Duke Lecturer Argues Trump-Linked WLFI Token Is Unregistered Security

Lee Reiners, a lecturing fellow at Duke University and former Federal Reserve Bank of New York examiner, published a blog post on Friday arguing that World Liberty Financial’s WLFI token may constitute an unregistered security, despite the project’s claims that it is a pure governance token.

Reiners cited the Securities and Exchange Commission’s recent token taxonomy, noting that WLFI does not qualify as a pure “digital commodity” and is likely subject to SEC scrutiny. “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.

Token Structure and Howey Test Analysis

Launched in October 2024, World Liberty marketed WLFI through its “Gold Paper” as a pure voting token for the World Liberty lending protocol. The project explicitly stated WLFI held no claim to equity, dividends, or profit rights, positioning it as a decentralized governance tool.

However, World Liberty sold approximately 25 billion WLFI tokens out of a total 100 billion supply across several public presale rounds. Reiners argues that buyers likely invested capital with a reasonable expectation of profits—an essential component of the Howey Test, which the SEC uses to determine whether 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.

Governance and Decentralization Concerns

Reiners challenged the decentralization of World Liberty and WLFI, citing apparent self-dealing arrangements. He pointed to a deal with the Dolomite lending protocol in which World Liberty used 5 billion WLFI as collateral to borrow $75 million worth of stablecoins. Dolomite’s co-founder, Corey Caplan, serves as a World Liberty adviser, and some of the borrowed tokens were USD1, the stablecoin issued by World Liberty.

Reiners also referenced a lawsuit filed by Justin Sun, who alleges that 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 unlock billions of presale tokens in approximately four years. While the team pitched the proposal as clarifying supply questions, many presale investors objected, noting they had little influence in the governance process.

Ownership Structure and Financial Arrangements

A Trump-affiliated entity, DT Marks DEFI LLC, is thought to own approximately 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 acquired 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.

Regulatory and Congressional Context

The SEC is now led by Chairman Paul Atkins, who was nominated by President Donald Trump. Members of Congress have repeatedly raised ethics concerns regarding the Trump family’s involvement in the crypto industry, with particular focus on World Liberty’s operations.

Reiners concluded by questioning the SEC’s independence: “The SEC has the legal authority to investigate World Liberty. 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.”