President Donald Trump signed an executive order today directing federal regulators to ease restrictions on including private equity, real estate, and cryptocurrency in 401(k) retirement plans—a move critics warn could expose workers’ savings to high-risk, high-fee investments.
The order instructs the Securities and Exchange Commission (SEC) and Labor Department to revise rules governing defined-contribution retirement plans, potentially opening the $12 trillion 401(k) market to alternative asset managers like Blackstone, KKR, and Apollo Global Management.
Industry groups have lobbied aggressively for the change, arguing it would provide retirees access to higher-yielding investments, but progressive Democrat Lisa McCormick and other critics condemned the decision, calling it a handout to Wall Street at the expense of working Americans.
“I harbor grave doubt about cryptocurrency, especially in the hands of greedy and unscrupulous billionaires,” McCormick said. “Cryptocurrency is backed by the full faith and credit of absolutely nothing.”
Financial watchdogs echoed concerns, noting that private equity and crypto assets are often illiquid, opaque, and subject to extreme volatility.
“Stuffing private equity, crypto, and other ‘alternative assets’ into 401(k)s is about propping up scams and bailing out an industry that’s run out of buyers,” said Helaine Olen of the American Economic Liberties Project. “Private equity consistently underperforms the S&P 500. This is a windfall for billionaire fund managers and a disaster for regular Americans.”
The order follows years of lobbying by alternative investment firms seeking to tap into retirement savings.
A Better Markets report warned that similar moves to allow crypto in state pension funds have exposed public workers to undue risk, citing:
- Extreme volatility in crypto markets
- Lack of transparency in private equity fees and performance
- Fiduciary conflicts as plan sponsors face pressure to include high-commission products
“State pension funds are not venture capital,” said Brady Williams, legal counsel for Better Markets. “These are risk-averse portfolios meant to provide secure retirements for teachers and firefighters. Cryptocurrency is fundamentally incompatible with that mission.”
The move comes amid growing scrutiny of crypto-related scams, including:
- Paxos Trust’s $48.5M settlement with New York regulators for compliance failures linked to Binance.
- FTX’s collapse and fraud charges against founder Sam Bankman-Fried.
- FBI warnings about “pig butchering” schemes, where victims are lured into fake crypto investments.
- The Federal Trade Commission and FBI have repeatedly cautioned that cryptocurrency fraud is surging, with losses exceeding $3.8 billion in 2022 alone.
The SEC and Labor Department must now draft new rules, a process likely to face legal challenges from consumer advocates.
McCormick and other critics are urging Congress to block the changes, arguing they undermine the Employee Retirement Income Security Act (ERISA), which mandates fiduciary responsibility in retirement plans.
“This isn’t about expanding choice—it’s about Wall Street exploiting Main Street,” McCormick said. “If Trump cared about retirees, he’d strengthen protections, not hand their savings over to hedge funds and crypto grifters.”