Duke Law Instructor Raises Concerns Over WLFI Token's Regulatory Status

A recent analysis by a Duke University law instructor has shed light on the regulatory status of World Liberty Financial (WLFI), a decentralized finance project backed by the Trump family. According to Lee Reiners, who teaches cryptocurrency regulation at Duke University School of Law, WLFI's token appears to be an unregistered security under U.S. federal law.

The analysis relies on the Howey Test, a legal standard established by the U.S. Supreme Court in 1946 that determines whether a transaction constitutes an investment contract and thus a security. Reiners argued that WLFI's structure and marketing create a clear expectation of profit for investors, satisfying a core element of the Howey Test.

The project's backers have described WLFI as a simple governance token, but Reiners pointed out that the reality is more complex. The token was sold specifically to raise capital for a cryptocurrency business venture, and the issuer's marketing materials and white paper explicitly or implicitly promised returns, according to Reiners.

Reiners also noted that recent legal developments have undermined claims of decentralization often used by crypto projects to avoid securities classification. He referenced the SEC's lawsuit against Tron (TRX) founder Justin Sun, which he argued demonstrated that many projects claiming to be decentralized are in fact centrally controlled.