Spending $169 million but avoiding discussions on cryptocurrency? Unveiling the money politics behind the crypto election

Original Title: “Crypto Giants Notch Wins in Expensive Quest to Sway U.S. Politics -- Without Mentioning Crypto”

Written by: Jesse Hamilton

Translated by: Ning, Tuo Luo Finance

In political elections, the saying "money makes the world go round" is vividly illustrated, and the direct product of this is the unique Political Action Committee (PAC), through which various types of donors influence elections via different PACs to secure favorable political roles for themselves.

The same goes for crypto. Currently, the crypto industry has accumulated a massive campaign fund, with PACs amassing as much as $169 million, capable of organizing numerous campaign activities and even determining the composition of Congress next year to some extent. The results have been quite significant, with this PAC achieving over 20 campaign victories, including elections in California and just completed in New York this week.

From a strategic perspective, the political operations of the crypto industry follow the successful model from two years ago's congressional elections, but this time, the funding from cryptocurrencies is even greater—comparable to the top industries thriving in the political arena, on par with key supporters of major political parties. However, those responsible for utilizing the funds are reluctant to discuss it extensively.

CoinDesk has repeatedly inquired over several months about who is in charge and how the funds gathered from industry leaders are being utilized, but the Fairshake Political Action Committee, which controls most of the funds, has refused to answer questions regarding the management, coordination, and decision-making of the PAC, and core supporters—Coinbase, Ripple, and a16z—have also remained silent.

By analyzing the federal campaign donation disclosures of over twenty prominent business leaders and leading companies, a rapidly expanding political influence of crypto is beginning to emerge. Most of the funds are raised through the coordinating PAC under Fairshake, which is affiliated with the following committees: the Protect Progress Committee supporting Democrats and the Defend American Jobs Committee supporting Republicans. The crypto industry is also leveraging a dark money organization—the Cedar Innovation Foundation—to promote crypto development in the crucial yet delicate battleground of Ohio.

The PAC's funds have heavily flowed into the primaries, far exceeding the candidates' personal fundraising to some extent, but due to regulatory prohibitions, so-called super PACs like Fairshake do not directly donate to campaign activities. Instead, they purchase advertisements supporting or opposing candidates, theoretically allowing for unlimited purchases. For example, when a primary candidate relies entirely on personal donations, with a contribution limit of only $3,300 per election, their opponent may receive millions in funding from Fairshake.

Crypto supporters have explained the massive campaign spending: tens of millions of American voters want the government to accept crypto assets and tailor rules for them, but this call has not been answered.

Coinbase's Chief Policy Officer Faryar Shirzad stated in an interview, "We find that crypto voters have almost no voice 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 policy and political spending aims to allow the public to evaluate things more freely."

But ironically, the ads funded by PACs usually do not mention cryptocurrencies, let alone advocate for them.

When CoinDesk contacted Coinbase, they stated they could respond to questions about political participation but refused to disclose the specific decisions behind the nearly $50 million donated by the company. Ripple and a16z Crypto were also asked similar questions, attempting to understand how the PAC was established, who manages it, and how the donors' intentions are communicated to the managers, but they all declined to answer.

Coinbase disclosed in a filing with the U.S. Securities and Exchange Commission that "in December 2023, we established the Fairshake Political Action Committee in collaboration with other cryptocurrency and blockchain market participants to support political candidates in the 2024 U.S. presidential election who advocate for cryptocurrency and blockchain innovation as well as responsible regulation."

However, a spokesperson for Fairshake stated that despite recent reports of some leaders supporting former President Trump, the PAC does not intend to comment on presidential candidates.

Coinbase's statement indicates a coordination among donors, but it is unclear how these companies, with their complex interests, come together and further collaborate; the only commonality is that most of the companies face enforcement disputes with federal regulators. Collaboration continues, as the aforementioned three companies recently made a round of matching donations, with each donating $25 million.

01. The Candidate's "Choice"

A rising star in the progressive political scene, Congresswoman Katie Porter (D-CA) is following in the footsteps of her predecessor, Senator Elizabeth Warren, who was a presidential candidate and holds significant influence in the Democratic Party, and is also a well-known opponent of crypto. This year, the 50-year-old congresswoman has a considerable chance of winning a Senate seat in California.

However, the crypto industry finds it hard to accept another high-profile senator blocking the industry's progress, so over $10 million was invested during the California primary to weaken her young voter base. She raised over $30 million in her Senate campaign from direct donors, with about $500,000 coming from external PACs. Due to the crypto industry, about one-third of that funding was inexplicably hedged.

Porter's campaign team hung banners over Hollywood and drove trucks around making sharp comments, promoting accusations that she misled voters to accept corporate-supported election activities—her campaign team refuted this, stating that "billionaires and corporate interest groups manipulate elections using misinformation."

Under the magic of funding, Porter ultimately fell behind California Democratic Congressman Adam Schiff—who raised similar funds but did not include contributions from the crypto opposition. Meanwhile, the top Republican candidate, former Major League Baseball star Steve Garvey, was eliminated in the primaries, blocking her path to the Senate and causing her to exit Congress entirely.

Fairshake's strategy focuses on regions strongly inclined toward a single party and supports crypto-friendly candidates in the primaries, with winners under this strategy having a chance to win the general election. This strategy is similar to that used by the leading industry GMI PAC in 2022, which viewed former FTX CEO SBF as one of its main supporters, with GMI's strategist Michael Carcaise currently holding a similar position at Fairshake.

02. Excessive Spending

Recently, the crypto PAC has turned its attention to a congressional district in Westchester County and parts of the Bronx in New York. The incumbent Democratic Congressman Jamaal Bowman opposed two recent votes in Congress, becoming a litmus test for the crypto industry's view of the incumbent: the House's Financial Innovation and Technology Act (FIT21) and the overturning of SEC SAB 121 (the Republican-backed bill received support from one-third of House Democrats—a rare bipartisan collaboration).

The industry spent $2.1 million on negative ads against Bowman, starting with the line, "Where's the decency? It's vanished in Bowman's New York."

Progressive House radical Congresswoman Alexandria Ocasio-Cortez (D-NY) called it "disgusting and abnormal" to pour so much external funding into a campaign to oust Bowman, with spending not limited to Fairshake but also including other PACs.

According to records from the Federal Election Commission, Bowman's personal fundraising efforts have raised about $4.3 million. However, during the campaign advertising in the district, the vast majority of the information was paid for by Fairshake and other external super PACs, rather than any candidate. On Tuesday, incumbent Congressman Bowman announced his defeat.

Bowman's campaign team and Democratic primary winner George Latimer's campaign team did not respond to requests for comments regarding cryptocurrencies.

Earlier this year, in a relatively obscure primary in Alabama, Shomari Tuss's campaign team successfully defeated several other Democratic candidates, even though his fundraising was not significantly different from that of his contemporaries—both received less than $500,000 in direct donations. The only difference was that, according to election records, Fairshake invested $2.4 million in ads for Tuss and spent over $200,000 opposing his Democratic colleagues.

Sarah Bryner, Director of Research and Strategy at OpenSecrets, stated in an interview, "It is becoming increasingly common for super PAC spending to exceed the personal donations of their candidates." Figus, who has held multiple government positions in Washington and worked for Ohio Democratic Senator Sherrod Brown, who has been an opponent of crypto legislation, stated on his campaign website that he would "embrace digital assets like cryptocurrencies to stimulate innovation and technological advancement." Political action committees are betting heavily on such statements from politicians.

Jordan Libowitz, Vice President of Communications at the Washington Center for Responsibility and Ethics, stated, "It is indeed becoming one of the largest money forces in this round of politics," referring to Fairshake's practices as "the rapid development of money politics."

According to the PAC, as of May 31, there remains $109 million in funds, making such a large amount even more noteworthy.

The political sector of cryptocurrencies is clearly not shy about spending large sums, but this is not the first time the industry has become a focal point for campaign funding. In the congressional elections two years ago, the industry raised nearly $100 million, of which about $74 million was related to the now-imprisoned SBF and the FTX exchange.

When the dust settled from the previous elections, one-third of Congress members had received funds related to FTX. Ultimately, these funds became targets for recovery in the company's multi-billion dollar bankruptcy case.

03. Self-Funded Endorsements

A few companies and individuals have stood out as major donors to cryptocurrencies, including well-known digital asset investors Marc Andreessen and Ben Horowitz behind a16z, Coinbase CEO Brian Armstrong, and the Winklevoss twins, Tyler and Cameron, behind the Gemini platform. Their donations are so substantial that they have begun appearing on the national top political donor lists.

Rankings from OpenSecrets.org show that Andreessen and Horowitz entered the top 10 this year, and their recent funding commitments may lead to even higher rankings. In 2022, SBF also made it into the top ten, having been rated as the fourth-largest donor in the U.S.

Although the PAC has not participated in the biggest political show of 2024, several crypto figures have already revealed their personal preferences in the White House race.

Last week, the Winklevoss brothers announced they would each donate $1 million to support Trump, which garnered media attention, but subsequently, due to the two exceeding the donation limit, some contributions were refunded. Prior to this, executives from Gemini had already supported most of the strong competitors attempting to seize the Republican nomination from Trump: Vivek Ramaswamy, Nikki Haley, Senator Tim Scott, and Florida Governor Ron DeSantis. They each also donated $2.5 million to Fairshake, becoming one of the largest individual donors to the fund.

Perianne Boring, head of the Digital Chamber, a lobbying group for the U.S. digital industry, supported Governor DeSantis's campaign last year and this year supports crypto 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 favor of cryptocurrencies.

As Trump becomes a proponent of crypto assets, Messari founder and CEO Ryan Selkis has consistently backed the former president, believing he is the best choice for the industry, although he has also provided funding to Ramaswamy and Democratic Congressman Dean Phillips.

In this election, the largest individual donors to campaign activities have donated millions to Fairshake, including Coinbase's Armstrong, who donated over $100,000 to some members of Congress, covering Republican senators and members who could balance the ratio of Democrats and Republicans in the House. Other donors include venture capitalist and Union Square Ventures co-founder Fred Wilson and former Bitfinex and Tether executive Phil Potter.

Nevertheless, most of the political influence in the digital asset field still comes from leading companies. Coinbase, Ripple, and a16z are among the top players, with Jump Crypto recently donating $10 million (a total of $15 million). USDC stablecoin issuer Circle and Payward, which is facing an SEC lawsuit, have also become significant funders.

04. The "Swing" of Bipartisan Funding

Although many insiders tend to support the Republican Party, the crypto PAC is very cautious in distributing funds between the two parties.

Ripple CEO Garlinghouse stated in a statement to CoinDesk, "At Ripple, we believe the future of the crypto industry is not fundamentally a partisan issue. Many Republicans and Democrats already have positions supporting innovation and compliance, which can restore America's leadership in this critical technology sector. The same leadership created numerous job opportunities and brought geopolitical benefits during the development of the internet—our elected officials have the opportunity to do this again."

He noted that it is not common for super PACs to provide funding to both parties, which enhances the industry's nonpartisan claims. From a practical implementation perspective, Garlinghouse and other companies mostly focus on press releases, blogs, and public statements. A spokesperson for a16z cited, "We will continue to contribute to candidates who believe in the productive use of blockchain technology."

However, these companies have not indicated support for the Cedar Innovation Foundation, a dark money operation backed by cryptocurrency interest groups. Nevertheless, the crypto PAC and Cedar share the same spokesperson—Josh Vlasto.

05. Avoiding Crypto

The latest ads against Bowman reflect another noteworthy aspect of crypto politics: industry-funded ads typically do not mention crypto assets. Just like the generic names of PACs such as "Protect Progress" and "Defend American Jobs," crypto campaigns strive to avoid being too closely associated with cryptocurrencies.

Most of the time, ads targeting Bowman or others do not mention their stance on cryptocurrencies, even though that is the purpose behind the spending. The ads aim more to damage or bolster the core political credibility of candidates. There is one exception, for example, trying to rally California's crypto enthusiasts against Porter, as demographic data shows this overlaps with her supporter base in the state.

Aside from that, these expenditures are unmasked political expediencies, attempting to spend large sums to get as many members of Congress as possible on the side of supporting cryptocurrencies to win in the most effective way.

Business interests have long sought to manipulate U.S. elections, especially following the U.S. Supreme Court's "Citizens United" ruling, which opened a highway for independent spending by super PACs.

Libowitz stated, "Behavior is becoming more transparent; a company writing a $25 million check is not out of goodwill but hopes to aid business development."

Insiders see the powerful potential of campaign funding, which has also catalyzed Congress's focus on various issues in this session, with competition having already begun well before the elections. Indeed, this year, crypto assets have also entered the presidential agenda.

Trump has shifted from past criticisms of cryptocurrencies to embracing them—echoing the friendly stance toward crypto held by Republican candidates competing against him early in the campaign, and opening his campaign to donations from cryptocurrencies. Although Fairshake states it will not participate in the conflict between Biden and Trump, this competition has profound implications for the fate of cryptocurrencies in the U.S.

Vlasto stated in a statement, "Our focus remains on supporting candidates from both parties in both houses who will stop viewing politics as a toy and protect American consumers through clear and responsible rules, stimulate American innovation, and increase American job opportunities." As Ripple's Garlinghouse emphasized, "Those who hinder this process will surely stand on the wrong side of history."

The fast-paced campaign industry has gradually absorbed the lessons of Washington's long-term games, with Vlasto emphasizing that election financing has prepared for influencing campaigns after November. "We are adopting sustainable strategies, building effective operational systems, and laying the groundwork for long-term development. We will have sufficient resources to influence the elections in 2024 and beyond."