Can Crypto Buy a Seat in Congress?
In the U.S. primaries, crypto millions sometimes failed to show much effect at all, though industry donors may claim credit in a few key wins on the road to the midterms.
A mountain of crypto riches can’t automatically purchase a seat in Congress. But for many campaigns winding their way toward the U.S. midterm election next week, it certainly doesn’t hurt.
This year’s elections mark the first wave of races in which industry donations not only rose to significant levels but, with well over $80 million in play, it actually reached a level occupied by other U.S. industries famous for their political clout – such as health care, energy and Wall Street itself.
Still, crypto’s campaign largesse didn’t assure victories during the primaries, as demonstrated by the flameout of Oregon congressional candidate Carrick Flynn after a single industry source spent nearly $1,000 for every vote he landed. Or consider the New York contest in which one of the industry’s chief Washington advocates, Michelle Bond, couldn’t muster one-third of the vote despite courting endorsements from Donald Trump Jr. and Sen. Ted Cruz (R-Texas).
Campaigns for the general election are in their final days as they press toward the Nov. 8 vote. While crypto interests may have wasted money in some noteworthy cases, they also managed to add serious dollars to close primary races that went their way.
One of the strategies of the industry’s most widely funded political action committee, according to an analysis of federal campaign records, was to support candidates in districts or states in which party dominance would already settle the general election. The political hopefuls supported by GMI PAC were often younger candidates seeking seats vacated by older lawmakers who retired or sought other offices.
Overall, a lot of the industry money – when factoring in the conservative PACs with GMI’s more balanced approach – went to crypto-sympathetic Republicans. Friends in the GOP could serve the industry well because Republicans are expected to take over the House majority.
“The balance of probabilities heavily favors the Republicans netting the five seats necessary to take control of the House,” said Isaac Boltansky, director of policy research at BTIG, a financial-services firm. They also have a chance to seize the Senate, though that remains a tougher path.
Sam Bankman-Fried, CEO of crypto exchange FTX, and fellow FTX executive Ryan Salame have drawn the most attention this year as campaign ATMs, with Bankman-Fried surging to become the country’s fourth-largest individual donor, according to campaign-finance analytical site OpenSecrets.org. That means he’s sandwiched between giants of U.S. investing – Ken Griffin of Citadel at No. 3 and Jeff Yass of Susquehanna International Group at No. 5. Yass is also a major donor for the crypto cause.
Much of the crypto industry’s giving is funneled through a small number of PACs that amassed major war chests. They typically spend the money on “independent expenditures” – the way a committee can spend unlimited amounts on ads to support a candidate without directly contributing money. Total ad spending is projected to approach $10 billion for the midterms, according to tracking firm AdImpact.
Two of the biggest PACs – Bankman-Fried’s Protect our Future and Salame’s American Dream Federal Action – are propped up almost entirely by the FTX executives. Bankman-Fried’s is easily the largest, having given $28 million. However, despite the CEO’s lofty position in the digital-assets industry, he says that’s not what his election involvement is about, leaving the political world confused about whether his candidates even have any private thoughts about crypto.
At a recent event in Washington, he said he wants “a culture of bipartisan constructive compromise and progress as opposed to partisan bickering.” But more specifically, he favors candidates who will prevent devastation from future pandemics. He said he’s supporting “people who will make sure to follow through on common sense things to try to not have what happened to us over the last few years happen again, except maybe way more deadly.”
With Bankman-Fried on that unrelated crusade, it may be FTX Digital Markets co-CEO Salame (No. 11 among the nation’s individual donors) who wins the title of the industry’s most prolific campaign contributor trying to shape digital-assets policy with his money. Salame’s PAC has been backing Republican candidates such as Alabama's Katie Britt, who is expected to win a Senate seat next month and arrive in Washington, D.C., supportive of crypto causes.
With the crypto PAC supplying her almost $2 million in ad support, Alabama Republicans voted for Britt to fill the U.S. Senate seat vacated by Richard Shelby, for whom she had served as chief of staff. Though Senate races such as hers are high-dollar affairs, the $2 million the PAC spent – according to available Federal Election Commission filings up to Sept. 30 – was equal to about a fifth of her overall direct campaign contributions from donors.
Britt, who is expected to coast through the general election in that GOP stronghold, has promised “staunch support” on Capitol Hill for the crypto industry.
“Supporting bitcoin means supporting personal freedom, American competitiveness and national security,” Britt said on her campaign website.
The PAC also boosted Brad Finstad (R-Minn.), a former Trump administration official who is the favorite to beat his Democratic opponent in Minnesota for a House seat. Finstad, who already won a special election this year to finish an incomplete term, hasn’t made crypto a plank in his campaign platform, but Salame’s group spent nearly $2 million on him earlier this year.
Apart from the FTX executives’ groups, the crypto industry has several others PACs. Two of the biggest are the Crypto Freedom PAC, a group backed by Yass and the conservative Club for Growth that’s deployed about $5 million so far this year, and GMI – which took in $12 million in this cycle and funds other industry PACs, including Web3 Forward and Crypto Innovation.
GMI is bankrolled by prominent industry names, including the founders of venture-capital firm Andreessen Horowitz, Circle Internet Financial, the FTX executives and many others, and its two affiliated PACs each focus on one of the political parties.
In one of the 15 primary wins GMI helped secure for candidates this year, it backed Jonathan Jackson, an Illinois businessman and college professor who is the son of the Rev. Jesse Jackson. Jackson, a rare congressional candidate who not only mentions crypto but has included it among the top issues of his campaign, was supported by almost $500,000 in ad buys. That amount rivals the money his campaign received in direct contributions.
“While 15 seats is a great start, it takes more than a single election cycle to truly effect change in Washington,” said Michael Carcaise, a strategist for GMI. He added that “seats up and down the ballot – including the race for president – are very much on our radar, not just in 2024 but for at least the next decade.”
The conservative Crypto Freedom PAC also threw support to Blake Masters, a Republican Senate candidate in Arizona and one of the most prominent crypto candidates in the midterms. Masters, the chief operating officer at billionaire and PayPal (PYPL) co-founder Peter Thiel’s venture-capital firm, has spoken about the need for crypto’s innovations to go up against what he describes as a corrupt banking system.
Polling has been showing that Arizona seat to be among the tightest election battles on the map. It’s one of the handful of races that will decide the majority of the Senate and potentially whether the Republicans control Congress entirely next year.
To be sure, some industry donations have also gone to veteran lawmakers who are likely to have an outsized role in crypto policy. Those include Rep. Patrick McHenry (R-N.C.), the potential next chairman of the House Financial Services Committee and who has been negotiating a possible stablecoin oversight bill, and Sen. John Boozman (R-Ark.), one of the authors of major crypto legislation in the Senate Agriculture Committee.
Though the industry has barely gotten its feet wet in politics, it already learned some major cautionary lessons about investing in novice candidates. In Oregon, Flynn didn’t have any apparent crypto position, but his major backer was one of the industry’s biggest names. Bankman-Fried’s PAC provided more than $10 million to fill every household in the district with his name.
The candidate who beat Flynn – an established legislator who served in the Democratic leadership of the Oregon House of Representatives – won twice as many votes from people in the district who were reportedly bewildered by the sudden ubiquity of the remarkably well-funded stranger.
The race for that district – in an interesting side note – also included Matt West, a decentralized finance (DeFi) developer who largely bankrolled his own campaign, but he came in sixth out of nine Democratic candidates. It was Bankman-Fried’s COVID-19 pandemic interests that assured his opponent, Flynn, got the support instead of the digital-assets veteran in that race.
“We thought it was worth increasing the chances of someone with genuine pandemic prevention expertise being elected to Congress,” said Mike Levine, a spokesman for the Protect Our Future PAC.
To a lesser extent, Salame’s American Dream Federal Action PAC also lost a major bet on a Republican candidate when Rep. Davis Rodney (R-Ill.) was badly beaten in the primaries by a candidate favored by former President Donald Trump. The PAC devoted more than $2 million trying to get Rodney re-elected.
Political giving has “been a little bit of a mixed bag” in these early days, said Kristin Smith, who runs the Blockchain Association in Washington, which has recently started its own PAC. But she noted the “huge shift” from just a few years ago, when crypto insiders were still resistant to engaging with politicians. She said that changed when the industry was blindsided by crypto tax provisions in a bill last year.
Winning and losing may not be the main point to the industry’s new involvement in U.S. political campaigns. Just tallying up the congressional election victories “misses the forest for the trees,” said Boltansky. The more important point is that the crypto field is making itself known as a significant political force.
“The industry will have the relationships and standing necessary to engage with policymakers the next time we see either a bad bill or a harmful proposal,” Boltansky said. That’s meaningful going into this next congressional session, when “there could be some actual movement on targeted measures like the stablecoin bill.”
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