Trump’s world freedom to get legal cover from new crypto law, says influential expert

The CLARITY Act, intended to provide regulatory clarity to the crypto industry, has been working its way through Congress for the past few years, but Duke University lecturer Lee Reiners, who previously worked as a bank examiner at the New York Federal Reserve, says the new law will remove securities regulation protections for consumers from crypto tokens such as the World Liberty Financial affiliate’s to WLFI financial tokens. The claim was made in a new blog post Published by Reiners on Friday where he also claimed that WLFI is an unregistered security as it exists today and that the SEC lacks the integrity needed to enforce the law.

Reiners builds his case that WLFI operates as an unregistered security by applying the Howey test, a legal framework established by the Supreme Court in 1946. Under that test, an investment contract qualifies as a security when it involves an investment of money in a common enterprise with a reasonable expectation of profits derived primarily from the efforts of others. He walks through each element with evidence drawn from World Liberty Financial’s Gold Paper white paper, token sale data, marketing materials and operational decisions.

Some of the supporting evidence Reiners pointed to when making his case included: World Liberty Financial sold WLFI tokens to raise capital for the development of the WLF protocol, Trump family-affiliated entities hold equity interests in the parent company and receive a large portion of the net income, WLFI token buyers had a reasonable expectation of profit based on marketing materials emphasized through marketing materials and recycling in the future. non-stock corporation structure and various technical mechanisms such as manual upgrades via multisig wallets and token freezing.

Reiners maintains that WLFI remains an unregistered security, even under the SEC’s recently updated guidance issued in March. That interpretation introduces different categories of crypto-assets such as digital commodities, digital collectibles, digital tools, stablecoins and digital securities. Reiners calls the framework legally flawed and inconsistent with decades of precedent because it ignores the economic content of what happens in practice despite all the marketing terminology surrounding blockchain technology. That said, even under this new regulatory framework for crypto, Reiners says WLFI doesn’t qualify as a purely digital commodity like bitcoin, whose value comes from a functional, decentralized network.

Reiners also points to several signs that the US Securities and Exchange Commission (SEC) currently lacks the integrity or independence to pursue a hypothetical case against World Liberty Financial. Enforcement actions against crypto projects have slowed dramatically over the past year, with many cases stalled or dismissed amid broader statements favoring the industry. This shift coincided with developments favoring Trump-linked businesses, which reportedly led to $1.4 billion in profits for the Trump family last year.

In the conclusion of his post, Reiners states bluntly: “The SEC has the legal authority to investigate World Freedom. But do they have the integrity and independence to investigate a crypto business in which the president and his family have a direct financial interest? Unfortunately, recent history suggests that the answer is no.”

Reiners also argues that the CLARITY Act would allow World Liberty Financial to bypass securities regulation entirely if passed in its current form. Senate drafts classify tokens like WLFI as network tokens, defined as digital commodities linked to a distributed ledger and treated as non-securities. This change would eliminate consumer protections built into securities laws, such as mandatory disclosures and anti-fraud provisions.

Of course, it remains unclear whether the CLARITY Act will pass in its current form. The Senate Banking Committee did a note scheduled for Thursday to amend and vote on the comprehensive crypto legislation. A previous battle between banking and crypto interests over stablecoin returns appears to have been resolved after new language was released last week, although some banking trade groups say the solution falls short. However, lingering ethical questions persist over crypto profiteering by government officials. Senator Kirsten Gillibrand did declare that the bill would not move forward without a provision prohibiting senior officials, including the president and members of Congress, from holding personal financial interests or industry ties in digital assets.

Democrats did pointed the crypto-smearing and corruption finger at Trump on a few separate occasions. House Democrats sent a letter to the SEC expressing concerns about pay-to-play related to the industry’s influence. They cited the waiver of Binance co-founder Changpeng Zhao, whose exchange now holds about $2 billion in World Liberty Financial’s USD1 stablecoin and generates tens of millions in annual revenue for the project. Another example involved a UAE-linked investment firm buying a 49% stake in World Liberty Financial for $500 million just before the UAE got approval for hundreds of thousands of previously restricted Nvidia AI chips. Crypto billionaire Justin Sun, who holds significant WLFI and TRUMP memecoin positions, and is now suing World Liberty Financial over frozen tokens, unilateral smart contract changes and pressure for additional investments, has also featured in this criticism.