Bismarck — The House Industry, Business and Labor Committee heard testimony on House Bill 1239, the ‘‘Freedom Act,’’ which its sponsor, Representative Nathan Thomann of District 34, described as a bill to protect digital-asset mining and similar data-center activity from new, industry-specific local restrictions and to exempt some mining activity from money-transmitter licensing.

The bill ‘‘provides for protections for digital asset mining, exemptions from money transmitter licenses, including zoning prohibitions for more restrictive zoning,’’ Representative Thomann said. He told the committee the measure is intended to prevent local governments from carving out a ban that would apply only to miners or data centers and not to other businesses in the same zone.

The measure drew questions and opposition from officials who said parts are unnecessary or create regulatory gaps. Lisa Cruz, commissioner of the Department of Financial Institutions, told the committee that miners who only validate blocks are already excluded from the state money-transmitter statute and that the bill’s licensing exemption could create a loophole for larger crypto firms that also transmit value.

‘‘Licensing and oversight help the industry to communicate that they are indeed regulated. . . . The exemption in section 2 creates a loophole,’’ Commissioner Cruz said, adding that miners who do not transmit value are already exempt under the department’s reading of the statute.

McLean County State’s Attorney Lad Erickson, speaking in opposition, said the bill’s zoning changes risk harming existing real-estate expectations and urged caution before ‘‘intermixing zoning statuses.’’ Erickson also highlighted the bill’s written size threshold for a ‘‘digital asset mining business’’ and described how mining and large data centers can consume substantial power: ‘‘This doesn't have a limit on it from anything up to these 200-megawatt industrial facilities,’’ Erickson said, giving the committee a frame of reference for megawatt-scale consumption.

Local government and municipal groups likewise opposed or cautioned against the bill’s zoning provisions. Corey Peterson of the League of Cities said most city residential areas lack electrical infrastructure and noise-control capacity to host one-megawatt mining operations, and he recommended keeping mining and large data-center uses away from residential zones.

Supporters, led by Representative Thomann, said the bill aims to align treatment of mining/data-center businesses with how other commercial or industrial uses are handled and to avoid industry-specific exclusions. Thomann said he was not trying to remove local authority to impose general noise or power-availability conditions, but rather to prevent ‘‘moving the bar’’ only to exclude this industry.

Committee members asked practical questions about whether the bill would force data centers into residential areas, how loud equipment can be, and whether utilities or local permitting could condition siting on availability of power. Thomann said mining operations typically locate where utility and transmission infrastructure exist and that the bill was not meant to permit them in residential districts.

Testimony also raised consumer-protection and law-enforcement issues. Commissioner Cruz cited FBI estimates of crypto-related losses and said the department needs authority to regulate firms that hold or transmit funds in order to protect consumers. Prosecutors warned about investigative and warrant issues tied to custody and access to digital assets and Bitcoin ATMs.

The committee heard multiple voices urging revisions: Cruz and others suggested the money-transmitter exemption be narrowed or removed; local officials urged explicit preservation of local zoning and planning authority over non-noise land-use factors such as traffic, aesthetics and utility capacity. No formal amendments or votes were recorded during the hearing; the committee closed public testimony and moved on to the next item.

The bill’s discussion underscores a set of trade-offs the committee faces: a sponsor-driven push to make the state more permissive to mining and certain data-center activity, set against regulators and local officials who warn that the proposal may undercut consumer protections, investigative authority and local land-use planning.

At the close of the hearing, committee leadership said they would hear further testimony and consider amendments before any committee action.