Congressional Democrats are strongly opposing a US Department of Labor proposal that would allow 401(k) investments to include cryptocurrency, private credit and private equity assets, arguing the change will expose workers to riskier and more complex investments.

In a letter shared exclusively with the Guardian, Senator Bernie Sanders, Senator Elizabeth Warren and House education and workforce committee ranking member Bobby Scott of Virginia, argued the rule would expose an estimated $14.2tn of 401(k) retirement savings to volatile assets and would probably not withstand a challenge in court.

“This would strip long-held investor protections from retirement savers and encourage the use of more risky, complex, and expensive investments,” said the letter. “The proposed rule is harmful to American workers.”

These high-risk assets can experience extreme volatility, the Democrats said, citing Trump’s memecoin, which soared to over $75 per token during Trump’s inauguration in January 2025 but has since dropped to $2 per token.

The letter noted seniors in the US were already struggling financially, with more than 22.8% of seniors in the US living in poverty, according to the Organisation for Economic Cooperation and Development (OECD), compared with just 5.1% in Denmark, 5.8% in France, 12.6% in Germany and 14.8 % in Canada.

The proposal could also expose workers to higher fees and erode their long-term returns.

The Financial Industry Regulation Authority (Finra) cautions that crypto investments “have experienced higher levels of volatility relative to more traditional investment assets” and “the risk of losing all of your investment is significant”.

The FBI reported cryptocurrency fraud complaints comprise some of the highest losses for Americans among cyber-enabled fraud, with over $11bn in losses reported in 2025.

Consumer advocates argue the proposed rule only puts retirement savings accounts at higher risk while benefiting the crypto industry.

“Opening 401ks to these products risks turning workers’ retirement savings into a Ponzi-like scheme that throws a lifeline to an industry scrambling for fresh cash,” Oscar Valdés Viera, a senior policy analyst at consumer advocacy group Americans for Financial Reform, said in a statement.

Democrats flagged Trump’s ties to the crypto industry and the conflict of interest it could present to the proposal. Trump’s adult sons have been managing the family’s crypto business, which includes a new Trump-based digital currency, as he carries out his second term in the White House. The ventures in crypto have potentially raised as much as $5bn for the family after the launch of its digital currency in September, according to the Wall Street Journal.

The labor department did not respond to comment.

The Trump administration says the new rule will provide workers with more diverse options for investment.

“The department’s days of picking winners and losers are over. Our rule clearly spells out that managers must evaluate any and all potential product offerings by following a prudent process,” said Keith Sonderling, acting US labor secretary, in a statement.

Trump’s secretary of treasury, Scott Bessent, added: “The treasury department is proud of this rule-making effort, which is another step in ushering in President Trump’s ‘Golden Age’.”