Three senior Democratic lawmakers — Senator Bernie Sanders, Senator Elizabeth Warren, and Representative Bobby Scott — have asked the U.S. Labor Department to rescind a proposed rule that would allow cryptocurrencies and other alternative investments to be offered inside 401(k) and other employer-sponsored retirement plans. The lawmakers say the plan would expose the nation’s roughly $10.1 trillion retirement market to volatile assets and increase the risk of fraud and investor harm.
In a letter to acting Labor Secretary Keith Sonderling, the trio, who serve as ranking members on key Senate and House committees overseeing banking, labor and education, argued that digital assets lack adequate investor protections. They warned many crypto products remain susceptible to misconduct and that securities-law safeguards that apply to public equities may not be available for many digital tokens, leaving retirement savers vulnerable.
The Labor Department’s draft guidance, first unveiled in March, would replace a blanket prohibition on certain alternative investments with a framework allowing plan fiduciaries to consider private equity, private credit, bitcoin and other digital assets on a case-by-case basis. Under the proposal, plan sponsors would not be required to add alternative options, but employers choosing to do so would have to document thorough due diligence demonstrating compliance with ERISA prudence standards, including concerns about diversification, liquidity, valuation, fees and participant understanding.
Labor officials have said the aim is not to create unfettered access to crypto or private markets but to let fiduciaries assess whether specific offerings meet established prudence tests. Proponents framed the move as expanding retirement savers’ choices. Critics, including Sanders, Warren and Scott, say it instead risks turning long-term retirement accounts into vehicles for high-risk investments.
Warren previously cited U.S. Government Accountability Office research describing crypto assets as uniquely volatile and difficult to evaluate with traditional forecasting. She has argued retirement accounts should prioritize long-term financial security rather than exposure to speculative instruments.
The department’s proposal stems from a presidential executive order signed on April 30 by President Donald Trump directing federal agencies to expand access to alternative assets in retirement accounts and to revisit ERISA guidance. The order also asked the Securities and Exchange Commission to explore ways for 401(k) investors to gain exposure to alternative investments. Administration officials and some agency leaders have said investment decisions should be left to employers and workers rather than restricted by broad government bans.
Beyond investor-protection concerns, the Democratic lawmakers’ letter raises questions about possible conflicts of interest, noting connections between the administration and crypto ventures. Those ethical concerns have also surfaced during congressional negotiations over the CLARITY Act, a bill to clarify digital asset market structure that is expected to move in the Senate. Democrats have signaled they will oppose crypto legislation that does not include provisions addressing potential conflicts involving public officials.
The Labor Department’s proposal remains under review. Sanders, Warren and Scott have asked the agency to withdraw it, arguing that more protections and clearer regulatory guardrails are needed before allowing retirement plans to offer high-risk alternative investments to ordinary savers.