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The Crypto Titans’ $160 Million War Chest Threatens Senate Democrats
(Bloomberg) — Cryptocurrency billionaires and their allies have amassed a $160 million war chest to protect their fortunes, backing U.S. candidates who favor light regulation of the troubled industry.
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The staggering sum makes the cryptocurrency industry one of the most influential players in federal campaign finance. It’s the kind of money that has already proven it can ruin California’s Senate race. In November it could be crucial to handing over the Senate majority to the Republicans.
Democratic control of the Senate hinges on the re-election of Banking Chairman Sherrod Brown of Ohio Jon Tester of Montana, both cryptocurrency skeptics and with enormous influence on the fate of the crypto titans’ key legislative goals. They are also the only two Democrats in office this year in states won by Donald Trump in the last election, making them prime targets for Republicans.
Fairshake, the cryptocurrency industry’s political action committee, and allied groups have nearly doubled their funding in recent weeks after receiving $25 million each from Ripple Labs, venture capital firm Andreessen Horowitz and Coinbase Global Inc. I billionaire twins Cameron Winklevoss AND Tyler Winklevosswho co-founded cryptocurrency exchange Gemini, contributed $4.9 million earlier this year.
CEO of Coinbase Brian Armstrong, whose estimated net worth has surged 50% this year as the cryptocurrency market rebounds to $10.8 billion on Thursday, urged his followers last week to vote for lawmakers of both parties that do not support digital assets. Armstrong traveled to Capitol Hill this week to meet with more than a dozen senators from both parties. Tester was on the list, and he later said he wanted to talk to other senators about a cryptocurrency regulation bill.
Faryar Shirzad, Coinbase’s chief policy officer, said the company does not control Fairshake and has tasked the PAC with pushing the industry’s agenda in elections.
“We have learned as an industry that you need to show up politically to be heard,” he said. “We are very, very committed to making it happen. We are very busy in this cycle and beyond. This is just the beginning of a long journey.”
Regulatory objectives
Cryptocurrency giants want to reduce oversight by the Securities and Exchange Commission, which has sued many major crypto operators and imposed heavy fines. Gary Gensler, the agency’s president, said the industry is riddled with fraud and that exchanges do not adequately safeguard their customers’ assets and often mix them with their own funds.
Platforms like Coinbase, which the SEC sued last year for allegedly violating securities laws, have a lot to lose if the regulator’s position holds. The SEC alleges that Coinbase made billions of dollars by illegally promoting the sale of securities and also failed to register as required as an exchange, broker, and clearing house.
Fairshake spokesman Josh Vlasto said this week that the super PAC is keeping an eye on both Brown and Tester’s reelection races, although it has not committed to spending on either race. Earlier this year, Kristin Smith, CEO of the trade group Blockchain Association, said the industry would watch how Brown handles the cryptocurrency legislative agenda.
The Democratic-led Senate has so far failed to follow up on the package of industry-friendly regulations, which the Republican-controlled House passed in May.
Michigan Democratic Sen. Debbie Stabenow, who met with Armstrong this week, said she is working with senators on legislation to address the regulation of cryptocurrencies by the Commodities Futures Trading Commission, the preferred cryptocurrency regulator.
Majority Leader Chuck Schumer supports this effort, calling it “sensible regulation.”
Heavy expenses
Fairshake spent $10 million ahead of California’s open March Senate primary to pummel progressive Rep. Katie Porter, a crypto-skeptic Democrat, with negative ads before her defeat. A TV ad called the congresswoman a fake and a skilled actress as words about her being a bully, a liar and unfit flashed across the screen. The ads did not mention cryptocurrencies.
The high-visibility election influence campaign represents a notable evolution from a year ago, when the cryptocurrency industry was reeling from a barrage of scandals and corporate failures, including the implosion of trading giant FTX in late 2022.
Former FTX CEO Sam Bankman-Fried built significant political influence in Washington with tens of millions of dollars in donations during the 2022 elections. He was found guilty of a series of crimes related to his management of FTX and sentenced in March to 25 years in prison.
The consequences of his political donations continue. Just 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, drawing on loans from Alameda Research and acting as a straw donor for Bankman-Fried .
The cryptocurrency market has rebounded this year thanks largely to U.S. regulators’ approval of Bitcoin exchange-traded funds in January, attracting more investors to the most popular cryptocurrency.
Choose sides
Armstrong recently touted a cryptocurrency advocacy website, which gave Brown an “F” grade and recommended Brown’s Republican opponent, Bernie Moreno, a longtime cryptocurrency advocate who founded a securities firm based on blockchain. The website gives Tester a mediocre “C”.
Brown and Tester are feeling the pressure. Both senators bristled last week when asked about the issue, with Brown repeatedly saying he has spoken to reporters enough about cryptocurrencies and that he won’t negotiate with the press.
Tester, a frequent ally of the banking industry, said he remained fairly neutral on cryptocurrencies. “When I fully understand it, then we will deal with it,” he said.
Moreno, meanwhile, has courted the industry with his cryptocurrency expertise. “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, criticized the Montana senator in posts on X, accusing Tester of trying to kill cryptocurrencies. Sheehy called Bitcoin and Cash “FREEDOM money.”
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