TLDR
- Democrats say the Labor Department proposal could expose retirement savers to volatile crypto and private funds.
- Sanders, Warren and Scott urged Keith Sonderling to rescind the retirement plan investment proposal immediately.
- The lawmakers cited fraud risks, weak safeguards and higher fees tied to alternative asset products.
- Trump administration officials say the proposal expands choice while requiring managers to follow prudent processes.
- Democrats also raised ethics concerns connected to Trump family ventures in the digital asset sector.
Top Democrats on three congressional committees are pressing the US Labor Department to scrap a proposal that would allow digital assets and other alternative assets in 401(k) retirement plans. Senator Bernie Sanders, Senator Elizabeth Warren and Representative Bobby Scott made the request in a Tuesday letter to acting Labor Secretary Keith Sonderling.
The lawmakers said the Labor Department proposal could open employer-sponsored retirement accounts to cryptocurrency, private equity, private credit and similar investment products. They argued that retirement savers could face greater exposure to assets that are often harder to value, more expensive to manage and less familiar to many workers.
The letter said the plan would weaken established investor protections for Americans saving through 401(k) plans. The Democrats also argued that the proposal would probably face legal challenges because retirement plan managers have duties under federal benefit law.
Concerns focus on volatility and safeguards
The lawmakers said digital assets can move sharply in value and may not carry the same protections that apply to many public securities. Their letter cited warnings from the Financial Industry Regulatory Authority that crypto investments have shown high volatility and that investors can lose their full investment.
The Democrats also pointed to fraud concerns in the digital asset sector, including FBI data cited in the letter that reported more than $11bn in cryptocurrency fraud losses in 2025. They said weaker enforcement at financial agencies could leave retirement savers with fewer safeguards during a period of changing securities law treatment for crypto assets.
The letter also raised concerns about fees tied to private equity, private credit and other alternative asset products. According to the lawmakers, higher costs could reduce long-term retirement returns for workers who may not fully understand the structure, liquidity limits or risks of those products.
Administration defends wider investment access
The Labor Department proposal followed an August 2025 executive order from President Donald Trump directing agencies to expand access to alternative assets. The administration has said the rule would not require retirement plans to add crypto or private funds, but would allow plan managers to review a wider range of options.
Sonderling said the department’s approach would require managers to evaluate products through a prudent process rather than exclude categories in advance. Treasury Secretary Scott Bessent also supported the rulemaking effort, saying it fits the administration’s broader economic agenda.
Sanders, Warren and Scott also questioned whether the policy could benefit people connected to the administration, citing Trump family involvement in crypto ventures, including World Liberty Financial. Democrats have raised similar ethics concerns during debate over the CLARITY Act, a digital asset market structure bill expected to be considered in the Senate.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
