Crypto and US Elections: The Challenges of the Political Sector
October 11, 2024
The rise of cryptocurrencies in the American political landscape is marked by the growing influence of pro-crypto PACs, which are using their financial power to support candidates favorable to the industry and influence legislative decisions. In just a few years, this sector has evolved from a marginal presence to a key player in political lobbying, especially evident in the 2024 elections. Faced with increasing pressure from regulators and the fallout from the FTX scandal, the crypto industry is ramping up its efforts to protect its interests. Through super PACs like Fairshake, it seeks to shape a more favorable regulatory framework while backing candidates whose positions align with its goals.
Crypto in Politics: A New Champion of Lobbying
Birth and Rise of Pro-Crypto PACs
The role of the cryptocurrency sector in U.S. elections has significantly evolved over the past few years. Virtually insignificant in 2017, this sector surged in 2020 — notably with the involvement of Sam Bankman-Fried and FTX — to become one of the leading American lobbies by 2024.
This evolution took shape in 2023 with the creation of Fairshake, a clearly “pro-crypto” super PAC that quickly mobilized substantial financial resources. To recap, a PAC (Political Action Committee) is a private organization aimed at supporting or opposing political candidates in order to promote or block the passage of certain laws. In short, these organizations spend heavily to influence politics in a direction that benefits them.
Returning to Fairshake, this PAC has emerged as one of the most influential players in the American political landscape. Founded in 2023 by a consortium of industry giants, including Coinbase, Ripple, Andreessen Horowitz, and Jump Crypto, Fairshake amassed an impressive $160 million budget in just one year. Notably, about 94% of these funds came from just the four companies mentioned, according to Federal Election Commission (FEC) funding reports.
Cryptos, the Leading American Lobby?
Since the Citizens United v. Federal Election Commission decision rendered by the U.S. Supreme Court in 2010, companies have been allowed to contribute as much as they want to electoral campaigns, under the First Amendment. Over 14 years and four presidential elections, companies have spent a total of $884 million to help finance campaigns.
Although the cryptocurrency sector only truly emerged during the last two elections, it already accounts for 15% of all known corporate contributions, with total expenditures of approximately $129 million. Only the fossil fuel industry has done better, with $176 million spent over the last 14 years — $73 million of which came from Koch Industries, a company famously involved in oil and petrochemicals.
What is most surprising, however, is that this contribution surge truly exploded in 2024. According to a report from Public Citizen, the cryptocurrency industry has already spent $119 million — accounting for 44% of all corporate funds donated during this presidential campaign (totaling $274 million).
It’s worth noting that Koch Industries lags far behind Fairshake in these 2024 elections. The private conglomerate donated $25 million to Americans for Prosperity, an organization it controls, and $3.25 million to support the election of Republicans to Congress.
The Goals of Pro-Crypto Lobbying
This sharp rise in financial contributions clearly reflects a desire to protect industry interests and gain legitimacy. The majority of the $119 million spent by the cryptocurrency industry has flowed through Fairshake — a non-partisan PAC, remember — which has strategically distributed the funds between candidates from both political parties to favor the election of pro-crypto candidates and defeat crypto-skeptics.
The best example of this strategy is in Ohio, where Fairshake massively supported Republican candidate Bernie Moreno against his Democratic opponent, Sherrod Brown. Bernie Moreno is not particularly “pro-crypto,” but Sherrod Brown is a staunch opponent of the digital asset industry.
In the background, the cryptocurrency industry’s ultimate goal is to finally secure a clear regulatory framework — and one that is more flexible than the one currently being imposed by the Securities and Exchange Commission (SEC).
The Consequences of the FTX Scandal
Impact of the Sam Bankman-Fried and FTX Case on the Crypto Industry
It’s impossible not to mention FTX in this context. The spectacular collapse of the cryptocurrency platform, orchestrated by its founder Sam Bankman-Fried, dealt a severe blow to the credibility of the crypto industry in Washington. Bankman-Fried had been one of the largest donors to the Democrats during the previous presidential election.
While the sector was once seen as innovative and forward-thinking, it suddenly became associated with fraud and financial irresponsibility. The dubious practices revealed by FTX’s downfall led to a loss of trust among lawmakers, reinforcing the perception of an opaque and risky industry. This turn of events gave a platform to critics calling for stricter regulations, making the crypto industry a prime target for regulators.
Players in the cryptocurrency industry, once courted by politicians, now face growing skepticism, making their lobbying efforts more complex. It is easy to trace a line between this event and the current need for super PACs like Fairshake to spend enormous sums to regain political trust and erase the damage caused by FTX and its founder.
Heightened Response from U.S. Regulators
In response to the FTX crisis, U.S. regulators — particularly the Securities and Exchange Commission (SEC) — intensified their crackdown on companies in the sector. After being accused of leniency toward FTX, the SEC sought to restore its image by taking a tougher stance on the cryptocurrency industry.
Under Gary Gensler’s leadership, the SEC launched a record number of lawsuits and investigations in 2023 and 2024, targeting major players like Coinbase, Kraken, and Binance. Accused of violating securities laws, these companies are now at the heart of legal battles that slow their development and create an atmosphere of regulatory uncertainty. This crackdown has prompted some companies to consider solutions outside U.S. borders, exacerbating tensions between the industry and authorities.
Growing Resistance Against the SEC and Gary Gensler
The regulatory pressure exerted by the SEC has galvanized opposition within the crypto industry. Companies like Coinbase have taken drastic measures by suing the SEC, challenging its authority to regulate the cryptocurrency market.
At the same time, legislative initiatives have multiplied to define a regulatory framework more favorable to innovation, reflecting the industry’s desire to restore its tarnished image. These efforts show unprecedented mobilization within the sector to influence regulation and avoid stifling the crypto market with what is perceived as an overly restrictive legislative framework.
Additionally, the growing weight of the cryptocurrency industry in the financial and technological landscape, combined with investor interest, is beginning to make itself felt in political discussions. Within the SEC itself, voices have been raised questioning the leadership’s stance, calling for a drastic change.
Political Figures and the Crypto Industry’s Influence Game
Donald Trump and Kamala Harris: Opposing Approaches
The positions of the two main presidential candidates, Donald Trump and Kamala Harris, highlight the divide over cryptocurrency. Once a skeptic, Trump has become a staunch supporter of cryptocurrencies and has fully embraced the cause, even promising to make the U.S. the “world capital of crypto.” Whether this change of heart is genuine or strategic, the outcome remains the same: this shift has placed Bitcoin and cryptocurrencies at the center of this U.S. presidential election debate.
On the other hand, Kamala Harris adopts a more reserved and measured stance. She has inherited an image tarnished by Joe Biden and his institutions, which have been openly anti-crypto. However, her team has met with industry leaders to assess positions and try to find common ground. According to some advisors, Harris would support a regulatory framework that allows the industry to grow while ensuring consumer protection. However, she must navigate figures within the Democratic Party, like Elizabeth Warren, a fierce opponent of cryptocurrencies, who advocates for stricter laws.
The Risky Gamble of Political Alliances
Cryptocurrency industry supporters must navigate this complex political landscape and align with the right actors. While organizations like Fairshake declare themselves non-partisan and distribute funds to both camps, it’s difficult to deny that the industry is increasingly leaning toward the Republicans as the election approaches.
Influential figures in the sector, like the Winklevoss brothers, Elon Musk (though not a pure crypto actor but an influential figure), and Ryan Selkis (founder of Messari), have all chosen to align with the Republicans and support Donald Trump. This is because Republicans have been more receptive to technological innovations and the development of the cryptocurrency industry, unlike the Democrats, whose policies have been particularly strict during the last administration.
However, by focusing mainly on Republicans, industry players risk alienating the Democrats. Yet, Democrats could also be open to discussions about the benefits of blockchain technologies, particularly Kamala Harris, who seeks to distance herself from the anti-crypto image of her predecessor, Joe Biden. This polarization must not deepen, or it could lead to divisions within the industry, limiting its ability to build bipartisan alliances necessary for balanced and sustainable legislation.
Bipartisan Alliances and the “Crypto Vote”
A new concept has emerged in these U.S. presidential elections: the “crypto vote.” Super PACs like Fairshake are betting on a potentially decisive segment of voters in key “swing states,” where the political balance is not clearly defined. According to Grayscale’s report “2024 Election: The Role of Crypto,” about 20% of Americans may be open to supporting pro-crypto candidates, and their vote could be influenced by this issue. However, this figure is contested by the U.S. Federal Reserve, which estimates that only 7% of Americans use or have used cryptocurrencies, suggesting that this criterion is not a significant factor in their voting decisions.
To mobilize this electorate, Fairshake has launched initiatives like Stand With Crypto. This campaign has collected over 1.2 million email addresses of crypto ecosystem supporters across the country, aiming to encourage them to vote and influence the results of Senate and House races.
Leaders in the crypto industry play a crucial role in implementing lobbying strategies. Brad Garlinghouse, CEO of Ripple, and Faryar Shirzad, Chief Policy Officer of Coinbase, have actively promoted the idea that cryptocurrencies can coexist with traditional regulation. Similarly, figures like Marc Andreessen and Ben Horowitz, the founders of the renowned venture capital firm Andreessen Horowitz, have used their influence and networks to shape legislative discussions.
The industry is also relying on targeted communication, using advertisements that touch on broader themes like public debt, inflation, freedom, and justice, to appeal to voters beyond the specific issue of cryptocurrencies. This approach was particularly evident during the California primaries, where Fairshake spent $9.7 million against Katie Porter, a declared opponent of cryptocurrencies.
Analysis of Results and Political Consequences
A Tangible Impact from Fairshake?
By supporting pro-crypto candidates and opposing those who are hostile to it, Fairshake has already seen several notable successes. The defeat of Jamaal Bowman in New York and Katie Porter in California demonstrates the effectiveness of this strategy.
At the time of writing, predictive markets like Polymarket show a dramatic shift, with Donald Trump pulling ahead of Kamala Harris. Does this mean that campaigns run by PACs like Fairshake have motivated voters to choose the “crypto vote,” often associated with Republicans? The real impact of this support is hard to evaluate, and we will have to wait for the November results to get a clearer picture.
Toward Crypto Market Regulation?
Regardless of the election outcome, the much-discussed “crypto vote” from Fairshake and its discussions with various political camps could lead to more relaxed regulations and clearer legislation. A Republican victory could accelerate these discussions and lead to faster growth for the crypto industry in the U.S., while a Democratic victory might be more moderate and could maintain the current status quo, or even strengthen the role of the SEC.
One of the most anticipated impacts is the potential adoption of the FIT21 bill, which could be fast-tracked. This bill is the most significant effort since the creation of the cryptocurrency industry to establish clearer and more favorable regulations. Supported by members of both parties, it illustrates the possibility of a bipartisan consensus. By facilitating a legislative framework that better regulates crypto activities while encouraging innovation, FIT21 could help restore confidence and create a level playing field for industry players.
Conclusion
The 2024 U.S. elections mark a turning point for the cryptocurrency industry. Through massive investments and intense lobbying campaigns, the sector has put itself in a strong position to improve its image and gain greater recognition within the political landscape.
The future of crypto in American politics remains uncertain, but the initiatives are promising. Despite scandals and growing regulatory pressure, the industry continues to exert significant influence on the political scene, with the potential to play a decisive role in the year-end elections.
One crucial question remains: will the crypto industry manage to survive and thrive in such a polarized and regulated political environment?
