Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—Better Markets warns against state pension fund investments in cryptocurrency, (Aug 5, 2025)
Organizations Mentioned:Better Markets
In a newly released Fact Sheet, the advocacy group urges states to protect public retirement savings from ‘crypto volatility,’ warning that such investments pose risks to public retirees’ financial security and the sustainability of public pensions.
As more U.S. states consider investing taxpayer-backed pension funds into cryptocurrencies, a new Report and Fact Sheet released today by banking industry group Better Markets warns that these actions could post a threat to the retirement security of millions of public workers. Entitled “State Pension Fund Investment in Cryptocurrency: A Risky Gamble with Public Retirement Security,” the report warns of the risks such investments pose to public retirees' financial security and the sustainability of public pensions. Better Markets highlights the potential issues with exposure of state-controlled pension systems to highly volatile digital assets like Bitcoin and crypto-linked exchange-traded products.
According to Better Markets, more than 20 states have introduced legislation in just the past two years that would permit or expand crypto investments in public funds, often with minimal oversight or disclosure. “Better Markets calls on states to take immediate action, including prohibiting crypto investments in pension funds, mandating full public disclosure of any digital asset exposure, and prioritizing fiduciary education and responsible funding strategies. Gambling with the futures of public workers is not financial innovation—it’s a betrayal of public trust. Lawmakers must act now to ensure retirement systems are managed with prudence, transparency, and a commitment to long-term stability.”
The report urges state governments to reject cryptocurrency investments in public pension strategies due to the systemic risks, legal uncertainties, and fiduciary concerns involved. The group stresses that “state pension funds are not venture capital.” Instead, they are long-term, risk-averse portfolios meant to provide a secure, stable retirement for public servants. “Cryptocurrency is fundamentally incompatible with that mission,” Better Markets says.
Several U.S. states are permitting state pension funds to invest in cryptocurrencies and related assets, with some states introducing legislation to enable such investments. The report details different forms of crypto investment allowed, such as direct ownership of cryptocurrencies, stablecoins, and exchange-traded products.
Better Markets investigates the drivers behind the crypto push, including factors like unfunded pension liabilities, political encouragement, financial innovation narratives, and macroeconomic uncertainty are fueling the rise of crypto investments in state-managed funds. The group notes that the Securities and Exchange Commission’s approval of crypto-based Exchange Traded Products (ETPs), “followed by the Trump Administration’s wholehearted support for crypto, has cast crypto as a legitimate asset class and created a false sense of stability in the sector.”
Possible issues. The report warns of economic uncertainty as inflation concerns, decreased growth, and market volatility loom. Although digital assets are sometimes framed as hedges, their performance has been “anything but consistent.”
Public pension plans have varying fiduciary standards, and investing in cryptocurrencies raises significant red flags due to their volatility, fraud risks, and regulatory uncertainties. Better Markets argues that cryptocurrencies pose unmanageable risks, regulatory ambiguity, and lack transparency and oversight, making them incompatible with the risk-averse nature of pension funds. “Even regulated crypto exchanges and ETF products suffer from opaque pricing mechanisms, operational vulnerabilities, and limited investor protections. Pension trustees cannot rely on these platforms with the same confidence afforded to traditional financial institutions.”
Better Markets recommends enacting prohibitions on crypto investments, ensuring full disclosure of digital asset exposure, educating investors and fiduciaries on risks, and strengthening funding policies through responsible budgeting and realistic return assumptions to safeguard public workers' and retirees' financial stability and trust.
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