TechFlow News, May 9: According to a report by The Block, Lee Reiners—a lecturer in law at Duke University and former examiner at the Federal Reserve Bank of New York—published a post on May 8 stating that WLFI, the governance token issued by the DeFi project World Liberty Financial—closely associated with the Trump family—may constitute an unregistered security.
Citing the SEC’s recently released token classification framework, Reiners argues that WLFI is not a “pure digital commodity” and therefore falls under the SEC’s regulatory purview. He notes that approximately 25 billion WLFI tokens were publicly presold prior to the protocol’s launch and marketed leveraging the Trump family’s brand, leading buyers to reasonably expect profits—a key element of the SEC’s “Howey Test” for determining whether an asset qualifies as a security.
Regarding decentralization claims, Reiners references litigation initiated by Justin Sun, pointing out that World Liberty unilaterally froze Sun’s tokens and revoked his governance rights—revealing a high degree of centralized control. Additionally, he highlights clear evidence of self-dealing: the project borrowed $75 million in stablecoins via the Dolomite protocol, using 5 billion WLFI tokens as collateral; notably, a co-founder of Dolomite also serves as an advisor to World Liberty, and part of the borrowed stablecoins consists of USD1, a stablecoin issued by World Liberty itself.
From a regulatory standpoint, DT Marks DEFI LLC—a Trump-affiliated entity—holds approximately 38% equity in World Liberty and is entitled to 75% of the net proceeds from WLFI token sales. Reiners states that the SEC legally possesses authority to investigate World Liberty but questions whether it can maintain independence when the President’s family holds direct economic interests in the project.
