The Crypto Bros Are Back—and They Have a Dangerous Political Goal

After the spectacular fall of FTX CEO Sam Bankman-Fried, you might have expected the embattled cryptocurrency sector, and its sophisticated lobbying operations, to have ground to a halt. But if anything, both are back with a vengeance—and the regulatory post-SBF crackdown that followed has spurred the sector to potentially become a major political force in 2024.

A new, unholy alliance has emerged on Capitol Hill, and it’s hoping not just to recraft governmental policy around digital funny money but to push its antiregulatory agenda across a whole host of elections. To do so, the crypto industry is teaming up with the people behind the latest megahyped, bubblicious tech trend: the artificial intelligence boom.

You may already have noticed crypto and tech money swishing around in the 2024 primaries. For the open California Senate seat, crypto-backed super PAC Fairshake splurged $10 million on ads against candidate Katie Porter, whose progressivism and crypto skepticism made her an enemy of the industry. She, of course, would lose. An affiliated PAC, Defend American Jobs, likewise dove into North Carolina’s GOP primaries, throwing half a million to the winning candidate for the 14^th Congressional District. That PAC also contributed $3 million on behalf of West Virginia Gov. Jim Justice, who’s far and away the front-runner in his Senate primary and will inevitably succeed Sen. Joe Manchin come 2025.

Another Fairshake affiliate, Protect Progress, has put millions behind candidates who have explicitly expressed their support for the crypto industry. The group blew nearly $2 million to boost Shomari Figures in the Democratic primary for Alabama’s 2^nd Congressional District; he ended up winning the April 16 runoff by 22 points. Protect Progress also spent nearly $1 million in support of Julie Johnson, who crushed her opponents in the Dem primary for Texas’ 32^nd Congressional District. The competitive primaries of crypto-supporting Democratic Maryland Senate candidates David Trone and Angela Ashbrook have seen a large influx of money from obscurely named crypto PACs like Defend American Jobs.

It’s in not just the electoral sphere but also the messaging being sent directly to current officials. According to CNBC, a dark-money nonprofit called the Cedar Innovation Foundation “is being heavily funded by crypto industry players” and running ads encouraging crypto enthusiasts to request that Ohio Sen. Sherrod Brown loudly oppose Securities and Exchange Commission Chair Gary Gensler; both are considered villains in the crypto world, along with Sens. Elizabeth Warren and Roger Marshall, who’ve likewise been the target of Cedar Innovation ads thanks to their co-sponsorship of the hated Digital Asset Anti–Money Laundering Act. Warren has also been courted by individual blockchain workers hoping to dissuade her from that legislation, and received a letter co-signed by figures from big firms—Coinbase, Andreessen Horowitz, the Blockchain Association—asking the same. A Fairshake spokesperson told Bloomberg that crypto donors will likely be homing in next on the primaries in important states like Michigan and Montana.

To see how we got here, despite all of crypto’s recent travails, it’s worth looking back to the first significant surge in crypto lobbying that occurred throughout 2021, when all aspects of the industry (Bitcoin, alternative currencies, NFTs, the blockchain) gained mainstream exposure, political acceptance, and frenzied valuations as a result of lockdown-fueled interest in virtual economics and get-rich-quick schemes. The then-nascent Biden administration had already turned its attention to crypto regulation, with the SEC lodging its securities charges against Ripple in February of that year—while also approving crypto exchange Coinbase’s request to go public. One of that company’s biggest investors, famed venture capital firm Andreessen Horowitz, lavished its money on other crypto players and launched an aggressive lobbying operation to shield the industry from regulations around tax reporting and money laundering—and, most importantly, to exclude it from SEC oversight. Results came quickly: Prior to its November passage, Biden’s infrastructure bill contained expansive tax-reporting requirements for Bitcoin miners that were significantly weakened by aggressive lobbying (including by Coinbase itself).

The point was to persuade both Biden administration members and members of Congress—from either party—to embrace crypto monkeymakers’ relevant legislative agenda. The clearest examples of this success manifested with Sens. Kirsten Gillibrand and Cynthia Lummis, who were wined and dined by several crypto bigwigs—Grayscale, the Blockchain Association, the Chamber of Digital Commerce, BTC Inc.—and introduced a bill, in the midst of the summer 2022 crypto crashes, that would have achieved lobbyists’ goals of shifting governance away from the SEC and exempting digital assets from certain tax requirements, like capital gains. Other senators who earned cash from SBF put forth a more constrictive bill that likewise placed crypto under the oversight of the Commodity Futures Trading Commission. Congressional representatives who earned the benefits of crypto-lobby largesse, like Republican Patrick McHenry, also gravitated thus.

Then, after FTX’s late-2022 collapse drew additional scrutiny to all the pols who glad-handed with SBF, the enthusiasm for crypto-industry handouts duly subsided. The entire industry, already smarting from the impact of interest rate hikes and the misdeeds of companies (and eager lobbyists) like Terraform Labs and Celsius, seemed ready to back off for a bit, as was made apparent by the 2023 Super Bowl’s conspicuous dearth of crypto ads.

Since the collapse of the FTX empire, the Biden administration has gone after every major crypto firm in existence, notching some significant legal victories along the way—for example, Binance, once the world’s largest crypto exchange, has had its business absolutely crushed by U.S. and international prosecution. (Its former CEO, Changpeng Zhao, was forced to step away from both the company and crypto altogether and just earned a four-month prison sentence.) Just one day after it lodged its own Binance suit, the SEC also sued Coinbase, the largest crypto exchange based in the U.S., for allegedly acting as an unregistered securities institution—a suit that, if successful, could tank Coinbase’s business model for good.

That’s a key sticking point in this fight: the government’s attempt to define many non-Bitcoin currencies, such as Solana, as securities that should be governed as such—not commodities, as Bitcoin is considered thanks to its collective use as a store of value, rather than a proper investment contract and vehicle (which is how securities function).

As the government lawsuits around these classifications began flying in, companies like Coinbase and orgs like the Blockchain Association escalated their lobbying game, playing nice by sweet-talking all manner of lawmakers into re-upping support for their preferred legislation (i.e., stripping the SEC of crypto-governance authority and granting states oversight over dollar-pegged tokens). Coinbase even launched a grassroots advocacy nonprofit called the Stand With Crypto Alliance, which partnered with prominent companies like Gemini and Blockchain.com, organized retail crypto traders to show their support, and produced a bunch of advocacy ads.

In December, three long-shot presidential candidates—Republicans Vivek Ramaswamy and Asa Hutchinson, plus Democrat Dean Phillips—gathered for an event hosted by Stand With Crypto, during which they expressed their support for the industry and promised to reduce aggressive government oversight. None of those guys got too far, of course, but their shared stance was telling as to what crypto lobbyists did expect from other politicians: Potential spoiler Robert F. Kennedy Jr., who has been backed by prominent crypto advocates like former Overstock.com CEO Patrick Byrne, spoke at the 2023 Bitcoin Conference in Miami, and recently proclaimed at a Michigan rally that he would “put the entire U.S. budget on blockchain.” (For whatever it’s worth, even city-level efforts to put certain municipal functions on the blockchain haven’t turned out so great.) Naturally, RFK Jr. has a high candidate rating from Stand With Crypto.

After the Republican-led House Financial Services Committee approved the preferred bills, Stand With Crypto kept bugging Congress to pass the legislation in full and advocated strongly for the crypto-friendly Republican Tom Emmer to replace Kevin McCarthy as House speaker. But that push failed, and the bills fell by the wayside, not least because they faced doubts from skeptical Democrats—including and especially Brown, who has been heading the Senate Banking Committee since 2021. Even an attempt at passing crypto provisions within the defense budget was scuttled. The crypto lobby ended 2023 with a record-breaking spend and little to show for it.

But a pair of court rulings last summer helped crypto companies successfully beat certain charges brought by the SEC. First, the SEC’s suit against Ripple, on which a federal judge ruled that the trading protocol’s sale of its XRP token straight to investors met the definition of a securities transaction—but trades of XRP between investors on a secondary market did not constitute trading in securities. The SEC’s appeal was rejected, although the judge did note that her ruling should not weigh on all digital assets swapped on secondary markets; rather, her legal definition was limited to XRP and XRP alone, leaving a hazy space for the overall altcoins-are-securities argument. The SEC also lost one against the company Grayscale, after an appellate judgment established that the crypto firm could incorporate Bitcoin into a spot exchange-traded fund, essentially allowing investors to trade a security whose financial health has a stake in Bitcoin’s price. The court-mandated SEC approval of several spot Bitcoin ETFs in January is credited with fueling the remarkable comeback (and record heights) Bitcoin’s value has achieved since its 2022 nadir, even as that surge has fallen just a touch.

Another seed of the crypto lobby’s comeback was planted just weeks after SBF’s downfall: the launch of ChatGPT. As the impressive chatbot became one of the fastest-growing apps ever, crypto bros and their financiers noticed the rapid consumer and professional adoption of the technology and realized they had a shot at a natural alliance. The CEO of ChatGPT’s parent company, OpenAI, was also a crypto enthusiast with a stake in the Andreessen Horowitz–backed biometric-crypto…