By Walt Williams
Forty-six states are holding legislative sessions in 2026, with the first half of the year a particularly active time for state policy. And while banking issues may not always take center stage, industry advocates expect to see proposals on interchange fees, fraud, artificial intelligence, stablecoins and more.
Many states entered the year in relatively strong fiscal shape, with rainy day fund balances hitting all-time highs in 32 states in 2025, according to the Pew Charitable Trusts. But several states, such as New York, California, Colorado and others, are facing budget deficits that are likely to consume much of their legislative activity. Even states in good fiscal shape are facing potential fights over rising fees and taxes, particularly property taxes.
Battles over fiscal policy can lead to surprising outcomes. Take Washington state, where shrinking tax collections have left lawmakers scrambling to find new sources of revenue, made more difficult by the absence of a state income tax.
During the past year, as Washington lawmakers took a hard look at the budget, banking advocates pointed out that nonprofit credit unions were exempt from paying the state’s business and occupation tax when they acquired banks. That message hit home especially among the more progressive wing of the state’s Democratic majority, according to Washington Bankers Association President and CEO Glen Simecek, who is retiring in January.
“They haven’t been hearing this narrative of banks versus credit unions for years — they look at banks and credit unions as the same type of business, just with slightly different names,” Simecek says. “So when they learned that credit unions weren’t paying taxes and then buying banks and taking them off the tax rolls, they were definitely interested in recapturing that lost revenue.”
Washington state eliminated the B&O exemption for credit union acquisitions of banks late last year.
Interchange
Washington lawmakers will meet for a shorter, 60-day legislative session this year, rather than their longer, 105-day session in odd years. The state’s looming budget shortfall will remain a focus, but Simecek expects a proposal on interchange fees for credit card and debit card purchases to materialize.
“We’ve really seen interchange become an issue,” he says. “This was a bit of a stealth campaign in that it came through the labor committee with an eye toward getting tipped workers their fair share and not having them subject to these what they called fees or ‘extortionist fees,’ that kind of thing. And so we’ve worked with lawmakers to explain to them how the interchange process works.”
Washington won’t be the only state to see possible legislation on interchange fees. In 2024, Illinois lawmakers passed a retailer-backed bill that bans banks, payment networks and other entities from charging or receiving interchange fees on the portion of a debit or credit card transaction attributable to tax or gratuity. The American Bankers Association, Illinois Bankers Association and others have challenged the law in federal court, but questions of legality are not stopping other states from exploring their own laws regulating interchange fees.
“I expect that the majority of states are going to see interchange bills,” says Alison Morgan, director of state government relations for the Colorado Bankers Association. In her own state last year, House lawmakers pushed through legislation restricting interchange fees, only to have it killed in the Senate. At the same time, lawmakers eliminated a fee that vendors were allowed to retain for collecting state sales taxes. The resulting loss of vendor fee revenue may provide retailers with an argument when advocating for a bill to curb interchange fee collection.
“We’re already beginning to do lunch-and-learns, one-on-one meetings and a lot of education to talk about the impacts of interchange and the risk of litigation, just like Illinois,” Morgan said.
Fraud
One issue likely to draw bipartisan support is fighting fraud, and many states have already taken steps to address the problem. Last year, at least 20 states drafted or passed laws and regulations governing virtual currency kiosks, also known as “crypto ATMs,” which have become a vehicle for criminals to defraud victims, according to AARP. For instance, Colorado enacted a new law requiring crypto ATM owners to warn customers about potential fraud and to establish dollar limits on daily transactions through the machines.
Missouri lawmakers also considered crypto ATM regulation last year as part of a larger package of measures to curb fraud, according to David Kent, chief lobbyist for the Missouri Bankers Association. Another bill in that package created a “trusted contact” program, allowing customers to designate a trusted contact that banks could reach out to if they had a concern about activity in the customer’s account.
“If they see fraud occurring or they’re trying to prevent that customer from taking that $10,000 cash down to Florida to the person they met online, we thought this would be a great opportunity for banks hit the pause button and let everything sort of settle down while they’re contacting this individual,” he says.
Missouri lawmakers will likely continue their work on fraud in 2026, although the focus may shift to title and property fraud, Kent adds. “Hopefully, we’re able to pass legislation that may be a model for other states to adopt in the future.”
Ohio is also likely to take up fraud in 2026, according to Don Boyd, vice president of state government relations for the Ohio Bankers League. His organization has been working with lawmakers on possible legislation regarding elder fraud, including a bill related to transaction holds for suspected fraud. Lawmakers may also explore new regulations for crypto ATMs, he says.
AI and stablecoin
Legislative activity in Ohio will be somewhat limited in 2026 given the state’s General Assembly holds two-year sessions beginning in odd-numbered years, so it is already halfway through its current legislative session. But one area where Boyd expects to see possible movement is in artificial intelligence.
“The good thing about having a long legislative session is we have some committee chairs who are taking a very slow and thorough approach to truly understand the issue and what we’re doing rather than trying to get something done,” Boyd said. “So they’re looking at what I could call the low-hanging fruit right now, like deepfakes.”
Ohio and 37 other states adopted approximately 100 measures related to AI in 2025, according to the National Conference of State Legislatures. Most of those measures didn’t relate directly to banking. For example, the single AI-related law passed by Ohio lawmakers concerned education and training. Still, the issue is expected to continue to dominate in 2026.
Stablecoins and cryptocurrency are another policy issue likely to be explored by state lawmakers. Last year, at least 40 states introduced legislation related to digital assets, according to NCSL. Many of those efforts are likely to carry over in 2025. Then there was the passage by Congress of the Genius Act, which allows states to establish their own regulatory frameworks for payment stablecoins.
Florida is one state that could see action on stablecoins and other digital assets this year. At least seven bills relating to cryptocurrency were introduced in the Florida legislature last year. Only one passed, but some lawmakers were continuing to push forward with new legislation late in the year, introducing bills to allow public funds to be invested in cryptocurrency and to create a regulatory framework for stablecoins.
Anthony DiMarco, executive vice president of government affairs at the Florida Bankers Association, says he knows the answer he’ll get if he asks lawmakers why they’re pushing forward with stablecoins: “Because we’re the ‘Free State of Florida,’ and we want to be forward thinking. We’re not going to wait for the other states.”
One factor likely to shape legislation is that 2026 is an election year. Forty-six states will hold races for legislative seats this year, and voters in 36 states will elect their next governors, where 15 are term-limited and thus face open-seat races. That means both parties are likely to put forward legislation to rally their bases and shore up support ahead of Election Day.
Buckle up.
Editor’s note: This story has been updated to correctly attribute research on state rainy day funds to the Pew Charitable Trusts.
