Regulation
Crypto Titans’ $160 Million War Chest Threatens Senate Democrats
Steven T. Dennis | Bloomberg
Crypto billionaires and their allies have amassed a $160 million war chest to protect their fortunes by backing U.S. candidates favoring light regulation of the ailing industry.
This staggering sum makes the crypto industry one of the most influential players in federal campaign finance. It’s the kind of money that has already proven it can disrupt a California Senate race. In November, this could play a crucial role in handing the Senate majority to the Republicans.
Democratic control of the Senate hinges on the re-election of Banking Chairman Sherrod Brown of Ohio and Jon Tester of Montana, both of whom are cryptocurrency skeptics and have enormous influence over the fate of the titans’ key legislative goals crypto. They are also the only two Democratic incumbents this year in states won by Donald Trump in the last election, making them prime targets for Republicans.
Fairshake, the crypto industry’s political action committee, and allied groups have nearly doubled their funding in recent weeks after securing $25 million each from venture capital firm Andreessen’s Ripple Labs Horowitz and Coinbase Global Inc. Billionaire twins Cameron Winklevoss and Tyler Winklevoss, who co-founded crypto exchange Gemini, contributed $4.9 million earlier this year.
Coinbase CEO Brian Armstrong, whose estimated net worth soared 50% this year with the crypto market’s resurgence to $10.8 billion on Thursday, last week urged his supporters to vote against lawmakers from both parties that do not support digital assets. This week, Armstrong visited the Capitol to meet with more than a dozen senators from both parties. That list included Tester, who later said he wanted to talk to other senators about a crypto regulation bill.
Faryar Shirzad, Coinbase’s chief political officer, said the company does not control Fairshake and has tasked the PAC with promoting the industry’s election agenda.
“We’ve learned as an industry that you have to show up politically to be heard,” he said. “However, we are very, very determined to achieve this. We are very committed to this cycle and beyond. This is just the beginning of a long road.
Regulatory objectives
Crypto giants want to reduce oversight from the Securities and Exchange Commission, which has sued many major crypto players and imposed hefty fines on them. Gary Gensler, president of the agency, said the industry is riddled with fraud and exchanges do not properly protect their clients’ assets and often commingle them with their own funds.
Platforms like Coinbase, which the SEC sued last year for alleged violations of securities laws, have a lot to lose if the regulator’s position is maintained. The SEC claims that Coinbase made billions of dollars by illegally promoting the sale of securities and also failed to register, as required, as an exchange, broker-dealer and clearing agency.
Fairshake spokesman Josh Vlasto said this week that the super PAC is considering Brown and Tester’s re-election races, although it has not incurred any expenses for either race. Earlier this year, Kristin Smith, chief executive of crypto trade group Blockchain Association, said the industry would be watching how Brown handles the crypto legislative agenda.
The Democratic-led Senate has so far failed to act on the proposed industry-friendly regulations, which the Republican-controlled House approved in May.
Michigan Democratic Sen. Debbie Stabenow, who also met with Armstrong this week, said she was working with senators on legislation governing the regulation of crypto assets by the Commodities Futures Trading Commission, crypto’s preferred regulator.
Majority Leader Chuck Schumer supports the effort, calling it a “reasonable regulation.”
Heavy expenses
Fairshake spent $10 million ahead of California’s open Senate primary in March to hit progressive Rep. Katie Porter, a Democratic crypto skeptic, with negative ads before her defeat. A TV spot called the congresswoman a consummate fake actor while the words bully, liar and unfit appeared on screen. The ads did not mention cryptography.
The high-visibility electoral influence campaign is a remarkable development from a year ago, when the crypto industry was reeling from an avalanche of scandals and business failures, including the implosion of the giant of FTX exchanges at the end of 2022.
Former FTX CEO Sam Bankman-Fried gained significant political influence in Washington through tens of millions of dollars in donations during the 2022 elections. He was convicted of a series of crimes related to his management of FTX and sentenced in March to 25 years in prison.
The fallout from his political donations continues. Last month, a federal judge sentenced one of his top deputies to more than seven years in prison for making millions in political donations while at FTX, taking loans from Alameda Research and acting as as straw donor for Bankman-Fried.
The crypto market has rebounded this year thanks in large part to U.S. regulators’ approval in January of Bitcoin spot exchange-traded funds, attracting more investors to the most widely held cryptocurrency.
Choose your side
Armstrong recently touted a crypto advocacy website, which gave Brown an “F” rating and recommended Brown’s Republican opponent, Bernie Moreno, a longtime crypto advocate who founded a crypto firm. blockchain-based securities. The website gives the tester an average “C.”
Brown and Tester are feeling the pressure. Both senators bristled last week when asked about the issue, with Brown repeatedly saying he had told reporters enough about crypto and would not trade in the press.
Tester, a frequent ally of the banking industry, said he has remained fairly neutral on crypto. “When I fully understand it, we will deal with it,” he said.
Moreno, meanwhile, courted the industry with his crypto experience. “I’m facing the most anti-crypto guy in America,” he said at a recent CoinDesk conference in Austin, Texas.
Tester’s Republican opponent, Tim Sheehy, blasted the Montana senator in posts on X, accusing Tester of trying to kill crypto. Sheehy called Bitcoin and cash “FREEDOM money.”