DOL Beats ForUsAll Crypto Suit

A federal judge has dismissed a complaint brought against the Department of Labor by recordkeeper ForUsAll Inc. alleging the department overstepped by recommending caution in the use of cryptocurrency in retirement plans.

DC District Court Judge Christopher Cooper Tuesday ruled that retirement plan provider ForUsAll had no basis for a legal complaint that the DOL caused it to lose clients by issuing a bulletin in March of 2022 warning about the risk of allowing participants to invest in cryptocurrency.

ForUsAll, which offers cryptocurrency to participants through the self-directed brokerage window, had alleged the warning caused “approximately one-third of the plans” that had been interested in the offering to walk away after the bulletin was issued. The release, Compliance Assistance Release No. 2022-01, was not binding, but only guidance. ForUsAll claimed the DOL was making an “arbitrary and capricious attempt” to limit the use of cryptocurrency in defined contribution plans and therefore was overstepping its authority under the Employee Retirement Income Security Act.

The San Carlos, California-based retirement plan provider was seeking for a DOL declaration that the bulletin was unlawful along with an injunction preventing the department from regulating about the guidance. Judge Cooper found that, even if ForUsAll could prove it had lost business from the warning, the court relief it was seeking would not necessarily solve its problem.

“None of this requested relief, however, appears likely to redress ForUsAll’s alleged injury because ForUsAll fails to show that these actions would cause the third-party fiduciaries to renew their discussions or enter into the contemplated partnerships,” Cooper wrote. “Nor is the Release final agency action subject to judicial review. For these two reasons, the Court grants the Department’s motion to dismiss.”

The complaint in ForUsAll Inc. v. United States Department of Labor was first filed in the District of Columbia District Court on June 2, 2022. In that complaint, ForUsAll said that guidance the department gave calling on fiduciaries and plan sponsors to use “extreme care” in considering cryptocurrency in retirement plans went beyond its regulatory authority as provided by ERISA, and in addition did not go through the proper comment period.

On November 1, ForUsAll reversed course, saying it would drop the suit if the court and DOL confirmed the guidance was not binding.

The DOL response said ForUsAll misrepresented the initial guidance as stating that allowing cryptocurrency in retirement plans “does not violate a fiduciary duty.” Rather, the department argued that the guidance only noted that cryptocurrency as an investment option may comply with fiduciary duties and prudence, depending “on the specific circumstances in a given situation.”

Judge Cooper ultimately agreed, noting that the release “is not a final agency action and is therefore unreviewable.”

The DOL’s announcement from 2022 was positioned as protecting the retirement savings of U.S. workers from market volatility, as well as legal risk. The announcement noted that “at this stage of cryptocurrency’s development, fiduciaries must exercise extreme care before including direct investment options in cryptocurrency.”

Cooper found that, even if the court followed through with ForUsAll’s request to retract the guidance, nothing would change in terms of cryptocurrency investing in retirement plans.

“The release reminds retirement plans that they have fiduciary obligations to participants under ERISA, outlines a list of ‘significant risks and challenges’ associated with cryptocurrency investments that the department finds troubling, and alerts plans that the department expects to conduct inquiries and investigations to ensure that these plans are complying with their duties when offering investment options in this area,” Cooper wrote. “All of this would remain the same if the court vacated the order.”

Neither ForUsAll nor the DOL responded to request for comment on the ruling.