Crypto executives pulled back on political giving in the immediate run-up to the Nov. 8 midterm elections, a move that followed the crash in digital currencies like Bitcoin and Ether.
(Bloomberg) — Crypto executives pulled back on political giving in the immediate run-up to the Nov. 8 midterm elections, a move that followed the crash in digital currencies like Bitcoin and Ether.
The industry emerged as a significant player in political spending in 2022 and outpaced donor groups such as drugmakers and defense contractors for much of the current two-year election cycle. There has been a spike in the number of political action committees backed by digital-asset companies and executives, including GMI PAC — a super-PAC whose top contributors include FTX Trading Ltd. Chief Executive Officer Sam Bankman-Fried, stablecoin issuer Circle Internet Financial and venture capitalists Marc Andreessen and Ben Horowitz.
But recent campaign-finance filings to the Federal Election Commission show this spending, which has topped $80 million since January 2021, slowed significantly as candidates entered the final stretch of the midterm election races.
In the third quarter, donors typically pour more money into campaigns and other political committees than any other period. Yet crypto has given around $5 million or less each month since July, with September’s $3.9 million representing a 63% drop from the $10.4 million in June. The slump continued in the first 19 days of October, with a haul of less than $600,000.
There’s probably more than one reason behind the drop in political giving — which could include donors’ preferences to focus on primaries rather than general elections as a way to shift sentiment about the industry within the parties. But it’s likely driven largely by the general decline in the crypto market and token prices this year, said Kristin Smith, executive director of the Blockchain Association, which recently launched its own crypto-focused PAC.
“Those who work in the crypto industry are often heavily invested in crypto and oftentimes part of their compensation, if they work at a company, is in crypto. So when prices are down, people have less money to spend,” said Smith, an active donor.
Crypto Crunch
The prices of Bitcoin and Ether — the largest cryptocurrencies — have plunged more than 50% since the beginning of the year. The market has suffered as the US Federal Reserve hikes interest rates in an effort to curb inflation and as investors shifted from riskier assets. The sector was also hit hard after the collapse of the popular algorithmic stablecoin TerraUSD in May, which set off a chain of bankruptcies among crypto firms and accelerated the drop in token prices.
Despite the recent chill in giving, crypto donors may have provided a lift to candidates on both sides of the aisle in the primaries.
Thirteen of the 15 Republican candidates who received donations from American Dream Federal Action, a super-PAC funded by FTX executive Ryan Salame, advanced in their primary races. Recipients included US Senator John Boozman, a lead co-sponsor on legislation that would give the Commodity Futures Trading Commission — the crypto industry’s preferred regulator — more power to oversee digital assets.
In addition, two super-PACs primarily funded by GMI PAC — Web3 Forward and Crypto Innovation PAC — also backed several winners. Web3 Forward, which only spends on behalf of Democrats, saw nine of the 11 candidates that it backed move forward to the general election on Nov. 8. Crypto Innovation, which supports Republicans, had five of the seven candidates it bankrolled advance.
Though these PACs donated to US lawmakers like Boozman and North Carolina Representative Patrick McHenry — a Republican who’s working on legislation to regulate stablecoins — they have also given money to a number of individuals who aren’t incumbents.
On the Democratic side, the industry has supported Jonathan Jackson, a business professor and son of civil rights activist Jesse Jackson, and Jasmine Crockett, a state representative and civil rights lawyer, for US House seats. As for Republicans, donations have gone to Bo Hines, a former North Carolina State University football player, and Mark Alford, a former Kansas City TV anchorman, in their bids for US Congress.
For-profit industries almost exclusively give to incumbents, said Pete Quist, deputy research director at OpenSecrets. He hasn’t been following crypto giving closely but said any spending from these companies or PACs representing their interests that diverges from that trend would be “highly unusual.”
“Incumbents are in office making policy and will be in office — more than likely — since they win between 90% and 95% of the time that they run for re-election,” he said. “Those contributions are really meant to pave the way for lobbying.”
(Corrects 10th paragraph to say that Web3 Forward had nine candidates that it backed advance. The error was due to an FEC coding mistake.)
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