All 19 of the congressional candidates backed by the crypto industry’s most widely supported political action committee, GMI PAC Inc., won their races last week, sending 16 new members to the House and Senate.
The millions in campaign spending from this group is at least partially responsible for a large number of relatively young and crypto-friendly additions to Congress. But that positive performance is also at least somewhat eclipsed by the FTX meltdown. Former FTX CEO Sam Bankman-Fried was a top contributor to GMI.
“Bankman-Fried contributed $2 million in January, and GMI's relationship with him was limited to his interest in GMI's mission at the time of his contribution,” the organization said in a statement to CoinDesk. The early GMI money was quickly channeled into two other political action committees that supported crypto-friendly candidates from both of the major U.S. political parties.
“As with all contributors, Bankman-Fried had no involvement in decision making about the PAC’s activities or which candidates the PAC supported," the statement read.
The implosion of his crypto empire and the devastation wrought on other companies and the real-people users of FTX will likely shape how Congress views digital assets in the coming session. Whether crypto goodwill will remain for those GMI and its affiliated PACs helped into office will immediately be tested.
The PAC’s success rate can be credited to a strategy that supported candidates in districts or states in which their party is dominant. The 16 new members of the House and Senate “span the ideological spectrum,” according to GMI, and have skills “to secure America’s role in the development of the next generation of the internet.”
Apart from favoring a few crypto-supporting incumbents such as Rep. Patrick McHenry (R-N.C.) who may become chairman of the House Financial Services Committee if Republicans win the House majority, the industry channeled money to winning congressional candidates such as Texas Democrat Jasmine Crockett and Maryland Democrat Glenn Ivey. GMI also boosted future senators such as Eric Schmitt, a Republican who has served as Missouri’s attorney general.
Still, the events of this month, where one of crypto world’s pillar companies is under investigation as an epic fraud, will play a part. Congressional hearings will likely question what happened with FTX, and the new lawmakers will have to consider appropriate legislation in what could be the most important year yet for the industry on Capitol Hill. Meanwhile, they will represent – to some degree – a legacy of Bankman-Fried’s big year as a political patron.
FTX has quickly become a political talking point in Congress. At a Senate Banking Committee hearing on Tuesday, Chairman Sherrod Brown (D-Ohio) opened his questioning of U.S. financial regulators by lamenting the industry’s dangers, thanking the officials “for your skepticism about cryptocurrencies.”
Sen. Pat Toomey (R-Pa.), the panel’s senior Republican, defended crypto, arguing that the FTX damage "is fundamentally not about the kind of assets that were held by FTX; it's about what individuals did with those assets."
Crypto was already a difficult political topic, with one of GMI’s winners – incoming Congressman Jonathan Jackson from Chicago – seeking to distance himself from industry support during his campaign, well before FTX self-destructed.
Even if the candidates who received Bankman-Fried’s help wanted to give back his money, much of it could be impossible to return, because the outside spending on help such as television ads – known as “independent expenditures” in the rules of U.S. campaign finance – doesn’t count as a direct campaign contribution. GMI, for instance, spent all of its money in this way.
Another PAC that Bankman-Fried funded with $27 million in donations, the Protect Our Future PAC, was meant to support candidates – primarily Democrats – who would push for protections against future pandemics. His giving halted in June, though some of his favored candidates went on to win in the general election last week.
A spokesman for the PAC didn’t respond to an email seeking comment in the wake of the meltdown of its primary benefactor’s company.
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