Sanders and Warren Urge Labor Department to Reject Crypto 401(k) Rule

Senators Bernie Sanders (I-VT) and Elizabeth Warren (D-MA) have called on the U.S. Department of Labor to reconsider a proposed rule that would broaden fiduciary discretion in retirement plans to include alternative assets such as cryptocurrencies, private equity, and private credit.

The lawmakers addressed a 14-page letter on Monday to Acting Labor Secretary Keith Sonderling, warning that the proposal could weaken long-standing fiduciary standards governing how retirement assets are allocated in 401(k) plans.

Lawmakers Challenge Expansion of Fiduciary Discretion

The proposed rule, first introduced in March, would allow fiduciaries to offer exposure to more volatile and less transparent asset classes, including Bitcoin and other digital assets, provided they document that they considered relevant risk factors before granting access.

Sanders, Warren, and Rep. Bobby Scott (D-VA), the top Democrat on the House Education and Labor Committee, argued that the rule effectively shifts fiduciary responsibility from a strict duty of prudence toward a presumption of compliance based on procedural disclosure.

They said this approach conflicts with the Employee Retirement Income Security Act of 1974 (ERISA) and longstanding Supreme Court precedent governing fiduciary obligations.

“The proposed rule is harmful to American workers and counter to statute, Congressional intent, existing regulations, and case law,” the lawmakers wrote.

Concerns Over Retirement Plan Risk Exposure

The lawmakers warned that expanding access to alternative and crypto-linked assets within the approximately $10 trillion U.S. retirement system could increase exposure to volatility and illiquid instruments.

They argued that assets such as cryptocurrencies and private market investments may not be suitable for retirement portfolios due to valuation uncertainty, liquidity constraints, and elevated risk profiles compared to traditional instruments.

Allegations of Political and Market Conflicts

The letter also raised concerns that the proposed regulatory shift could indirectly benefit President Donald Trump and affiliated digital asset ventures by expanding potential investor access to crypto-linked products.

The lawmakers referenced crypto-related projects and tokens associated with Trump and his family, arguing that broader retirement exposure could expand the market for such assets.

“The change to the prudence standard described above expands opportunities for President Trump and his family to profit at the expense of taxpayers, workers and retirees,” the letter stated.

Labor Department Reviewing Proposal

A spokesperson for the Department of Labor confirmed receipt of the letter and said the agency is reviewing the concerns raised by lawmakers.

The proposal follows an executive order signed by Trump in August directing the department to reassess its approach toward alternative assets in retirement investment products.

Debate Over Retirement Asset Rules Intensifies

The dispute reflects a broader policy divide over whether retirement systems should be permitted to allocate capital into higher-risk alternative asset classes, including digital assets, as part of portfolio diversification strategies.

Supporters of expanded access argue it could modernize retirement investing and potentially unlock new sources of return, while critics warn it could expose long-term savings to unnecessary volatility.

Analysts have previously estimated that allowing exposure to crypto assets within retirement accounts could channel hundreds of billions of dollars into the digital asset market over time, significantly expanding its institutional footprint.