U.S. Senators Bernie Sanders and Elizabeth Warren, along with Representative Robert Scott, are pressing the Department of Labor (DOL) to abandon a proposed rule that could open the door for 401(k) retirement plans to hold alternative assets, including cryptocurrencies.
In a June 1 letter to acting labor secretary Keith Sonderling, the lawmakers argued the plan would expose retirement savers to “higher levels of risk” and weaken long-standing protections for 401(k) participants. The department has not yet commented on the letter or provided a timeline for its review of the proposal.
Rule would expand “safe harbor” for alternative assets
The proposal, unveiled in March, outlines how plan fiduciaries could evaluate and include nontraditional assets such as private equity, real estate, private credit, hedge funds, and digital currencies in 401(k)s.
It builds on an executive order under former president Donald Trump that directed the DOL to explore expanding access to alternative investments in retirement plans. Central to the draft rule is a broadened “safe harbor” framework that would give plan fiduciaries clearer legal protections if they add such assets after following a defined due‑diligence process.
Supporters, including the Managed Funds Association, say the change would help workers access asset classes long used by large institutions to pursue higher, risk‑adjusted returns. They argue that fear of litigation has discouraged plan managers from offering these products, even to sophisticated plan participants.
The public comment period on the rule closed Monday at midnight, drawing more than 37,000 submissions from asset managers, trade groups, digital asset firms, retirement consultants, and private citizens.
Lawmakers warn of weaker safeguards and higher costs
Sanders, Warren, and Scott contend that the safe harbor framework could effectively dilute the fiduciary duty that governs retirement plans. They warn that making it easier to add complex and often higher‑fee products could undercut protections designed to limit exposure to volatile and opaque markets.
Their letter cautions that many retirement savers may not fully understand the risks tied to leveraged strategies, illiquid private vehicles, or thinly traded digital tokens. They argue that, if the rule is adopted, losses in these products could be harder to challenge in court because fiduciaries would be shielded by the safe harbor if they followed the outlined procedures.
Crypto volatility and fraud take center stage
The lawmakers placed particular emphasis on digital assets, citing extreme price swings and mounting fraud losses.
They highlighted a cryptocurrency associated with Trump that surged above $73 before collapsing to near $2 as of June 2. They also noted the World Liberty Financial token, linked to the Trump family, which trades around $0.059 after reaching a 52‑week high of $10.01, underscoring how quickly token values can erode.
Citing figures from the Federal Bureau of Investigation and blockchain analytics firm Chainalysis, the letter referenced an estimated $11.3 billion to $11.4 billion in crypto‑related fraud losses in 2025 in the United States, and roughly $17 billion globally. Older Americans, they said, represented a disproportionate share of those losses, raising concerns about exposing retirement accounts to the sector.
Chainalysis also reported an estimated 1,400% year‑over‑year surge in impersonation scams in 2025, a trend the lawmakers said illustrates the difficulty of policing digital asset markets even as products become more mainstream.
Questions over Trump‑linked financial ties
The letter further pointed to 2025 reports indicating that members of the Trump family amassed roughly $5 billion in paper wealth following the launch of World Liberty Financial.
The lawmakers argued that these connections heighten concerns about whether a regulatory shift favoring alternative and digital assets could indirectly benefit individuals tied to the former president. They suggested this potential conflict of interest adds another layer of scrutiny to a rule that traces back to a Trump‑era directive.
Market reaction shows mounting caution
The policy fight comes as digital asset markets show signs of strain. Digital asset investment products have logged three straight weeks of net outflows, totaling about $4.21 billion, as traders reduce risk exposure.
Bitcoin has retreated from May peaks above $80,000 to the low $70,000 range, amid softer institutional demand and broader risk aversion. Tokens tied to political figures or themes have been especially volatile, with wide intraday swings and deteriorating liquidity.
For 401(k) plan sponsors and asset managers, the outcome of the DOL review will shape whether they feel comfortable adding such products at all. The pointed challenge from Sanders, Warren, and Scott injects additional political and regulatory uncertainty that could delay, narrow, or even derail the final rule.
What traders are watching next
Traders in digital assets and retirement‑linked products are now focused on the DOL’s response to the congressional letter and the substance of any revisions to the proposed regulation. Key questions include:
- whether the department narrows the safe harbor, heightens documentation requirements, or carves out digital assets from broader alternative‑asset guidance
Any sign that the rule will be scaled back or shelved could further cool appetite for politically exposed tokens and delay the entry of 401(k) plans into higher‑risk asset classes. Conversely, if the DOL moves ahead largely as proposed, plan fiduciaries could gain a clearer, though still controversial, pathway to offering alternatives and cryptocurrencies inside workplace retirement accounts.
Concerned about crypto risks in retirement plans? Learn how crypto safety can better protect your investments.
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