President Trump, Crypto Billionaire
His new family tokens, which have soared in value, are courting legal and political trouble.
By The Editorial Board
Donald Trump doesn’t always separate his personal interests from his public obligations, and a howling example is his sudden new status as a crypto billionaire.
The President is inviting trouble with what looks like remarkably poor judgment.
Crypto markets have boomed since Mr. Trump’s election in part on expectations of friendlier regulation.
And so be it. Animal spirits have been rising all around.
But Mr. Trump and his family have tried to cash in on the mania by minting Trump-branded coins.
On Friday, as a private citizen soon to be President, Mr. Trump announced sales of his $TRUMP crypto token.
“It’s time to celebrate everything we stand for: WINNING!” he posted on X.com.
Melania Trump debuted her own coin on Sunday.
Step right up, Americans, you can’t lose betting on $TRUMP.
But what happens when some inevitably do?
Unlike Trump-stamped tumblers ($42) and pickleball paddles ($180), crypto tokens are vehicles for speculation.
Like other cryptocurrencies, their price is volatile.
After surging roughly 10-fold after its launch, $TRUMP’s price has since fallen by half.
Twenty percent of Trump tokens are currently available for trading on crypto exchanges.
Trump Organization affiliates hold the other 80%—worth $31.4 billion at its trading price late Wednesday—which is subject to a three-year unlocking schedule.
Mr. Trump’s business affiliates can’t sell their token interest now, but they will profit when they do assuming the price doesn’t crash.
All of this creates flashing-red political risks and ethical conflicts.
Start with who may be buying the tokens.
A business or foreign official with interests before the federal government might seek to curry favor with Mr. Trump by announcing plans to buy millions of his token to pump up the price.
Or, worse, whispering to Mr. Trump that he’s made the purchases, since crypto holdings aren’t disclosed.
If Mr. Trump’s regulators then act in a way that aids crypto or the person seeking the favor, he’ll be accused of aiding the buyer in service of presidential self-dealing.
The President might claim immunity by saying the regulation is part of his official duties, but that won’t remove the political taint.
That also won’t stop civil lawsuits if (and probably when) there’s a crypto crash.
A President isn’t immune from lawsuits for actions taken before becoming President under the Supreme Court’s Clinton v. Jones (1997) ruling.
Federal law doesn’t define all types of securities, nor specify how cryptocurrencies are to be regulated.
The Supreme Court set out a multifactor test for determining a security in its Howey (1946) precedent.
But Biden SEC Chair Gary Gensler dunned crypto developers that didn’t meet the Howey definition for failing to register with the agency and make investor disclosures.
Mr. Trump has created a regulatory nightmare for Paul Atkins, his highly qualified nominee to run the SEC.
Mr. Atkins was crypto-friendly long before his nomination, but now any regulatory move he takes that the industry supports will be attacked as helping Mr. Trump’s business.
The Trump tokens might hurt the crypto industry by making it all look like a get-rich-quick scheme.
Mr. Trump’s $TRUMP website includes the disclaimer that the tokens are “intended to function as a support for, and engagement with the ideals and beliefs embodied by the symbol ‘$TRUMP’” and “are not intended to be, or to be the subject of, an investment opportunity, investment contract, or security of any type.”
That disclaimer won’t stop lawsuits.
If the token’s price drops, buyers who lose money could argue that Mr. Trump failed to make required securities disclosures about the risks.
Democratic state Attorneys General could seek restitution for investors.
If Mr. Trump hypes the token at a press conference, they might even charge him after he leaves office with market manipulation since he isn’t immune from prosecution for unofficial acts.
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No careful President would get anywhere near this kind of political risk, and we can’t recall any President who has.
Where are Mr. Trump’s lawyers?
In his first term, Mr. Trump was often deterred from some of his worst impulses by legal advisers who saw their job as serving the Presidency as much as this President.
The crypto caper is a worrisome sign that Mr. Trump’s current advisers don’t understand the difference any better than he does, or that they are too cowed to speak up.
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