The American Federation of Teachers (AFT), which represents 1.8 million educators, has written to the Senate Banking Committee urging a reconsideration of the crypto market‑structure proposal known as the Responsible Financial Innovation Act. In a letter obtained exclusively by CNBC, AFT President Randi Weingarten called the draft “irresponsible” and “reckless,” citing “profound risks to the pensions of working families and the overall stability of the economy.”
Weingarten’s letter, addressed to Committee Chairman Tim Scott (R‑SC) and Ranking Member Elizabeth Warren (D‑MA), argues that the bill would open the door to fraud and unethical practices in retirement plans, including AFT‑backed pensions. “The legislation pretends that crypto assets are stable and mainstream, when they are anything but,” she wrote. “Rather than protecting investors, the bill strips away the few safeguards that exist for crypto and erodes protections for traditional securities, jeopardizing retirement investments.”
A specific concern highlighted by the AFT is the ability for non‑crypto companies to place their stock on a blockchain, effectively sidestepping existing securities regulations. Wall Street firms have been vocal about the “tokenization” of financial assets—a trend championed by Larry Fink, CEO of BlackRock. Tokenization could allow securities to be traded in a digital format without the oversight of the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). Weingarten warned that “this loophole and the erosion of traditional securities law will have disastrous consequences: pensions and 401(k) plans could end up holding unsafe assets even when they are supposed to be invested in traditional securities.”
Beyond pension risk, the AFT argued that the bill does little to curb the fraud, illegal activity, and corruption that plague crypto markets today. “If enacted, this bill has the potential to lay the groundwork for the next financial crisis,” the union concluded.
Industry reaction
The broader labor movement is echoing the AFT’s concerns. The AFL‑CIO, the nation’s largest federation of unions, publicly opposed the draft during an October hearing before the Senate Banking Committee. At the same time, senior executives from Bank of America, Citi and Wells Fargo announced plans to meet with lawmakers to discuss the proposals, signaling strong financial‑industry interest in shaping the final language.
The bill, which builds on a House‑passed measure from the summer, is co‑sponsored by Senators Cynthia Lummis (R‑WY) and Bernie Moreno (R‑OH) alongside Chairman Scott. While its stated goal is to create a clear regulatory framework for digital assets, it also raises unanswered questions about tokenized securities that fall outside the traditional definition of cryptocurrency.
Tokenization has become a flashpoint in the legislative debate. Democrats, who must provide at least seven votes for the bill to pass, remain wary of a framework that could dilute state‑level consumer protections and concentrate oversight in federal agencies. Massachusetts Secretary of State William Galvin warned that “sweeping provisions that will exclude significant portions of the financial industry from state oversight” could create a “recipe for disaster for millions of savers.”
Senator Mark Warner (D‑VA) admitted at a recent CFO Council Summit that he is “in crypto hell” trying to forge a workable market‑structure bill. Warner is part of a small group of Democratic senators meeting to review the Senate Banking draft and propose counter‑offers. Their primary aim is to strike a balance between the CFTC’s commodity‑focused approach and the SEC’s securities‑focused mandate.
Progress on the Senate version stalled for weeks during the longest government shutdown in U.S. history. At the Blockchain Association Policy Summit, Senator Lummis indicated that a revised draft could be released by the end of the week, allowing both industry stakeholders and bipartisan lawmakers to vet the language before a markup session slated for next week.
What the bill means for the market
If passed, the Responsible Financial Innovation Act could accelerate the mainstream adoption of digital assets by providing a clearer regulatory pathway. However, the AFT’s warnings underscore a potential trade‑off: faster adoption may come at the expense of investor protection, especially for retirees whose retirement accounts are already vulnerable to market volatility.
Analysts note that the legislation’s treatment of tokenized securities could set a precedent for how traditional assets are handled on blockchains. By allowing equity tokens to bypass existing registration requirements, the bill could create a new class of “shadow securities” that operate outside the purview of the SEC and CFTC. This raises the specter of regulatory arbitrage, where issuers choose the most favorable jurisdiction or framework, potentially undermining market integrity.
Moreover, the bill’s language about “stable and mainstream” crypto assets appears premature. While some large‑cap tokens have shown improved liquidity, the broader market remains fragmented and prone to abrupt price swings. Without robust consumer safeguards—such as mandatory disclosure, fiduciary duties for retirement‑plan managers, and clear liability for token issuers—investors could face heightened exposure to fraud and operational risk.
Financial institutions are watching closely. If the Senate adopts a framework that aligns with the Department of the Treasury’s guidance on anti‑money‑laundering (AML) and knows‑your‑customer (KYC) standards, banks may feel more comfortable offering crypto‑related services to corporate and retail clients. Conversely, a lax approach could embolden fintech startups to launch tokenized products without sufficient oversight, sparking a competitive race that could destabilize traditional markets.
Ultimately, the AFT’s opposition highlights a broader tension in the crypto debate: the desire for innovation versus the need to protect everyday investors. As the Senate Banking Committee grapples with these competing priorities, the final shape of the Responsible Financial Innovation Act will likely become a bellwether for how the United States balances technological progress with financial stability.
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