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THE CRYPTO TRIAD WON THE ELECTION  
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Freddy Brewster
November 20, 2024
The Lever
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_ After gargantuan industry donations, the government is ready to go
all-in on cryptocurrency — at the risk of consumers and the greater
financial system. _

Former President Donald Trump speaks at the Bitcoin 2024 Conference
on July 27, 2024, in Nashville, Tennessee. , AP Photo/Mark Humphrey

 

After spending unprecedented amounts of money to sway races up and
down the ballot, the cryptocurrency industry is perhaps the biggest
winner of the 2024 election cycle — to the potential detriment of
consumers and the financial system.

Just a decade ago, crypto was largely unheard of — but now the
industry is worth more than $3 trillion
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and will have more than 270 crypto-friendly politicians in the House
of Representatives, a majority of senators with favorable views on the
nascent industry, and multiple allies in President-elect Donald
Trump’s White House. 

Three cryptocurrency political
[[link removed]] action
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[[link removed]] spent more than a
quarter of a billion dollars trying to elect pro-crypto candidates on
both sides of the aisle — the most
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of any industry this election cycle. This so-called “crypto triad”
even donated to influential politicians’ campaigns not facing
reelection or in uncompetitive races.

The coming years will be pivotal for crypto regulation. Experts say
that Trump could stack relevant agencies with crypto boosters and
crypto-backed lawmakers will likely push to weaken regulatory efforts,
allow the digital money to become more entwined with everyday
consumers, and rollback rules designed to crack down on money
laundering and terrorist financing — provisions that can be
burdensome for crypto exchanges.

These pro-crypto measures could undermine investor protections
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jeopardize the larger financial markets by allowing the extremely
volatile industry
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to avoid scrutiny and become more entrenched with traditional markets,
experts told _The Lever._

The crypto industry has been marketed as a way to fight back against
large banks that have taken advantage of consumers for decades, but
the industry’s unpredictability and a lack of regulation in 2022
resulted in exchanges collapsing
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and customers losing their life savings
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among other problems. In 2023, multiple banks with deep ties to the
industry collapsed amid
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rising inflation and runs on customer deposits. 

Now, after spending hundreds of millions of dollars to elect
politicians, the industry will have the most political influence it
has ever had. 

“This will be the most crypto-friendly legislature ever,” said
Adam Rust, director of financial services at the Consumer Federation
of America, a consumer protection group. 

The crypto industry will likely be given a regulatory playground
“under the guise that this would promote innovation and help the
market to mature,” Rust told _The Lever_. “That’s a choice that
confers benefits to the industry but not [to] consumers. It forces
consumers to be exposed to products that don’t receive full
regulation.”

The crypto industry will also have friends in the upcoming White
House, as Trump surrounds himself with crypto supporters and industry
figureheads such as billionaire Elon Musk, who is heavily invested
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in cryptocurrencies [[link removed]];
Vice President-elect and Ohio Sen. JD Vance, who holds between
$250,000 and $500,000 worth of bitcoin
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Lutnick, a financial adviser with deep ties to the crypto industry
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who is cochairing Trump’s transition team and was just nominated
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for Commerce Secretary, which partially oversees crypto regulations
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The Trump family also recently created their own crypto project
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called World Liberty Financial, and Trump’s social media company,
Trump Media and Technology Group, is reportedly
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talks to buy a small crypto exchange.

Cryptocurrencies and industry companies
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have experienced massive spikes
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in value and stock prices
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Nov. 5 election. Many of these companies and industry titans dumped
buckets of cash to help elect pro-crypto candidates including Trump
— who promised to make the United States the “crypto capital of
the planet.
[[link removed]]”

“What we’ve seen from this election is that the crypto industry,
despite claiming to transform finance, has basically perfected the
age-old Washington game of pay-to-play politics, where if you pour a
ton of money into a race and scare people, they’re going to try to
play ball,” said Mark Hays, associate director for cryptocurrency
and financial technology at the consumer advocate group Americans for
Financial Reform. “The industry has unfortunately thrown its weight
around in this election, and they are expecting policymakers to
deliver on their policy goals in Congress because of all that
spending.”

A NEW CRYPTO MAJORITY

Bitcoin, the first cryptocurrency
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was invented in 2009
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wake of the 2008 financial crisis as a way for consumers to fight
inflation and spend money with a currency outside of government
control. Since then, the cryptosphere has exploded into an industry
worth more than the U.S. housing market when it collapsed in 2008.
Crypto interests have grown into a massive force with deals with
traditional banks
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countries using bitcoin as legal tender
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and enough money to sway elections. 

Regulators say that the industry is plagued by widespread fraud
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has a history of mismanaging customer funds
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and lacks many of the basic protections
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regulate other financial products like the stock, bond, and commodity
markets. 

“It is a field that is rife with abuse and fraud,” said Securities
and Exchange Commission (SEC) Chair Gary Gensler during a June 13
Senate hearing
[[link removed]].
“And some of the leaders of this whole field are either in jail,
about to go to jail, or awaiting extradition. I mean, tens of billions
of dollars have been put at risk.”

But regulator pushback hasn’t slowed the industry from gaining
access to lawmakers. Crypto companies and trade associations have
invested heavily in lobbying, hired
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former congressional staffers
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and regulators
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and developed a rating system to track how lawmakers vote.

According to Stand With Crypto
[[link removed]], a pro-industry nonprofit
dedicated to “common sense regulations for the crypto industry,”
271 pro-crypto candidates [[link removed]] were
elected to the House of Representatives earlier this month, along with
19 pro-crypto Senators. The nonprofit tracks lawmakers’ stances and
doles out ratings based on how they support crypto-friendly policy.

Before the Nov. 5 elections, 45 senators received an A rating from
Stand With Crypto. That number will likely grow to 48 as
crypto-skeptical Sens. Sherrod Brown (D-Ohio) and John Tester
(D-Mont.) lost reelection, while Sen. Joe Manchin (I-W.Va.) is
retiring from his post. Brown and Manchin received F ratings
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while Tester received a C. 

Five other senators have received B ratings, increasing the number of
pro-crypto lawmakers in the upper chamber to 53 — giving them a
simple majority in the Senate and making it all but certain that a
number of the industry’s wish list items will be passed.

Throughout the election, crypto trading platforms like Coinbase
routinely touted crypto’s widespread use among citizens, claiming
that 52 million Americans own crypto
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and that “crypto is becoming an increasingly important aspect of
local economies
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However, a recent poll
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from the Pew Research Center found that 63 percent of Americans “say
they have little to no confidence that current ways to invest in,
trade, or use cryptocurrencies are reliable and safe.”

So how did the crypto industry win elections when so many people are
skeptical of their products? Heaps of money and deceptive ads,
according to Dennis Kelleher, president of Better Markets, a financial
markets watchdog group.

“Instead of focusing their political ads on crypto, the industry
funneled money to campaigns through super PACs with generic, anodyne
names like Fairshake, Defend American Jobs, and Protect Progress that
produced equally generic political ads,” Kelleher wrote in a Nov. 7
opinion piece
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for the _San Francisco Chronicle_. “Crypto never came up.”

The amount of money the crypto industry threw around wasn’t
necessarily to garner support for their policy initiatives, but
instead to scare politicians into backing their causes. 

“The fear of this spending already manifested in a congressional
vote on the [Financial Innovation and Technology for the 21st Century
Act
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said Bartlett Naylor, financial policy adviser at the consumer
advocacy organization Public Citizen, referring to legislation that
would move crypto oversight to what many consider a weaker agency.
“It was a crypto-enabling bill that got 71 Democrats to support it,
and these Democrats did not want targets on their backs saying that
they were anti-crypto.”

THE “CRYPTO TRIAD”

Defend American Jobs [[link removed]],
Fairshake [[link removed]], and Protect
Progress [[link removed]], dubbed the
“crypto triad
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are crypto-backed super PACs that combined spent more than $265.5
million dollars this past election cycle, according to federal
disclosures reviewed by _The Lever._

Fairshake spent more than $172 million supporting and opposing
candidates on both sides of the aisle, while Protect Progress
supported mostly Democrats and Defend American Jobs supported mostly
Republicans, according to OpenSecrets
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a newsroom dedicated to tracking money in politics. The candidates
these groups supported all received
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Defend American Jobs could not be reached for comment, and the other
two groups did not respond to requests for comment.

In Ohio’s most expensive election battle
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ever, Defend American Jobs notched the biggest win by spending more
than $40 million to oust Brown, who is the current chair of the Senate
Committee on Banking, Housing, and Urban Affairs
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which oversees financial policy and other issues in the upper chamber.
Brown helped block the Financial Innovation and Technology for the
21st Century Act, and the pro-crypto bill will likely die in the
Banking Committee. Brown will be replaced by Sen.-elect Bernie Moreno
(R-Ohio), a car dealership owner and cryptocurrency and blockchain
entrepreneur
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“This is what happens when you mess with the crypto army,” Cameron
Winklevoss, cofounder of crypto exchange Gemini and staunch industry
advocate, posted [[link removed]] on
X, formerly Twitter, after Brown lost reelection. 

Winklevoss and his twin brother Tyler were early funders of Facebook
and together started Gemini
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a crypto platform, in 2015. Earlier this year
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Gemini was forced to pay out more than $2 billion to its users after
the exchange halted withdrawals and filed for Chapter 11 bankruptcy
amid the 2022 crypto crash — during which many users lost their life
savings
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The Winklevoss twins gave more than $4.9 million to Fairshake this
past election cycle, according to federal data
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and were public supporters
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of Trump. 

The biggest funder of Fairshake was Coinbase, a crypto exchange whose
CEO has taken a prominent advocacy role
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industry since the 2022 collapse of major crypto exchange FTX and the
incarceration of its CEO, Sam Bankman-Fried, for a variety of fraud
convictions. Coinbase donated more than $129 million to the crypto
triad, with $126 million going to Fairshake alone.

“Coinbase is thrilled, along with the rest of the industry, that we
will have the most pro-crypto congress that's ever been elected,”
said Kara Calvert, Coinbase’s vice president for U.S. policy.
“That's a major shift from where we were in the last election, and
certainly four and six years ago.”

Last week, _The New York Times_ reported
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that Coinbase has been in contact with the Trump transition team to
coordinate a meeting between Lutnick, the transition team cochair, and
Coinbase CEO Brian Armstrong, who has advocated for Trump to appoint
Hester Pierce, a Republican SEC commissioner
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the SEC. 

Pierce, whose nickname is “Crypto Mom,
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been staunchly opposed
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SEC’s crackdowns on crypto. Pierce is reportedly being considered
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are Dan Gallagher, chief legal, compliance, and corporate affairs
officer at Robinhood
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a stock and crypto trading platform; and Mark Uyeda, another
Republican SEC commissioner
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“[Pierce] would be the best choice,” Armstrong posted on X
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fair, professional. Can work with both sides.”

Armstrong is one of the largest funders of the crypto triad, which
includes crypto exchange Ripple Labs and its founder Brad
Garlinghouse, as well as venture capitalists Marc Andreessen and Ben
Horowitz, founders of venture capitalist firm a16z. A16z did not
respond to a request for comment and Ripple directed _The Lever_ to
social media posts from its CEO.

Ripple Labs donated
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$48 million to the three super PACs, with $45 million going to
Fairshake. Andreesen and Horowitz gave $47 million to the three
groups, with $44 million going to Fairshake, according to federal data
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reviewed by _The Lever. _

Garlinghouse has also been in contact with the Trump transition team
to offer insight on personnel decisions, _The New York Times_ reported
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“Markets have responded to Trump’s win — he’s bringing crypto
back to America,” Garlinghouse posted
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incoming Congress will make sure U.S. innovation gets the regulatory
clarity it deserves.”

A “PRO-CRYPTO ADMINISTRATION”

Under Gensler, the SEC — which has more than 4,600 employees and a
budget [[link removed]] of $2.1
billion — has been aggressively
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enforcement actions against crypto platforms for failing to properly
register their products as securities, as well as cryptocurrency
creators who fail to properly register their cryptocurrencies. In June
2023, the SEC charged
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operating an “unregistered national securities exchange, broker, and
clearing agency,” among other allegations, and the case is awaiting
jury trial
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Coinbase and the SEC have been dueling in court
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over regulatory clarity. Coinbase has claimed that the SEC needs to
make more lenient rules specific to the crypto industry, while the SEC
has defended its use of existing rules for regulating exchanges,
claiming they are sufficient. One of Coinbase’s attorneys
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on the pending case is Eugene Scalia
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son of former Supreme Court Justice Antonin Scalia.

The SEC was also recently sued
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by 18 states and a top crypto advocacy group for allegedly violating
the Constitution in its attempt to regulate the industry. 

The industry also wants to oust current SEC Chair Gensler, who many in
the cryptosphere have accused of regulating through enforcement
actions. 

Kristin Smith, CEO of the Blockchain Association, a pro-crypto trade
association, is urging Gensler to stop all enforcement actions during
the lame duck session. 

“Chair Gensler should immediately halt any planned enforcement
actions against crypto firms and focus instead on an orderly
transition,” Smith wrote in a Nov. 19 op-ed for _Fortune_
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magazine. “This would allow his successor to implement a regulatory
framework aligned with both congressional intent and market
realities.”

The crypto industry has long desired for the Commodity Futures Trading
Commission, rather than the aggressive and heavily-funded SEC, to
oversee the industry. The Financial Innovation and Technology for the
21st Century Act, which would have handed crypto oversight to the
smaller commission, has been a focus of industry lobbying. The
Blockchain Association has spent
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nearly
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$1.5 million
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so far this year lobbying Congress on the legislation and other
issues, while companies and special interest groups across the
cryptosphere have also poured millions of dollars into lobbying on the
bill and other related concerns, disclosures show
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The Commodity Futures Trading Commission is about a sixth the size of
the SEC — just 725 employees, with an operational budget of $365
million — and has traditionally regulated trades and futures
contracts for the agricultural and resource-based markets, like the
projected price of corn or soy. The agency currently regulates Bitcoin
because it is considered a commodity and not a security like stocks.

The commission also has far more limited investigatory tools and
largely relies on tips from whistleblowers and consumer complaints to
police malfeasance, said
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Chair Rostin Behnam. 

“The message is very clear for Trump nominees, most importantly to
the Securities and Exchange Commission and also to the Commodity
Futures Trading Commission, that this is going to be a pro-crypto
administration,” said Naylor with Public Citizen.

According to experts, the industry is also pushing for changes at the
Internal Revenue Service, the Treasury Department, and other top
agencies that oversee crypto-related matters and are subject to
presidential appointments. Among other agency moves, crypto interests
would like to see an ease of restrictions on what they claim are
burdensome anti-money laundering rules and rules barring financing of
human trafficking and terrorism funding, said Hays with American for
Financial Reform. 

Cryptocurrency funding operations have been linked to known terrorist
organizations, according to the Treasury Department
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“MORE PEOPLE WILL BE HURT”

The crypto industry and its kingpins have been strategic with their
money, donating to politicians set to play pivotal roles in upcoming
votes on relevant legislation. By dumping buckets of cash into the
Ohio Senate race, the crypto industry helped place an ally in charge
of the Senate Banking Committee, which will likely be a locus of
decision-making on crypto-related bills. 

Taking Brown’s place will be Sen. Tim Scott (R-S.C.), the current
ranking member of the committee and newly elected head
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of the National Republican Senatorial Committee — a party
fundraising committee dedicated to electing Republicans. 

Scott did not face reelection this year, but still received more than
$38,000 in campaign donations from Armstrong, Coinbase’s CEO, and
the Winklevoss Twins, federal data
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shows. This past summer, Scott vowed
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to help remove Gensler as SEC chair and to pass pro-crypto legislation
authored by Sen. Cynthia Lummis (R-Wyo.), a staunch supporter of the
industry. 

This past summer, Lummis introduced a bill
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that would require the federal government to hold a certain amount of
bitcoins as a “reserve,” similar to the way the government holds
gold — which could be a massive boon for bitcoin holders because it
would likely cause the value
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of the cryptocurrency to skyrocket.

“The acquisition and long-term storage of substantial quantities of
bitcoin by the United States can strengthen the financial condition of
the United States, providing a hedge against economic uncertainty and
monetary instability,” the bill states
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Along with advocating
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for the Senate to pass the Financial Innovation and Technology for the
21st Century Act, Lummis cosponsored a bill
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alongside New York Sen. Kirsten Gillibrand (D) that would put the
Commodity Futures Trading Commission in charge of crypto assets
“that do not provide their holders with financial interest in a
business entity.”

According to federal data reviewed by _The Lever_, Lummis, who
didn’t face reelection this cycle, received
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more than $47,000 in donations from Andreessen, Armstrong, Ripple Labs
CEO Garlinghouse, Horowitz, and the Winklevoss Twins. Gillibrand, who
ran in an uncompetitive
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race, received
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more than $72,000 from Andreessen and his wife, Armstrong,
Garlinghouse, and Horowitz and his wife.

“Almost all of the money that was spent in the elections came from a
handful of wealthy donors from Silicon Valley,” said Hays with
American for Financial Reform. “They did not come from rank-and-file
voters.”

The House Financial Services Committee is the key body pushing out
crypto legislation in the lower chamber, and its current chair, Rep.
Patrick McHenry (R-N.C.), is retiring. McHenry has been a cheerleader
for the industry and the reported front-runners
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looking to fill his spot have also received crypto donor cash.

This includes Reps. French Hill (R-Ark.), who counts Coinbase as one
of his top donors
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this past election cycle; Andy Barr (R-Ky.), who received money
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from a16z, Coinbase, and Blockchain Capital LLC; Bill Huizenga
(R-Mich.), whose top donor
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is crypto-affiliated venture capitalist firm a16z; and Frank Lucas
(R-Okla.), whose second-largest donor
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is a16z.

The unprecedented amount of money spent by crypto groups could give
the industry even greater access to the levers of power and allow the
industry to become even more entrenched within mainstream banking and
financial markets. The policies that crypto groups have pushed have
largely been to the benefit of just a handful of influential companies
and wealthy individuals, experts say, and if another crypto market
implosion happens, the ripple effects could be even greater than
before. 

“Voters need to be aware that the policies that the crypto industry
is seeking are going to benefit a few people, but they’re going to
come at the expense of a lot of consumers and investors,” Hays said.
“We’re going to see a bubble. It’s going to look good, and then,
like past crypto bubbles, it’s going to pop eventually, and it could
be bigger than last time, and more people will be hurt.”

Time and again, The Lever has shown that independent journalism
empowered by everyday people, rather than billionaires and massive
global corporations, can move the needle. Our reporting led to
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