Super PACs with ties to the cryptocurrency industry have spent at least $31.2 million in primary races ahead of this year’s midterms, with most of the money coming from a handful of executives at just one company.
The super PACs are part of a Washington spending spree by the industry that has included big checks for lobbying and individuals’ campaign donations to cryptocurrency-friendly incumbents. Industry insiders are now trying to increase their political clout with millions funneled through super PACs. The money arrives as Washington is writing the rules that will govern the industry.
Craig Holman, a lobbyist for Public Citizen, said it’s unusual to see this much spending on primaries by outside groups.
“What we're seeing is a fundamental politicization of the cryptocurrency industry,” Holman said in an interview. Cryptocurrency industry insiders have emerged as political megadonors just as Washington lawmakers and regulators have flexed their muscles in the space, he said.
Lawmakers have introduced dozens of bills in the current Congress touching on the governing of cryptocurrencies. Provisions on tax reporting of digital assets made it into last year’s infrastructure law over the industry’s objections.
On the executive level, President Joe Biden in March instructed the executive branch to start work establishing a national policy for digital assets.
“This is a very wealthy industry that was very happy to be unregulated,” Holman said. “But once the federal government started shifting attention towards regulating the industry, the same as we saw with the big tech industry, they suddenly became big political players on Capitol Hill.”
The PACs have put money into the campaign for Sen. John Boozman, R-Ark., the ranking member of the Senate Agriculture Committee, the panel with oversight of the Commodity Futures Trading Commission, the industry’s preferred regulator. They’ve also contributed to campaigns for House Financial Services ranking member Patrick T. McHenry and Ted Budd, a Republican committee member running for Senate in North Carolina.
But the largest single recipient of crypto-linked super PAC money was Carrick Flynn, a Democrat seeking to be the party’s nominee in Oregon’s newly created 6th District. Flynn lost to Andrea Salinas.
Through June 14, crypto-linked super PACs tracked through Federal Election Commission disclosures had spent $31.2 million in support of 13 Democratic and 11 Republican candidates in 24 primary races, including four Senate and 20 House primaries. The super PACs spent $22.5 million on Democratic races and $8.7 million on Republican races.
Crypto-linked super PACs supported the winner in 18 of the 19 primaries with final results as of June 15. Super PACs can raise unlimited cash from corporations, unions and individuals, but they have to spend the money without coordinating with parties or candidates.
Kristin Smith, executive director of the Blockchain Association, said the stakes are high for the industry come November.
The industry wants to avoid another situation like the tax reporting provisions that ended up in the infrastructure bill, Smith said. There are also pieces of legislation that have come together, including the bill introduced this month by Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., showing Congress is getting serious about cryptocurrency, she added.
“The pieces are starting to come together to see legislation move next year. I think that that's definitely a possibility,” Smith said in an interview. “Having more candidates elected who have an understanding of crypto technology, I think will help inform better policymaking.”
A pair of super PACs, Protect Our Future PAC and American Dream Federal Action PAC, funded almost entirely by executives at the cryptocurrency exchange FTX and its subsidiaries, have independent expenditures of $27.5 million in support of candidates in primary races.
More than 72 percent of that, $19.8 million, has come from Protect Our Future, funded mostly through donations from FTX founder and CEO Sam Bankman-Fried and Nishad Singh, the company’s director of engineering. Bankman-Fried has contributed $23 million of the $24.2 million the PAC has raised so far, and Nishad $1 million, according to FEC filings.
Bankman-Fried — who at 30 had an estimated net worth of $8.8 billion as of Wednesday, according to the Bloomberg Billionaires Index, despite the recent crash in cryptocurrency markets — is relatively new to the political scene. But his giving escalated in both amount and sophistication since he emerged as a donor last cycle.
Bankman-Fried’s donations to Protect Our Future alone quadruple the $5.7 million he spent during the entire 2020 election. All-in this cycle, Bankman-Fried has spent at least $32.8 million spread out over dozens of Democratic and Republican candidates, and PACs, including a $6 million donation to the House Majority PAC, the biggest outside group supporting House Democratic candidates.
Protect Our Future PAC spent $11.4 million in Oregon’s 6th District, with $10.5 million going to support Flynn and $938,600 opposing Salinas.
So far, the PAC has spent money in support of candidates in 10 other Democratic primaries in California, Georgia, Illinois, Kentucky, New Jersey, North Carolina, Ohio and Texas. That included a fight between two sitting Democrats in Georgia, Lucy McBath and Carolyn Bourdeaux, in a redrawn district. The PAC spent $1.9 million in support of McBath, who won.
The PAC-backed candidate has won in eight races, with primaries in Illinois coming up on June 28.
Ryan Salame, co-CEO of FTX Digital Markets, has funded his own super PAC, the American Dream Federal Action PAC. The PAC has spent $7.7 million in support of Republican candidates in three Senate and six House primaries. Salame’s PAC has backed the winner in all seven of the concluded races. That includes $1.2 million spent in support of Boozman.
The American Dream Federal Action PAC also spent $516,560 to support Budd’s bid for the Senate seat opened up by Sen. Richard M. Burr’s, R-N.C., retirement. Budd has favored a light-touch approach to regulating the cryptocurrency industry.
FEC disclosures account for $4 million raised by the PAC, all through donations from Salame. The PAC has not yet disclosed the donors behind the additional $3.7 million spent by the group.
Neither the Salame nor the Bankman-Fried PAC has explicitly said it would favor candidates friendly to the cryptocurrency industry.
Bankman-Fried and his brother Gabe have said the billionaire’s goal is to stop the next pandemic. The American Dream Federal Action PAC’s website says it backs “forward-looking candidates — those who want to protect America’s long term economic and national security by advancing smart policy decisions now.”
However, both Bankman-Fried and Salame also donated to GMI PAC, a super PAC championing candidates friendly to “blockchain innovators.” Bankman-Fried donated $2 million to the PAC, and Salame $1 million.
The group has raised $7.4 million, largely from individuals and companies with ties to the cryptocurrency industry. GMI PAC has so far not spent any money in support of candidates, but has transferred $2.5 million to its affiliated PAC Web3 Forward, which has.
Web3 Forward has spent $2.6 million on five Democratic primary races so far, including three candidates also backed by Protect Our Future PAC. The super PAC spent $1.3 million in support of Jasmine Crockett, who won her primary to fill the seat of retiring Rep. Eddie Bernice Johnson, D-Texas. Protect Our Future spent $1.4 million in support of Crockett. Both PACs backed Robert Garcia and Sydney Kamlager for open seats in California’s 37th and 42nd districts. Both won spots in the November ballot in the state’s all-party primaries on June 7.
On the other side of the aisle, the super PAC Crypto Innovation spent $1 million in support of mostly incumbent Republican candidates in primary races. The group has disclosed raising $675,000, with $450,000 coming from GMI PAC and $225,000 coming from other donors, many of whom overlapped with GMI’s donors.
Crypto Innovation spent in support of Budd and Boozman, along with McHenry, R-N.C., who is in line for chairman of House Financial Services if his party takes the House in November.
Public Citizen’s Holman pointed to an analysis by his group showing spending on lobbying by the industry quadrupled from $2.2 million in 2018 to $9 million in 2021. Spending by cryptocurrency companies and related industry groups reached at least $2.8 million in the first quarter of this year, according to Senate lobbying disclosures.
“The instability and uncertainty of how cryptocurrency actually operates ought to push lawmakers into some sort of consensus over how it should be addressed and how it should be regulated. But instead, we've seen lawmakers all over the board on this within both Democratic ranks and Republican ranks,” Holman said. “I think that uncertainty has been fueled by the very large political expenditures and lobbying expenditures made by the industry.”
Mark Hays, a senior policy analyst on fintech for Americans for Financial Reform, said this much industry money flowing into politics has left fewer lawmakers willing to speak in favor of robust regulation.
“We're seeing more policymakers put their fingers in the wind to see which way it's blowing,” Hays said in an interview. “Both parties are showing signs of being susceptible to industry influence as a result of the large amounts of money that are being spent in the political process, and that should be concerning for all Americans, regardless of their political affiliation.”
Blockchain Association’s Smith defended spending by the industry, saying it’s a valid way to participate in the political process.
“The reason people are putting money into this is because they care,” Smith said. “Stakeholders have a right to express themselves politically and support candidates that express interest in learning about a certain technology. That's very well within their rights. I think that political engagement is a good thing.”
Herb Jackson contributed to this report.