators to temporarily block the state from taking enforcement action against Kalshi’s sports contracts.
The State AGs argue that the New Jersey District Court’s decision that event contracts linked to KalshiEx LLC, a prediction market that allows users to wager on the outcome of real-world events, fall within the exclusive purview of the U.S. Commodity Futures Trading Commission, was in error and creates a “loophole” that could lead to gambling addiction. The State AGs contend that Congress did not intend to strip states of their power to regulate sports betting and that gambling regulation is part of the states’ inherent police powers.
3. Local DA and State AG Work Together on Cryptocurrency Matters
On June 18, 2025, the NYAG announced the seizure and freezing of $300,000 in cryptocurrency linked to alleged scams targeting Russian-speaking communities on Facebook. The NYAG conducted a joint investigation with the Brooklyn District Attorney’s Office and the New York State Department of Financial Services. Meta shut down more than 700 accounts associated with an advertiser promoting the operation. The Brooklyn District Attorney’s Office executed a series of warrants that resulted in the seizure of the domains and accounts. The operation, which involved shutting down more than 700 accounts associated with Vietnam-based “Black Hat” promoters, aims to return funds to victims and prevent future operations through real-time blockchain monitoring. To mitigate harm, the Brooklyn District Attorney seized an additional $140,000 worth of cryptocurrency and is seeking to return these funds to victims. The operators allegedly used private messaging apps like WhatsApp and Telegram to defraud victims and claimed to victims that their investments were growing in value, according to prosecutors.
On a separate and local level, on June 27, 2025, the Los Angeles District Attorney charged two individuals with stealing more than $1 million from 30 victims through a fraudulent cryptocurrency investment scheme targeting low-income, primarily Spanish-speaking community members. The defendants allegedly operated a fake cryptocurrency mining business and recruited victims through their financial services company, Zukre Platform Corporation. Although Zukre claimed to install, maintain, and operate computing equipment to mine cryptocurrency, the company allegedly conducted no such operations and was not a registered business in California. According to the indictment, the defendants allegedly represented that the investments were risk-free, and victims were provided with written contracts and instructed to download a Zukre-branded mobile application, which was purported to show ongoing profits from their investments. This matter again demonstrates that state authorities remain focused on allegations of fraud in the sale or marketing of digital assets, notwithstanding any reduction of federal focus on digital assets.
4. State AGs Battle over Environmental Justice Efforts
On June 17, 2025, 13 Democratic State AGs[2] released guidance reinforcing the importance of environmental justice actions despite President Trump’s Executive Orders rolling back such efforts. The guidance aims to clarify the advanced environmental decision-making processes for stakeholders.
Recent federal actions labeled certain environmental justice efforts as “illegal discrimination,” prompting concerns and confusion. The guidance covers topics to encourage public and private entities to develop and pursue environmental justice initiatives tailored to the needs of their communities. The environmental justice activities in the guidance include education and technical support, public participation efforts, scientific monitoring, interventions, climate resilience, enforcement partnerships, and advocacy and organizing.
On June 12, 2025, 16 Republican State AGs[3] urged the Trump administration to support legislation that would protect the fossil fuel industry from climate change-related lawsuits. In a letter to Attorney General Pam Bondi, the coalition proposed measures to limit federal funding to states pursuing such legal challenges, aiming to counteract efforts by predominantly Democratic states to hold oil and gas companies financially accountable for their alleged role in climate change. The State AGs suggest additional steps the Department of Justice could take to effectuate the President’s Executive Orders, including the following: reinforcing energy companies for climate change or out-of-state greenhouse-gas emissions, creating a right of removal to federal district court for any suit involving claims that implicate climate or ambient greenhouse-gas-related harms, and restricting federal funding for states that seek to impose liability on energy companies for climate change or out-of-state greenhouse-gas emissions.
5. Texas Enacts New AI Legislation, with Texas AG Enforcement Beginning January 2026
On June 22, 2025, Texas enacted the Texas Responsible Artificial Intelligence Governance Act (TRAIGA), becoming the second state after Colorado to pass comprehensive Artificial Intelligence (AI) legislation. Effective January 1, 2026, the law imposes obligations on businesses that develop or deploy AI systems in Texas or offer AI products or services used by Texas residents. TRAIGA defines AI systems broadly and includes distinct provisions not found in the Colorado AI law.
Among other restrictions, TRAIGA prohibits the development or deployment of AI systems that (1) manipulate human behavior (e.g., encourage self-harm, violence, or criminal activity); (2) enable governmental entities to engage in “social scoring” (i.e., evaluating individuals based on personal characteristics or behavior to determine how they are treated); and (3) intentionally produce or assist in generating visual materials, deepfake videos or images, or text-based conversations involving sexually explicit content or child sexual abuse material.
The Texas AG has enforcement authority under the statute, with civil penalties ranging from $10,000 to $12,000 per curable violation and $80,000 to $200,000 per uncurable violation. Ongoing violations may incur daily fines of $2,000 to $40,000. The law also establishes the Texas Artificial Intelligence Council (the “Council”), a seven-member body appointed by state leadership and composed of Texas residents with expertise in AI systems, privacy and data security, and technology ethics, among other areas. The Council is charged with identifying barriers to AI innovation and advising on future legislation.
Finally, TRAIGA introduces a regulatory sandbox program administered by the Texas Department of Information Resources in consultation with the Council. The program allows approved participants to test and develop AI systems for up to 36 months, subject to reporting and oversight. During this period, the Texas AG and state agencies are restricted from initiating enforcement actions against participants, providing a structured environment for innovation under state supervision. The sandbox reflects Texas’s broader aim to promote AI development while maintaining regulatory guardrails.
[1] The State AGs include Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nevada, New York, North Carolina, North Dakota, Northern Mariana Islands, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, and Wisconsin.
[2] The State AGs include Arizona, California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, and Vermont.
[3] The State AGs include Alabama, Arkansas, Florida, Georgia, Iowa, Kansas, Kentucky, Montana, Nebraska, North Dakota, Ohio, Texas, South Carolina, South Dakota, West Virginia, and Wyoming.
