Texas Enacts 'Asset Forfeiture' Law SB1498, Allowing Crypto, NFT Seizures

Texas enacts 'asset forfeiture' law SB1498, allowing the state to seize digital assets tied to criminal offenses. Proceeds will go to a special forfeiture fund, not the Strategic Reserve just created by SB 21. The two bills are distinct: while SB 21 established a framework for Texas to accumulate Bitcoin as part of a strategic reserve, SB1498 equips law enforcement with the tools to seize and store crypto assets acquired through or used in illegal activities.

The bill was authored by Senator Robert Nichols and co-sponsored by Senators Borris Miles and Tan Parker. It received strong support in committee and passed the Senate on April 1 with a 26–5 vote. The House followed with final passage in late May before it was enrolled and sent to Governor Greg Abbott. The Governor allowed the bill to become law without a veto, marking a significant shift in the state's approach to crime and digital finance.

Under SB1498, digital assets can be classified as “contraband” if used in connection with a range of felonies and misdemeanors including fraud, money laundering or securities violations. The bill also broadens the definition of “proceeds” to include any increase in the value of a digital asset from the time it was acquired to the time it was forfeited, ensuring that state agencies may claim appreciation in crypto assets, not just their initial value.

Importantly, the legislation introduces strict custody procedures to ensure security and traceability of seized assets. Digital currencies, NFTs, and stablecoins taken under SB1498 must be transferred within 72 hours into secure, offline wallets, so-called “cold wallets”, which are controlled by law enforcement agencies or the office of the state’s attorney. These wallets are required to be isolated from internet-connected systems or exchange platforms to reduce risk of unauthorized access or loss.

The statute also redefines key terms to better align with modern financial technology. It defines digital currency as a digital representation of value recorded on a cryptographically secured distributed ledger, such as blockchain or similar systems. Furthermore, it clarifies that “depository accounts” under Texas law now include digital wallets, whether hosted by custodians or directly managed by users.

Jurisdiction for forfeiture proceedings under the bill has also been expanded. Prosecutors may now initiate proceedings not only in the county where the asset was seized, but also in the county where the law enforcement agency is based. This provision helps streamline digital asset-related cases, especially when assets are held remotely or spread across jurisdictions.

While the Legislative Budget Board noted that the fiscal impact of SB1498 remains uncertain, they acknowledged that forfeitures involving digital assets could provide future revenue. However, the frequency and scale of such seizures are difficult to predict. Agencies across the state will likely need to invest in technical infrastructure, training, and secure wallet management tools to ensure compliance with the new law.

The bill has drawn praise from law enforcement and regulators seeking to keep pace with financial innovation. In its analysis, the Senate Research Center highlighted the need to modernize asset forfeiture laws and provide prosecutors with legal authority over crimes involving cryptocurrencies and blockchain-based financial tools.

Civil liberties groups, however, had criticized the bill for some time. The Libertarian Party of Texas had issued a statement warning that SB1498 expands the power of the state to seize property without necessarily securing a conviction. Opponents argue the law undermines due process and could lead to overreach, particularly in cases involving minor infractions or disputed transactions. The longstanding controversy around civil asset forfeiture, where law enforcement can seize property based on suspicion rather than proof, remains a focal point of concern.

Texas’s legislative move places it at the forefront of digital asset law enforcement. While states like New York and California have pursued regulatory oversight of crypto businesses and exchanges, Texas’s SB1498 directly targets the assets themselves. It is the first law in the state to outline precise procedures for seizing and storing blockchain-based assets tied to criminal activity.

As digital currencies become more integrated into both legitimate commerce and illicit activity, policymakers are increasingly seeking ways to close legal gaps. SB1498 reflects this shift. It brings the state’s civil forfeiture framework in line with 21st-century realities and sends a clear message that digital assets are not beyond the reach of the law.

How the law will be applied in practice remains to be seen. In the coming months, SB1498 may serve as a model for other states or as a lightning rod in ongoing debates about property rights, privacy, and government power in the digital age.