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Less than a year after the trial of FTX founder Sam Bankman-Fried, the Democratic Party’s leadership has lost any political will it briefly had to govern and regulate cryptocurrencies. All it took for an industry with countless pending lawsuits for securities violations to secure this turnaround was about $120 million in outside spending in this year’s elections.
At a virtual “Crypto4Harris” town hall fundraiser last night, Senate Majority Leader Chuck Schumer (D-NY) put the final nail in the coffin by firmly embracing the digital currency and pledging to bring industry-preferred legislation to a vote on the Senate floor.
“Crypto is here to stay no matter what. So Congress must get it right … we all believe in the future of crypto,” Schumer said. Other attendees at the event included Mark Cuban, crypto-friendly Sen. Kirsten Gillibrand (D-NY), and Sen. Debbie Stabenow (D-MI), who chairs the Senate Agriculture Committee, which oversees markups for several crypto bills. The summit was hosted by the Crypto Council for Innovation.
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In what looks like the first part of the industry’s rewards for the party softening its stance, the major crypto electoral PAC, Fairshake, announced this week it would be spending on behalf of Democratic Senate candidates Elissa Slotkin in Michigan and Ruben Gallego in Arizona, two crucial states for Democrats’ hopes of retaining control of the Senate. The commitments are relatively paltry so far with just $3 million to each, but it’s still a gesture by the PAC that Democrats caving under pressure will be returned with favors.
Fairshake this week also committed to spending $12 million to oust Senate Banking Committee chair Sherrod Brown (D-OH), who faces his own tough re-election fight in a red state. Previously promised spending by Fairshake against Sen. Jon Tester’s (D-MT) re-election has yet to materialize, but could still emerge. Any loss by a frontline Democratic Senate candidate would likely hand the Senate to Republicans. So Schumer’s cave to crypto may not be enough to save his position as majority leader.
Slotkin and Gallego had previously gotten “F” ratings on crypto industry scorecards, but both of them supported the Financial Innovation and Technology for the 21st Century (FIT21) Act, which would effectively ensure lax regulatory oversight of crypto by placing it under the purview of the far weaker Commodity Futures Trading Commission instead of the more hawkish Securities and Exchange Commission.
This pivot is entirely a function of a big-money astroturf campaign.
FIT21 passed the Republican-controlled House earlier this year, with the affirmative votes from over 70 Democratic members including Slotkin, Gallego, and former House Speaker Nancy Pelosi (D-CA). Those Democratic votes signaled the party’s emerging appeasement of crypto in the face of millions in outside spending targeting Democratic candidates. Pelosi’s vote was interpreted as sending a message to these PACs to ease off their hostility to the party, and Schumer’s comments further underscored that point.
If Schumer puts FIT21 on the floor, it could garner enough votes to clear a Senate filibuster and get to President Biden’s desk. It’s unclear whether Biden would sign it, but he has notably not threatened a veto.
Schumer did not single out FIT21 in his remarks, but he did say: “I want to bring members on both sides of the aisle here in the Senate together, create momentum so we can pass sensible legislation that helps the United States maintain its status as the most innovative country in the world. My goal is to get something passed out of the Senate and into law by the end of the year, and I believe we can make that happen.” He added that lawmakers would “provide some guardrails to keep users of this technology safe, to preserve our national security and to ensure that this tech can’t be abused by criminal organizations.”
Stabenow’s attempt at a bipartisan bill collapsed earlier this year, and Gillibrand’s legislation may be seen as too industry-friendly for much of the Democratic caucus. FIT21 may be the only chance to get something done this year, especially because it’s already passed the House.
THE FACT THAT THE CRYPTO INDUSTRY raised money for the Harris-Walz ticket suggests that the promised “reset” from the Harris campaign with crypto financiers is imminent, even though many of their marquee figures have endorsed Donald Trump.
This pivot is entirely a function of a big-money astroturf campaign. Crypto has never been listed as a top issue for most Americans, and recent polling of voters in swing states shows that between 61 and 77 percent hold a negative view of the technology.
When Schumer says, “Crypto is here to stay no matter what,” he really means that their campaign cash is seemingly bottomless and too formidable to oppose. The industry mobilized this year, forming a network of independent expenditures under the umbrella of Fairshake to weaponize a broken campaign finance system to their advantage. Fairshake has become the single largest outside spender in this year’s elections thus far, with $120 million in cash on hand, even greater than the notoriously well-armed American Israel Public Affairs Committee (AIPAC).
The PAC immediately made its intentions clear to go after any legislator insufficiently servile to their wishes. It began with knocking off Rep. Katie Porter (D-CA) in the California Senate primaries by dropping $10 million. Through their various spending arms, they’ve tipped the scales in several congressional races, including helping to knock out Squad members Reps. Jamaal Bowman (D-NY) and Cori Bush (D-MO), and spending successfully in a number of open-seat Democratic primaries.
The PAC is so feared that in congressional races it’s now routine for candidates who aren’t even expecting to receive financial backing from Fairshake to pledge support on their campaign website, just to dissuade the PAC’s intervention on behalf of their opponent.
Party elders panicked even more when the top funders bankrolling Fairshake PAC, including Marc Andreessen, Ben Horowitz, and the Winklevoss twins, threw their weight behind Donald Trump against Joe Biden earlier this summer. Then, when Kamala Harris took over at the top of the ticket, her campaign immediately started to indicate that they would strike a much friendlier posture toward these tycoons’ business.
Harris’s team has now held several fundraisers with crypto backers and collected checks from them. Her campaign’s efforts to curry favor along with the types of comments from Schumer last night are being well received by Silicon Valley.
In his remarks at the crypto fundraiser, Schumer drew a comparison between the crypto legislation he wanted to pass and his work on artificial intelligence, which has been criticized by outside groups for not setting effective guardrails on the technology’s development. Schumer also appeared to take a jab at progressive skeptics of crypto when he said that “sadly, there are a lot of members in Congress nowadays who built their political brands around creating spectacle and sensationalism instead of putting in the hard work of legislation. Nonetheless, passing legislation this year is absolutely possible, even in these divided times.” That could have been directed at Republicans, though some at the town hall interpreted those comments to be a thinly veiled reference to Sen. Elizabeth Warren, who has been one of the most outspoken critics of crypto and the bȇte noire of Fairshake.
As Dennis Kelleher, head of the financial reform group Better Markets, put it in a recent op-ed in the Financial Times“the crypto industry’s extensive lawbreaking rap sheet is at odds with Harris’s long and strong record as a prosecutor who fights for consumer and investor protections and against financial industry lawbreaking.”