A Labor Department proposal to allow cryptocurrency, private credit, and private equity in 401(k) retirement accounts is drawing sharp pushback from congressional Democrats who say it exposes workers to dangerous volatility and threatens $14.2 trillion in savings.
In a letter obtained by the Guardian, Senators Bernie Sanders and Elizabeth Warren, along with House education committee ranking member Bobby Scott, warned the rule would strip away long-held investor protections and push workers toward riskier, more expensive investments. The three lawmakers predicted the proposal would not survive legal challenge.
The Democrats cited Trump's memecoin as exhibit A in their volatility argument. The token soared to over $75 during Trump's January inauguration but has since collapsed to $2. Such swings are routine in crypto markets, the lawmakers noted, with the Financial Industry Regulation Authority cautioning that digital assets carry "significant" risk of total loss compared to traditional investments.
The crypto industry has already cost Americans dearly. FBI data shows cryptocurrency fraud complaints produced more than $11 billion in losses during 2025 alone, ranking among the highest loss categories for cyber-enabled fraud.
Beyond volatility lies another concern: fees. Consumer advocates worry the rule opens the door to higher charges that will erode long-term retirement returns. Oscar Valdés Viera, a senior policy analyst at Americans for Financial Reform, called the proposal a potential "Ponzi-like scheme that throws a lifeline to an industry scrambling for fresh cash."
Demographics add weight to the argument. More than 22.8% of U.S. seniors currently live in poverty, according to OECD data, compared with 5.1% in Denmark, 5.8% in France, 12.6% in Germany, and 14.8% in Canada. Retirement security in America already lags peer nations by a wide margin.
Democrats also flagged a glaring conflict of interest. Trump's family crypto business, which includes a new Trump-branded digital currency, has potentially raised as much as $5 billion since its September launch. Trump's adult sons are managing the venture while the president pushes the regulatory change that would benefit it.
The Trump administration frames the proposal differently. Acting Labor Secretary Keith Sonderling said in a statement that "the department's days of picking winners and losers are over" and that the rule requires managers to evaluate products through a "prudent process." Treasury Secretary Scott Bessent called it another step in President Trump's "Golden Age."
The Labor Department did not respond to requests for comment beyond Sonderling's prepared statement.
Author James Rodriguez: "This is exactly the kind of policy that turns retirement accounts into speculation playgrounds for those at the top while ordinary workers absorb the losses."
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