TLDR
- Senators Elizabeth Warren and Richard Blumenthal sent a letter asking the SEC to investigate the Trump memecoin.
- They say Trump and early buyers made $636 million while over a million investors lost $3.81 billion.
- The lawmakers compared the coin’s price crash to a rug pull scheme.
- Democrats want ethics provisions added to the CLARITY Act before they support it.
- The Senate is set to leave for recess on August 6, leaving little time for a deal.
Two Democratic senators are asking federal regulators to look into a cryptocurrency tied to President Donald Trump. Elizabeth Warren and Richard Blumenthal sent a letter to the Securities and Exchange Commission on August 3.
The letter asks the SEC to check whether the Trump memecoin broke the law. The senators used the word “scam” to describe what may have happened.
What The Senators Are Claiming
Warren and Blumenthal say Trump and other early buyers of the coin made $636 million in profit. They say this happened while regular investors lost money.
More than a million people bought the coin after it launched. The senators say these buyers lost a combined $3.81 billion once the price fell.
The coin dropped by 98% from its peak. The senators compared this pattern to a rug pull, where a project’s value collapses after insiders cash out.
In their letter, the senators wrote that they are concerned the memecoin scheme could be an illegal scam. They pointed to investor complaints that the project was abandoned once it launched.
The senators are asking the SEC to find out if a fraudulent scheme took place. They want action taken before more coin holders lose money.
How This Connects To The CLARITY Act
This request comes as the Senate works on a bill called the CLARITY Act. The bill would set rules for how cryptocurrency is regulated in the United States.
Senate Democrats say they want stronger ethics rules added to the bill. They are also asking for better language on illicit finance and stablecoin yield rules.
Some Republicans have not backed the bill either. Because of this, the bill may need support from more than ten Democrats to pass with 60 votes.
It is not clear if Democrats’ demands will be met this week. The Senate plans to start its recess on August 6.
If lawmakers do not act before recess, the bill may not move again until after the November elections. Senators returning in September will likely be focused on the vote instead.
The Wall Street Journal Editorial Board also weighed in this week. It said the bill needs changes to lower risk to the financial system.
Crypto investor Anthony Scaramucci pushed back on that view. He said the WSJ Editorial Board’s comments looked like a late attempt by banking groups to delay the bill.
Financial firm Bernstein said regulators could step in in a different way if the bill fails. It said the SEC and the Commodity Futures Trading Commission may write more rules on their own.
Analyst Zack Guzman raised a warning about this approach. He said new rules made by regulators could be reversed later if Democrats take control of Congress.
He called this risk the “Gary Gensler trap,” referring to how rules made under one SEC chair can be undone by the next one.
For now, the memecoin’s fate and the bill’s future remain tied together. Both are waiting on decisions from lawmakers before the Senate leaves for its break.
