Three congressional Democrats want the Labor Department to throw out a proposed rule that would open the door to crypto in 401(k) plans. Senators Elizabeth Warren and Bernie Sanders, joined by Representative Bobby Scott, sent a letter on June 1 to acting Labor Secretary Keith Sonderling urging the agency to rescind the proposal, which they say would expose roughly $14.2 trillion in workers’ retirement savings to volatile, high-fee assets.
The timing is awkward. The public comment window on that rule closed the same day their letter went out, which means the decisive call now belongs to the agency itself, and the loudest political leverage Democrats hold sits in a separate bill working its way through the Senate.
What Warren, Sanders and Scott Want
The letter carries three signatures: Warren, the Massachusetts Democrat and ranking member on the Senate Banking Committee; Sanders, the Vermont independent who leads Democrats on the Senate health and labor committee; and Bobby Scott of Virginia, the top Democrat on the House education and workforce committee. Their ask is blunt. Pull the rule.
The trio frames the proposal as a threat to people who can least afford a bad year. Retirement savers, they argue, would be steered toward products that cost more and behave less predictably than the index funds that anchor most workplace plans. The proposal carries out an executive order President Trump signed in August to widen 401(k) access to alternative assets, and the lawmakers tie the two together directly.
This would strip long-held investor protections from retirement savers and encourage the use of more risky, complex, and expensive investments. The proposed rule is harmful to American workers.
Warren has spent months building a paper trail on the administration’s crypto policy, from her demand for records on new crypto bank charters to her objections inside the market-structure bill now in the Senate. This letter fits that pattern. It is also, on its own, a long shot: the people being asked to scrap the rule are the same people who wrote it.
How the March Rule Opens 401(k)s to Crypto
From Biden-Era Caution to a Trump Safe Harbor
The Department of Labor (DOL, the federal agency that polices workplace retirement plans) published its March proposal to open 401(k)s to alternative investments on March 30. Its formal name is the rule on Fiduciary Duties in Selecting Designated Investment Alternatives, and the mechanics matter more than the title. It does not order any plan to add crypto. What it does is build a process-based safe harbor: a documented checklist that, once a plan fiduciary follows it, shields them from lawsuits over the decision to offer an alternative asset.
That shield is the whole game. For years the litigation risk kept the question academic, because few employers would court a class action to put bitcoin on a menu. The Biden administration reinforced that caution with 2022 guidance telling plans to use extreme care before touching crypto. The Labor Department rescinded that guidance in May and replaced the warning with a path forward.
| Feature | Biden-era guidance (2022) | Proposed rule (March 2026) |
|---|---|---|
| Stance on crypto | Use extreme care | Permitted under a safe harbor |
| Litigation risk for employers | High, discouraged adoption | Reduced if checklist is followed |
| Assets addressed | Crypto and digital assets | Crypto, private equity, private credit, real estate, annuities |
| Status | Rescinded May 2026 | Comment period closed June 1 |
The Assets Now on the Menu
The rule reaches well past crypto. Trump’s order defined alternative assets broadly, and the proposal follows suit. Plans could open up to:
- Digital assets held through actively managed vehicles, including bitcoin and other tokens
- Private equity stakes in companies that are not publicly traded
- Private credit, meaning loans made outside the banking system
- Real estate, commodities and infrastructure financing
- Lifetime income products such as certain annuities
The reach is large because the system is large. More than 90 million Americans hold accounts covered by the proposal, and the savings at stake run to trillions of dollars.
The Volatility Numbers Behind the Pushback
The lawmakers did not invent the risk argument. They leaned on the Government Accountability Office (GAO, the investigative arm of Congress), which studied the crypto options sitting inside 401(k) plans between 2021 and 2023. Its December 2024 report on crypto in 401(k) plans found that these assets swung four to 12 times more wildly than the S&P 500, the index of 500 large U.S. companies that most retirement funds track.
The spread tracks the asset. Bitcoin, with the longest price history, sat at the calm end. The newer tokens, including Solana, ran to the top of the range. GAO also published a simulation showing that a 20% bitcoin allocation produced far more volatility than a 1% or 5% slice, a warning about what happens when a saver leans in rather than dabbles.
Volatility is only part of the complaint. The three Democrats point to the other features of these products:
- Higher management fees than the index funds that dominate most 401(k) menus
- Less price transparency and tougher valuation than listed stocks
- Limited liquidity, with some private holdings hard to sell on short notice
Why Trump’s Crypto Holdings Are in the Frame
The letter saves its sharpest line for the president. Warren, Sanders and Scott argue that Trump stands to gain from a rule his own administration is writing, and they put it plainly: the proposal, in their words, has the potential to boost the President’s bottom line at the expense of ordinary workers and retirees.
The number behind that charge comes from World Liberty Financial (WLFI), the crypto venture a Trump-family entity controls through a 60% stake. When WLFI’s token began trading in September, it lifted the family’s paper wealth by about $5 billion, based on holdings of roughly 22.5 billion tokens, according to reporting on the World Liberty Financial token launch. The founders’ tokens were locked at the time, so the gain existed on screen rather than in cash.
That is the conflict the Democrats want voters to see. A wider 401(k) door could push fresh demand toward digital assets across the board, and the first family is now a sizable holder of one. Watchdog groups have raised the same concern since the venture launched, and the White House has rejected any policy language that singles out the president by name.
The Letter Lands as the CLARITY Act Stalls
Democrats cannot vote the rule down. The Labor Department wrote it and can keep it, so their leverage runs through a separate measure: the CLARITY Act, the market-structure bill that would set the ground rules for how crypto is regulated in the United States.
That bill cleared the Senate Banking Committee on May 14 in a 15-9 vote, with all 13 Republicans joined by two Democrats, Ruben Gallego of Arizona and Angela Alsobrooks of Maryland. During the markup the committee rejected an ethics amendment from Senator Chris Van Hollen that would have barred elected officials from profiting off crypto while in office. Democrats have signaled they will withhold support unless that kind of guardrail goes in, and Warren has separately pushed amendments to the CLARITY Act limiting crypto firms’ Federal Reserve access.
The math is tight. The bill needs 60 votes on the Senate floor, which means roughly seven Democrats beyond the committee crossovers. Gallego has already warned his yes could flip if there is no ethics deal by the floor vote. Republican leaders and the White House are racing to pass the CLARITY Act before the July 4 recess, and the conflict-of-interest objection in the 401(k) letter is the same objection holding up the bigger bill.
What Retirement Savers Should Expect
Nothing changes in anyone’s account this week. The proposal closed its public comment window after drawing more than 20,000 submissions, and the agency now has to weigh those comments and decide whether to finalize, revise or drop the rule. There is no statutory deadline forcing a quick answer.
Even if the rule is finalized, it does not put crypto in a single 401(k) on its own. It clears the legal path; the choice still sits with each employer and the plan fiduciary who runs the menu. Many large plan sponsors have said they are in no rush, given the same volatility GAO flagged. Savers who want crypto exposure can already buy it through a self-directed brokerage window or an individual retirement account.
The comment window is shut. The next move belongs to the Labor Department, and there is no clock forcing its hand.
Frequently Asked Questions
Can I Put Crypto in My 401(k) Right Now?
For most workers, no. Whether crypto appears in a 401(k) depends on the employer and plan administrator, and few offer it today. Some plans let you hold crypto through a self-directed brokerage window, and you can buy it in an individual retirement account. The proposed rule would make it easier for employers to add crypto, but it would not require them to.
What Did the Labor Department Actually Propose?
On March 30, 2026, the DOL proposed a rule called Fiduciary Duties in Selecting Designated Investment Alternatives. It creates a safe harbor that protects employers from lawsuits if they follow a documented review process before adding alternative assets such as crypto, private equity or real estate to a plan menu.
Why Do Warren and Sanders Want It Scrapped?
They argue crypto and other alternatives are more volatile, costlier and harder to value than standard 401(k) funds, citing a GAO finding that crypto in plans was four to 12 times more volatile than the S&P 500 between 2021 and 2023. They also say the rule could benefit President Trump’s crypto businesses.
Does the Rule Force My Employer to Offer Crypto?
No. The rule removes a legal barrier; it does not mandate any asset class. Each employer and plan fiduciary still decides what goes on the investment menu, and many large sponsors have signaled caution.
What Happens Next?
The public comment period has closed. The Labor Department must review submissions and decide whether to finalize, change or withdraw the rule, with no fixed deadline. Separately, the CLARITY Act crypto bill is moving through the Senate, where the same conflict-of-interest fight is in play.
Disclaimer: This article is for informational purposes only and is not investment, tax or retirement advice. Cryptocurrency and other alternative assets are highly volatile and can lose significant value. Anyone weighing these investments inside a retirement account should consult a qualified financial adviser. Figures are accurate as of publication on June 3, 2026.
