By Jesse Hamilton
Compiled by: Ning
In political elections, the saying "money makes the world go round" is vividly reflected, and the direct product of this is the unique Political Action Committee (PAC). Various types of donors influence elections through different PACs to determine political roles that are beneficial to themselves.
Encryption is no exception. At present, the encryption industry has accumulated huge campaign funds, and PACs with up to $169 million have been able to organize a large number of campaign activities and even determine the composition of Congress next year to a certain extent. The results have been impressive, too, with the PAC already scoring more than 20 electoral victories, including in California and just this week in New York.
From a strategic point of view, the crypto industry's political operation follows the successful model of the congressional campaign two years ago, but this time, there is more money in cryptocurrencies - enough to rival the top industries that are thriving in the political world and key supporters of the major political parties. However, those responsible for using the funds are reluctant to discuss it too much.
CoinDesk has asked repeatedly over the course of months who is in charge and how decisions are made using the money gathered by industry leaders, but the Fairshake Political Action Committee, which controls most of the funds, has refused to answer questions about the PAC's management, coordination and decision-making. Core supporters - Coinbase, Ripple and a16z - have also remained silent.
By analyzing federal campaign donation disclosures from more than two dozen prominent business leaders and leading companies, a picture of crypto that is rapidly expanding its political influence begins to emerge. Most of the money was raised through a coordinated PAC under Fairshake, which is affiliated with the following committees: the Democratic-backed Committee to Protect Progress and the Republican-backed Committee to Defend American Jobs. The crypto industry also used a dark money organization, the Cedar Innovation Foundation, to promote crypto in the key but delicate battleground of Ohio.
PAC money has poured into the primaries, far exceeding the candidates' individual fundraising, but so-called super PACs like Fairshake don't donate directly to campaigns because of regulations prohibiting them. Instead, they buy ads for or against candidates, and in theory, they can buy unlimited ads. For example, when a primary candidate relies entirely on individual donations, which are capped at just $3,300 per election, his opponent could receive millions of dollars in funding from Fairshake.
Cryptocurrency supporters have explained the massive campaign spending by saying that tens of millions of American voters want the government to accept crypto assets and tailor rules for them, but this call has not been met.
Faryar Shirzad, chief policy officer at Coinbase, said in an interview: “We found that crypto voters have almost no say in the political process, and there is a huge disconnect between decision makers and the American public.” Wall Street giant Goldman Sachs also mentioned that “broader policies and political spending are designed to allow people to evaluate things more freely.”
Ironically, PAC-funded ads don’t usually mention cryptocurrencies, let alone promote them.
When CoinDesk reached out to Coinbase, it said it could respond to questions about political involvement but declined to comment on the company’s nearly $50 million in donations. Ripple and a16z Crypto were asked similar questions about how PACs are set up, who manages them, and how the wishes of donors are communicated to them, but both declined to answer.
Coinbase disclosed in a filing with the U.S. Securities and Exchange Commission that “In December 2023, we partnered with other cryptocurrency and blockchain market participants to form the Fairshake Political Action Committee to support political candidates in the 2024 U.S. presidential election who support cryptocurrency and blockchain innovation and responsible regulation.”
However, a Fairshake spokesperson said the PAC does not plan to weigh in on the presidential candidate, despite recent news that some leaders support former President Trump.
Coinbase’s statement suggests there is coordination among the donors, but it’s unclear how these companies with complex interests came together to further their cooperation, with the only commonality being that most of them face enforcement disputes with federal regulators. The cooperation continues, with the three companies recently making a round of matching donations, with each company donating $25 million.
01 Candidates’ “Choice”
Rep. Katie Porter (D-Calif.), a rising star in progressive politics, is following in the footsteps of her predecessor, fellow Sen. Elizabeth Warren, a former presidential candidate, influential in Democratic politics and a well-known crypto opponent. The 50-year-old has a strong chance of winning a Senate seat in her home state of California this year.
But the crypto industry couldn’t bear the thought of another high-profile senator blocking its progress again, so it invested more than $10 million during the California primary to weaken her young voter base. Her California Senate campaign raised more than $30 million from direct donors and about $500,000 from outside PACs. About a third of that money was hedged for no reason because of the crypto industry.
Stop Porter's campaign from hanging banners over Hollywood and driving around in vans delivering scathing commentary, pushing charges that she misled voters into accepting corporate-backed election campaigns — claims her campaign refuted, saying "billionaires and corporate interests used misinformation to manipulate the election."
Through the magic of funding, Porter ended up trailing Rep. Adam Schiff, D-Calif. — who raised a similar amount, but without the crypto opposition — while the top Republican candidate, former Major League Baseball star Steve Garvey, was eliminated in the primary, blocking her path to the Senate and keeping her out of Congress altogether.
Fairshake’s behavioral strategy is to focus on areas that strongly lean toward a single party and support crypto-friendly candidates in primaries, with the winner of this strategy having a chance to win the general election. It is the same strategy used by the leading industry GMI PAC in 2022, which counted former FTX CEO SBF as one of its main backers. Michael Carcaise, a strategist at GMI at the time, currently holds a similar position at Fairshake.
02 Excessive spending
More recently, crypto PACs have set their sights on a congressional district in Westchester County, New York, and parts of the Bronx. The district’s incumbent Democratic Rep. Jamaal Bowman opposed two recent votes in Congress that became a litmus test for the crypto industry’s view of incumbent lawmakers: the House’s Financial Innovation and Technology for the 21st Century Act (FIT21) and a bill to overturn SEC SAB 121. (The Republican-backed bill received a third of House Democrats’ votes in favor — a rare bipartisan effort.)
The industry ran $2.1 million worth of negative ads against Bowman, opening with the line "Where's the decency? It's gone in Bowman's New York."
Rep. Alexandria Ocasio-Cortez (D-N.Y.), a progressive House activist, called it “disgusting and unnatural” that so much outside money was being poured into the campaign to oust Bowman, not just from Fairshake but other PACs as well.
Bowman’s personal fundraising efforts have raised about $4.3 million, according to Federal Election Commission records. But when it comes to campaign advertising in the district, the vast majority of messages are paid for by Fairshake and other outside super PACs, not any of the candidates. Bowman, the incumbent, lost on Tuesday.
Bowman’s campaign and the campaign of Democratic primary winner George Latimer did not respond to requests for comment on cryptocurrencies.
Earlier this year, in a relatively niche primary in Alabama, Shomary Tucci’s campaign managed to beat several other Democratic candidates despite raising about the same amount of money as his competitors — both received less than $500,000 in direct contributions. The only difference was that Fairshake spent $2.4 million on ads for Tucci and more than $200,000 against his fellow Democrats, according to election records.
Sarah Bryner, director of research and strategy at OpenSecrets, said in an interview: "It is increasingly common for super PACs to spend more than their candidates' individual donations." Figgs has held several government positions in Washington and worked for Ohio Democratic Senator Sherrod Brown, who serves as chairman of the Senate Banking Committee and has been an opponent of crypto legislation so far. But Figgs said on his campaign website that he would "embrace digital assets such as cryptocurrencies to stimulate innovation and technological progress." And political action committees are betting big on politicians' remarks like this.
“It’s really becoming one of the biggest money forces in this cycle of politics,” said Jordan Libowitz, vice president of communications for the Center for Responsibility and Ethics in Washington, calling Fairshake’s approach “the rapid evolution of money politics.”
According to the PAC, as of May 31, there was still $109 million in funds remaining, and such a large amount of funds makes it even more eye-catching.
Crypto’s political arm is clearly not shy about spending big, but this isn’t the first time the industry has been in the spotlight for campaign finance. In a congressional race two years ago, the industry raised nearly $100 million, with about $74 million of that tied to now-jailed SBF and the FTX exchange.
When the dust settled on the previous election, it emerged that a third of all members of Congress had received funds associated with FTX, which were ultimately the subject of recovery in the company’s multibillion-dollar bankruptcy.
03 Pay out of your own pocket
A handful of companies and individuals have emerged as major cryptocurrency donors, including Marc Andreessen and Ben Horowitz, the prominent digital asset investors behind a16z, Brian Armstrong, the CEO of Coinbase, and Tyler and Cameron Winklevoss, the twins behind the Gemini platform. Their donations have become so large that they are beginning to appear on lists of the nation’s top political donors.
OpenSecrets.org's rankings show Andreessen and Horowitz in the top 10 this year, and their recent financial donation commitments may achieve higher rankings. In 2022, SBF also entered the top 10, and he was once ranked as the fourth largest donor in the United States.
While PACs aren’t participating in the biggest political show of 2024, several crypto dignitaries have revealed their personal preferences in the White House race.
Last week, the Winklevoss twins made headlines when they announced they would each donate $1 million to support Trump, but some of the donations were later refunded because they exceeded the campaign contribution limit. Prior to this, Gemini executives had supported most of the serious contenders trying to wrest the Republican nomination from Trump: Vivek Ramaswamy, Nikki Haley, Senator Tim Scott and Florida Governor Ron DeSantis. They also each donated $2.5 million to Fairshake, becoming one of the fund's largest individual donors.
Perianne Boring, head of the Digital Chamber, a U.S. digital industry lobbying organization, supported Governor DeSantis' campaign last year and this year supported cryptocurrency enthusiast Robert Kennedy Jr.'s independent presidential run. Kristin Smith, head of the Washington Blockchain Association, chose to support Ramaswamy, who was once the most radical candidate in terms of cryptocurrency support.
As Trump has emerged as a promoter of crypto assets, Messari founder and CEO Ryan Selkis has been vocal in his support for the former president as the industry’s best choice, even as it has provided funding to Ramaswamy and Democratic Rep. Dean Phillips of Biden’s party.
The largest individual campaign donors have given millions of dollars to Fairshake this election, including Coinbase’s Armstrong, who has given more than $100,000 to some lawmakers, including Republicans in the Senate and lawmakers who could help bring a more balanced House of Representatives. Other donors include Fred Wilson, a venture capitalist and co-founder of Union Square Ventures, and Phil Potter, a former Bitfinex and Tether executive.
Still, most of the political influence in the digital asset space comes from the biggest companies. Coinbase, Ripple, and a16z are the leaders, and Jump Crypto recently donated $10 million (for a total of $15 million). USDC stablecoin issuer Circle and Payward, which is facing SEC litigation, have also become large funders.
04 The “swing” of funds between the two parties
Although many insiders tend to support the Republican Party, crypto PACs are very careful to divide their funds between the two parties.
“At Ripple, we believe the future of crypto is not a partisan issue at all,” Ripple CEO Garlinghouse said in a statement to CoinDesk. “Many Republicans and Democrats already have positions in support of innovation and compliance that can allow the United States to regain leadership in this critical technology space. This same leadership created massive job creation and geopolitical dividends in the development of the internet — and our elected officials have the opportunity to do it again.”
He said it was unusual for super PACs to provide funding to both parties, which reinforced the industry's nonpartisan claims. In terms of specific implementation, Garlinghouse and other companies have mostly focused on press releases, blogs and public statements. A spokesperson for a16z gave an example: "We will continue to contribute to candidates who believe that blockchain technology has productive uses."
None of these companies have expressed support for the Cedar Innovation Foundation, a dark money operation backed by cryptocurrency interest groups. However, the crypto PAC and Cedar share the same spokesperson, Josh Vlasto.
05. Avoid talking about encryption
The latest ad targeting Bowman reflects another noteworthy aspect of crypto politics: Industry-funded ads typically don’t mention crypto assets. As common PAC names like “Protect Progress” and “Defend American Jobs” suggest, crypto campaigns are trying to avoid being too closely associated with cryptocurrencies.
Most of the time, ads targeting Bowman or others don’t mention their stance on cryptocurrency, even if that’s the purpose behind the spending. The ads are more about trying to damage or bolster a candidate’s core political credibility. There are exceptions, such as trying to turn cryptocurrency enthusiasts against Porter in California, a demographic that overlaps with her base of supporters in the state.
Beyond that, these expenditures are thinly veiled political expediency, an attempt to win in the most efficient way possible by spending huge amounts of money to get as many members of Congress as possible on the pro-crypto side.
Business interests have long sought to manipulate U.S. elections, especially with the U.S. Supreme Court’s Citizens United decision, which opened a superhighway for independent spending by Super PACs.
“It’s more transparent that a company is writing a $25 million check not out of the kindness of their heart but because they want to help their business,” Liebowitz said.
Industry insiders see strong campaign funding potential, which has also catalyzed Congress's attention to various issues in this session, and the competition has begun long before the election. In the same way, crypto assets have also entered the presidential agenda this year.
Trump has shifted from past criticism of cryptocurrencies to an embrace — echoing the crypto-friendly stances of Republican candidates competing against him earlier in the campaign and opening his campaign to cryptocurrency donations. While Fairshake has said it will not participate in the Biden-Trump conflict, the competition has far-reaching implications for the fate of cryptocurrencies in the United States.
“Our focus remains on supporting candidates from both parties and in both chambers of Congress who will stop playing politics and pass clear and accountable rules that protect American consumers, spur American innovation, and grow American jobs,” Vlasto said in a statement. As Ripple’s Garlinghouse emphasized, “Those who stand in the way of this progress will surely be on the wrong side of history.”
The notoriously fast-paced campaign industry has gradually learned the lessons of the long game in Washington, and Vlasto emphasized that general election financing is ready to influence the campaign after November. "We adopt a sustainable strategy and establish an effective operating system to lay the foundation for long-term development. We will have sufficient resources to influence the 2024 campaign and beyond."