As a growing number of U.S. states consider or enact legislation allowing public pension funds to invest in cryptocurrency, a new report from public interest group Better Markets issues a stark warning, urging states to instead implement statutory prohibitions to protect retiree security.
Better Markets argues that investing pension money in cryptocurrencies like Bitcoin or Ethereum or related digital assets is too risky a gamble for retirees, who could face severe repercussions during some of the most vulnerable periods of their lives. States should protect these funds by avoiding crypto investments altogether, according to its report titled, “State Pension Fund Investment in Cryptocurrency: A Risky Gamble with Public Retirement Security,” released on August 4, 2025.
“State pension funds are not venture capital,” said Brady Williams, legal counsel of Better Markets, in a statement. “These are long-term, risk-averse portfolios meant to provide a secure, stable retirement for teachers, firefighters, nurses, and countless other public servants. Cryptocurrency is fundamentally incompatible with that mission.”
This push for crypto investment comes as, in recent years, a growing number of U.S. states have introduced legislation or pursued policies that permit the investment of state-controlled funds, including pension funds, into cryptocurrencies and related digital assets. To date, several dozen states have allowed or proposed allowing such investments—typically capping them between 5% and 10% of the total portfolio. In 2024 and 2025 alone, over 20 states have introduced legislation enabling state treasurers, pension boards, or other fiduciaries to invest public dollars into digital assets.
The report highlights several critical reasons why cryptocurrency investments are deemed unsuitable for public pension portfolios:
- Extreme volatility: Crypto prices can swing wildly, risking big losses.
- Regulatory uncertainty: The laws and rules around crypto are unclear and constantly changing.
- Fraud and security risks: Crypto is often targeted by hackers and scams.
- Lack of oversight: Crypto markets don’t have the same protections as traditional financial institutions.
- Fiduciary duty: Pension managers have a legal responsibility to protect retirees’ money, and crypto’s risks may violate that duty.
The report recommends that states ban crypto investments in pension plans, disclose any digital asset investments to the public, educate investors and fiduciaries about the risks of crypto, and focus on responsible budgeting and realistic investment goals instead of chasing risky returns.
“Gambling with the futures of public workers is not financial innovation—it’s a betrayal of public trust,” said Williams. “Lawmakers must act now to ensure retirement systems are managed with prudence, transparency, and a commitment to long-term stability.”
As a non-profit and independent group formed following the 2008 financial crisis, Better Markets states its purpose is to serve the public interest in financial markets, working to improve the financial system so it benefits all Americans.
The report notes that several structural and political factors are fueling the rise of crypto investments in state-managed funds. A primary driver is the chronic underfunding of state pension systems, which has left policymakers desperate for higher returns. As large numbers of Baby Boomers retire, crypto’s promise of outsized gains is viewed by some as a “desperation play” to address these shortfalls.
This trend is further propelled by political encouragement, with the SEC’s approval of crypto-based exchange-traded products (ETPs) creating a false sense of legitimacy for the asset class. Financial innovation narratives pushed by crypto firms and lobbying groups, alongside macroeconomic uncertainty, also contribute to states considering these investments.
A critical distinction highlighted by the report is that, unlike private retirement plans governed by the Employee Retirement Income Security Act (ERISA), public pension plans are largely exempt from its federal protections. This means they are not backed by the Pension Benefit Guaranty Corporation (PBGC), a government agency that insures private defined benefit pension plans, and their specific protections vary significantly from state to state.
While states define their own fiduciary standards, the absence of consistent federal oversight makes these funds uniquely susceptible to the high risks associated with cryptocurrency, underscoring Better Markets’ call for explicit prohibitions.
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