TL;DR:
The decentralized finance (DeFi) project World Liberty Financial, directly linked to Donald Trump’s family, faces legal questioning. Lee Reiners, an academic at Duke University, warned that the platform may have issued unregistered securities.
Recently, Reiners published an analysis arguing that the WLFI token does not qualify as a pure “digital commodity.” From his perspective, the financial asset could be under the scrutiny of the Securities and Exchange Commission (SEC).
Although the World Liberty Financial team defines WLFI as a governance token, Reiners contends that buyers likely invested capital with a reasonable expectation of profit. This factor is an essential component of the Howey Test, used by the SEC to determine which assets constitute securities.
The project’s official documentation, known as the “Gold Paper,” indicates that the token does not grant rights to dividends or equity. However, the Duke expert points out that the issuer’s marketing and promises to develop a cryptographic system are decisive for regulatory classification.
The report highlights that the sale of 25 billion tokens occurred before the lending protocol was operational. Reiners said this reinforces the idea that the capital was used to finance a centrally controlled business, rather than a decentralized ecosystem.
The operational structure of World Liberty Financial is also a subject of criticism from industry figures. Justin Sun, founder of TRON, filed a lawsuit alleging that the project froze his tokens and blocked his voting rights despite his initial support.
Data from the platform’s official portal confirm that the entity DT Marks DEFI LLC owns about 38% of the project. Furthermore, this firm has the right to receive the majority of the profits derived from public sales of WLFI.
Reiners also cited possible conflicts of interest related to the Dolomite protocol. According to his analysis, a $75 million loan in stablecoins was facilitated using 5 billion WLFI as collateral, involving direct advisors to the project.
The current regulatory framework presents a complex scenario, given that the SEC is led by Paul Atkins, nominated by Donald Trump himself. The agency’s ability to independently investigate a project with direct financial links to the presidential family is, according to Reiners’ report, an open question.
In early 2026, an entity linked to the United Arab Emirates acquired 49% of the protocol through a $500 million deal. This move underscores the institutional scale the initiative has reached amidst the debate over its regulatory compliance.
Currently, the World Liberty Financial governance process contemplates the unlocking of billions of pre-sale tokens over an approximate four-year period, an event that investors and regulators are monitoring closely.
