World Liberty Financial, the DeFi and stablecoin project closely associated with the Trump family, may have issued an unregistered security, according to Lee Reiners, a lecturing fellow at Duke University and former Federal Reserve Bank of New York examiner, in a blog on Friday.
Citing the Security and Exchange Commission’s recent token taxonomy, Reiners notes that the WLFI is not a pure “digital commodity,” and likely subject to SEC scrutiny. This is despite the World Liberty team’s claims that WLFI is a pure governance token.
“WLFI is not a decentralized commodity. It is a Trump-branded governance token sold to finance a centrally controlled crypto business. If the SEC’s interpretation means anything, it should apply here,” Reiners wrote.
The SEC is now led by Chairman Paul Atkins, who was nominated by President Donald Trump.
Launched in October 2024, WLFI was marketed through the project’s “Gold Paper” as a pure voting token for the World Liberty lending protocol. The project explicitly stated WLFI did not hold claim to any project equity, dividends, or profit rights, positioning WLFI as a tool for decentralized governance.
However, World Liberty sold approximately 25 billion WLFI tokens, out of the total 100 billion supply, in several public presale rounds. Reiners argues that buyers likely invested capital with the reasonable expectation of profits, an essential component of the Howey Test used by the SEC to determine which assets are securities.
Notably, the token was sold before the World Liberty protocol was built, and leveraged the Trump family name.
“The SEC’s interpretation specifically emphasizes that issuer marketing matters; that white papers and official communications matter; and that promises to develop a crypto system, achieve functionality, build network effects, or support a project can create a reasonable expectation of profit,” Reiners argued.
Reiners, who has testified against the SEC’s new interpretive guidance for blockchain-based tokens, also challenged the decentralization of World Liberty and WLFI. He noted that the token has been used for apparent self-dealing, citing an arrangement with the Dolomite lending protocol to borrow $75 million worth of stablecoins using 5 billion WLFI as collateral.
Dolomite’s co-founder Corey Caplan is a World Liberty adviser, and some of the borrowed tokens were USD1, the stablecoin issued by World Liberty.
Reiners also pointed to a lawsuit filed by Justin Sun, who alleges World Liberty froze his tokens and blocked his governance rights, despite his substantial early support for the project. “Sun’s allegations, if true, reveal that World Liberty retained sweeping unilateral control over $WLFI. They also raise an obvious question: Is $WLFI an unregistered security?” Reiners wrote.
Late last month, World Liberty opened a governance process that would controversially unlock billions of presale tokens in about four years. While the team pitched the proposal as a way to clarify questions about the supply, many presale investors took umbrage with the process and noted that they had little sway in the governance process.
Members of Congress have repeatedly raised ethics concerns regarding the Trump family’s involvement in the crypto industry, and raised particular points about World Liberty’s operations.
A Trump-affiliated entity, DT Marks DEFI LLC, is thought to own about 38% of World Liberty following a $500 million deal in early 2026 to a UAE-linked entity tied to Sheikh Tahnoon bin Zayed Al Nahyan, which bought 49% of the protocol. DT Marks DEFI LLC is entitled to 75% of net proceeds from WLFI token sales, according to World Liberty’s website.
Additionally, Abu Dhabi-based state investment firm MGX used World Liberty’s USD1 stablecoin to close a $2 billion investment in crypto exchange Binance. This deal occurred before President Trump pardoned former Binance CEO Changpeng Zhao, who had pleaded guilty to federal financial violations.
“The SEC has the legal authority to investigate World Liberty,” Reiners wrote. “But do they have the integrity and independence to investigate a crypto venture in which the president and his family have a direct financial stake? Unfortunately, recent history suggests the answer is no,” Reiners wrote.
© 2026 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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