Barbarians Outside the Election: Crypto Whales Quietly Eroding American Politics

Author: Wu Tianyi, De Things

On July 23, according to the FEC official website, the blockchain group FairShake has become the largest Super Political Action Committee (Super PAC) in this election cycle, raising over $200 million. According to CoinDesk, the fund has so far supported more than 20 congressional candidates in the 2024 elections to achieve primary victories. The vast majority of the funds are managed through a coordinated group of PACs under Fairshake. The companies behind Fairshake PAC and its affiliates declined to answer questions about their origins or ongoing relationships with the organization.

PAC stands for Political Action Committee, which is an organization that collects and uses funds to support or oppose political candidates. PACs typically follow specific contribution limits and reporting regulations and operate within the contribution limits for individuals and entities. They can also contribute directly to candidates' campaigns.

On the other hand, Super PACs have the ability to raise and spend unlimited amounts of money but are not allowed to contribute directly to candidates or political parties.

Fairshake PAC was jointly created by more than a dozen cryptocurrency companies in 2023 and has now become one of the highest-spending PACs in the 2024 election cycle. Cryptocurrency-friendly venture capital firm Andreessen Horowitz, cryptocurrency exchange Coinbase, veteran venture capitalist Ron Conway, venture capital executive Fred Wilson, tech executives Cameron and Tyler Winklevoss, and cryptocurrency solutions company Ripple have all contributed to Fairshake.

Currently, Fairshake PAC is publicly "influencing" American politics. Kara Calvert, Coinbase's head of U.S. policy, stated that Coinbase is committed to "educating" congressional members so that "when they are asked about cryptocurrency in town halls, or when they are asked about cryptocurrency by Fairshake or any other organization, they better know what they are talking about."

Represented by Fairshake PAC, various cryptocurrency institutions are no longer content to remain in the background; cryptocurrency practitioners and enthusiasts are set to elect a president for themselves:

"Fairshake supports candidates committed to ensuring that America becomes a home for the next generation of internet innovators.

If the broader open blockchain economy is to fully realize its potential in the U.S., it is crucial to provide blockchain innovators with the ability to develop their networks under clearer regulatory and legal frameworks."

Any discussion of effective altruism has vanished.

Cryptocurrency first made its political debut in 2021, a year marked by a significant surge in cryptocurrency lobbying activities, driven by lockdowns that sparked interest in virtual economies and get-rich-quick schemes. Various aspects of the industry (Bitcoin, altcoins, NFTs, blockchain) gained mainstream exposure, political recognition, and wild valuations. The newly established Biden administration had already turned its attention to cryptocurrency regulation, with the SEC filing securities charges against Ripple in February of that year while also approving Coinbase's listing request. One of the company's largest investors, the prominent venture capital firm Andreessen Horowitz, poured substantial funds into other cryptocurrency participants and launched an aggressive lobbying campaign to protect the industry from tax reporting and anti-money laundering regulations—most importantly, to exclude it from SEC oversight.

The results came quickly: before passing in November, Biden's infrastructure bill included extensive tax reporting requirements for Bitcoin miners, but these requirements were significantly weakened due to aggressive lobbying.

Members of the Biden administration and congressional members (regardless of party affiliation), such as Senators Kirsten Gillibrand and Cynthia Lummis, were "lavishly entertained" by several cryptocurrency entities like Grayscale, the Blockchain Association, the Digital Chamber of Commerce, and BTC Inc., and proposed a bill during the summer cryptocurrency crash of 2022 that would achieve the lobbyists' goal of shifting governance away from the SEC and exempting certain tax requirements for digital assets, such as capital gains tax.

Among them was a key lobbyist—former FTX founder Sam Bankman-Fried—who proposed a more lenient bill that similarly placed cryptocurrency under the supervision of the Commodity Futures Trading Commission.

However, after FTX's collapse at the end of 2022, it was revealed that SBF, one of the biggest spenders in the U.S. campaign at the time, was primarily focused on covering up a Ponzi scheme, and all politicians who had shaken hands with SBF received "extra attention," leading to a decline in the cryptocurrency industry's enthusiasm for donations. The entire industry was already suffering from the impact of interest rate hikes and the misconduct of companies like Terraform Labs and Celsius (and eager lobbyists), seemingly preparing to retreat temporarily, as evidenced by the noticeable lack of cryptocurrency ads during the 2023 Super Bowl.

AI and Web3 Join Forces to Disrupt

After the collapse of FTX, the Biden administration began pursuing every major cryptocurrency company, achieving some significant legal victories in the process—such as the complete collapse of Binance, once the world's largest cryptocurrency exchange, due to lawsuits in the U.S. and internationally. (Its former CEO, Changpeng Zhao, was forced to leave the company and the cryptocurrency sector and was sentenced to four months in prison.) The day after the lawsuit against Binance was filed, the SEC also sued Coinbase, the largest cryptocurrency exchange in the U.S., accusing it of acting as an unregistered securities agency—if successful, this lawsuit could completely destroy Coinbase's business model.

But just weeks after SBF's collapse, another seed for the resurgence of cryptocurrency lobbying was planted: the launch of ChatGPT.

As this impressive chatbot became one of the fastest-growing applications of all time, cryptocurrency enthusiasts and their investors noticed the rapid adoption of the technology by consumers and professionals and realized they had an opportunity to form a natural alliance. The CEO of OpenAI, the parent company of ChatGPT, is also a cryptocurrency enthusiast and holds stakes in the biometrics cryptocurrency project WorldCoin, which is backed by Andreessen Horowitz.

The booming AI startups and companies also require substantial infrastructure to handle their resource-intensive technologies—while struggling cryptocurrency miners possess a wealth of idle infrastructure, including data centers, cooling systems, and energy connections, which are essential for companies looking to catch up with OpenAI's advancements. Financially troubled digital asset experts found that they could leverage the investment hype surrounding AI by integrating technology into cryptocurrency processes, causing the value of these so-called AI tokens to indeed soar, just like all other AI-related companies today.

But beyond material interests, cryptocurrency zealots and AI bulls share a more significant commonality: a thirst for unrestrained growth and a disdain for regulatory burdens.

Proponents of effective accelerationism believe that any slowdown in AI development poses a danger to the mission of driving life-changing AI, which can lead humanity to new frontiers and earn substantial profits for its practitioners. They advance under the banner of the "Technological Optimism Manifesto," which encourages all technologies to develop unhindered—without government intervention or regulation.

The boldest Bitcoin and cryptocurrency supporters, including Coinbase's Brian Armstrong, adhere to this belief. This has also changed the way they lobby.

Thus, cryptocurrency activities took a sharp right turn. The Biden administration's crackdown on cryptocurrency and attempts to establish AI guidelines sparked outrage in both industries, with technologists yearning for a complete transformation—a more liberal, typically hands-off change.

From Pawns to Players

In August 2023, as Coinbase launched the "Stand With Crypto" campaign, Brian Armstrong announced that he and his company would donate to the Super PAC Fairshake.

Fairshake PAC thus stepped onto the stage of American politics, with its chief spokesperson and organizer being Josh Vlasto, who previously served as an assistant to the current Senate Majority Leader and former Governor of New York.

While running Fairshake, Vlasto is also responsible for coordinating the billionaire-backed "Peace Facts" organization, which was established after October 7 as a pro-Israel group aimed at shaping the information environment surrounding the Gaza war. In the initial months of the war, the "Peace Facts" organization was one of the largest ad buyers online, spending nearly $500,000 on targeted ads to counter online criticism of Israel.

The massive spending figures for cryptocurrency in this election year have been buoyed by the recent rise in virtual currencies. Bitcoin's price surged to a historic high of $73,000, partly due to a slowdown in mining, which limited supply. (Currently, the BTC price is $69,000.)

The Biden administration fueled this market rebound, helping donors who are now spending on campaigns to reap substantial profits. However, SEC Chairman Gary Gensler remains firmly opposed to cryptocurrency. Therefore, Fairshake PAC, with its substantial funding, carefully selects candidates to support, eliminating politicians who criticize the industry and nurturing new allies across party lines to replace them.

One of the most notable impacts occurred in March of this year when Democratic progressive star Katie Porter raised over $30 million in her campaign, originally having a significant chance of winning a Senate seat in California. However, Porter followed Elizabeth Warren's political path and played a crucial role in Harris's confrontation with banks, leading Fairshake to identify her as a potential "anti-crypto ally" of Warren.

During the California primary, Fairshake invested over $10 million to undermine Porter's base of young voters. Sharp criticisms of Porter were everywhere, from banners hanging over Hollywood to trucks on the Walk of Fame, promoting her misleading voters into accepting corporate-friendly legislation. Ultimately, about a third of Porter's campaign funds were hedged by Fairshake, causing her to fall behind her Democratic colleague Adam Schiff and fail to advance to the fall general election.

Leveraging Republican Control of the Senate

Whether cryptocurrency can claim its ads influenced primary results in a large state like California is debatable, but Fairshake is indeed attempting to shift the Senate under Republican control to gain more influence in the House.

Republicans are generally more inclined to loosen regulations on cryptocurrency, so these PACs aim to gain a stronger foothold within the Democratic Party. Fairshake's largest donors, Ripple, Andreessen Horowitz, and Coinbase, have contributed over $1 million to the House Majority PAC, which is controlled by House Minority Leader Hakeem Jeffries (D-NY). According to campaign finance analyst Open Secrets, Coinbase has also donated $500,000 each to the Republican Senate Leadership Fund and the Democratic Senate Majority PAC.

Two campaigns particularly symbolically indicate that crypto PACs are choosing to support friendly Democrats in crowded open seats.

In Alabama's newly majority-Black Second Congressional District, which is heading into a Democratic primary runoff, Shomari Figures's support is expected to surpass his opponent's due to $1.7 million in campaign funding provided by the "Protect Progress" organization.

In Texas's 32nd District, Julie Johnson recently won a contentious Democratic primary, replacing Colin Allred, who is running for U.S. Senate. Johnson has also benefited from cryptocurrency funding.

Like Adam Schiff, Figures and Johnson have dedicated sections on their campaign pages to explicitly signal to the Super PAC that they are seeking financial support from the industry. However, these initiatives seem to matter little to voters, as cryptocurrency has never been listed among the top 20 priorities in issue surveys.

In some campaigns, cryptocurrency groups do not need to spend any money to influence politicians' behavior. Fairshake has stated that it still plans to participate in Senate campaigns in Michigan and Maryland but has not yet taken sides. This looming threat has already affected candidates' positions.

In the Maryland Democratic primary, Democratic Congressman David Trone and Prince George's County Executive Angela Alsobrooks both expressed openness to cryptocurrency, despite not having taken a strong stance previously. Trone co-signed a letter last year with cryptocurrency critic Elizabeth Warren, calling for increased enforcement, but has recently echoed industry viewpoints. Trone stated that he believes in legal certainty for cryptocurrency companies so that the U.S. does not "fall behind in the global race for technological advancement and economic competitiveness."

Alsobrooks also praised blockchain technology, emphasizing that it "can help all Americans, including traditionally underserved communities, create generational wealth for their families."

This phenomenon is not only present in the electoral arena but also directly reflected in messages sent to current officials. According to CNBC, a nonprofit organization called Cedar Innovation Foundation "received substantial funding from cryptocurrency industry participants" and ran ads encouraging cryptocurrency enthusiasts to urge Ohio Senator Sherrod Brown to oppose SEC Chairman Gary Gensler and Senator Elizabeth Warren.

American businessman and investor Ben Horowitz wrote a blog post in December condemning "misleading and politicized regulation," criticizing lobbyists who "often run counter to a positive technological future," and announced that the company would pursue its political interests as follows: "If a candidate supports an optimistic technology-driven future, we support them. If they want to stifle important technologies, we oppose them. These important technologies include AI and decentralized technologies from the blockchain/crypto/web3 ecosystem."

It is not difficult to see that loosening regulations has become a common demand in the rapidly evolving tech sector. This sentiment peaked when Trump shouted at the 2024 Bitcoin conference, "I will fire the current SEC chairman on day one," transforming himself into the "crypto savior." However, interestingly, Fairshake has raised $202 million, quietly surpassing the MAGA led by Trump.