Like recent fluctuations in the cryptocurrency market has sent the industry’s major companies heading for bankruptcy, FTX owner Sam Bankman-Fried has emerged as something of a bailout king. The crypto exchange he runs has bought up smaller companies, turning the billionaire into a major player in a market undergoing massive change and attracting attention from Washington, DC
Despite the market’s woes, it seems crypto is here to stay—and lawmakers will soon have to choose whether to regulate the industry or let it buy their votes. With major crypto PACs supporting both parties, a number of state and federal lawmakers are worth keeping an eye on their crypto ties.
In recent months, Bankman-Fried has made a name for herself as a major liberal financier – both as a public figure and as a promoter of democratic politics. The crypto tycoon has poured hundreds of thousands of dollars into the coffers of the Democratic National Committee – becoming its largest single donor in May – and donating thousands to pro-crypto Democrats such as New York’s junior senator, Kirsten Gillibrand. In addition to his personal donations, he has funneled millions to candidates through his and his brother’s Protect Our Future and Guarding Against Pandemics PACs, which advertise goals to prevent the next pandemic.
But while Bankman-Fried hones her role as an ally and influencer of the Democratic Party, other movers and shakers at FTX are keen to make a name for themselves by straddling the aisle. Earlier this year, FTX CEO Ryan Salame started his own PAC, American Dream Federal Action. Funded entirely by four donations from Salame worth $12 million, American Dream focuses exclusively on electing Republicans. His girlfriend, Michelle Bond, is running to replace Republican Lee Zeldin, who is running for governor of New York’s 1st congressional district. Salame has donated to another super PAC, GMI PAC, which has pushed over $1 million into the Crypto Innovation PAC, which has spent at least $115,000 on Bond’s run.
PACs backed by the FTX leadership have had some early victories. Protect Our Future has come behind winning Democrats in the US House primaries, such as candidates Jonathan Jackson, Nikki Budzinski and incumbent Representative Chuy García of Illinois. New York State Assembly candidate Alex Bores, who had a fundraiser hosted by Gabe Bankman-Fried, won his primary. The American Dream can count Katie Britt, Republican candidate for Senate in Alabama; Rep. Ted Budd, Republican candidate for Senate in North Carolina; Brad Finstad, Republican candidate for Minnesota’s 1st Congressional District; Bo Hines, Republican candidate for North Carolina’s 13th Congressional District; and seated reps. Dusty Johnson of South Dakota and Senator John Boozman of Arkansas among the success stories.
Not all attempts have been successful. Protect Our Future spent $11 million endorsing Oregon Democrat Carrick Flynn, only to see him lose the primary last May. Despite having $2.4 million in spending behind his American Dream candidacy, Rep. Rodney Davis, R-Ill., lost to fellow Illinois Republican and Trump-backed Rep. Mary Miller after the two were pitted against each other due to redistribution.
“This is a very prosperous industry that was very happy to be unregulated,” Public Citizen’s Craig Holman told Roll Call last month. “But when the federal government started to shift its focus to regulating the industry, the same thing we saw with the big tech industry, they suddenly became major political players on Capitol Hill.”
Photo: Alex Wong/Getty Images
There are existing ones laws governing crypto – and pending opportunities to change them.
Last month, Sam Bankman-Fried told the Washington Post that he is “really excited” about new legislation already on the table called the Responsible Financial Innovation Act. The bill, sponsored by Gillibrand, would put the Commodity Futures Trading Commission in charge of regulating crypto. The CFTC currently regulates bitcoin and ethereum futures, but the new bill would put the agency fully in charge of the crypto market — and outsource the Securities and Exchange Commission.
“However, I think the CFTC is very sensible as the market’s regulator,” Bankman-Fried told the newspaper. As the young industry falters, it resorts to a method tested by its predecessors: funding lawmakers who can regulate it. “They are really experienced, competent and efficient and have a deep knowledge of markets and crypto markets and you can do a really good job with that.”
“They want no regulation, or they want to help write the regulation. What else is new?”
According to Jeff Hauser, founder and director of the Revolving Door Project, “Much of the activity in the crypto space involves the buying and selling of securities, which have been regulated in the United States for nearly 90 years by the SEC.”
As The American Prospect reported in June, FTX’s efforts to control the regulatory sphere surrounding crypto recall tactics deployed by investment group Blackstone in the late 2000s. After years of primarily donating to the GOP, the financial firm shifted to a more “both sides” approach at the start of the financial crisis, when CEO Hamilton James became a major backer of Barack Obama — ensuring the firm would have its bases covered after the presidential election in 2008. So while Bankman-Fried has personally donated to a number of Democrats on the Senate Agriculture Committee — Dick Durbin of Illinois and Michael Bennet of Colorado and max to Chair Debbie Stabenow of Michigan as well as members Tina Smith of Minnesota and Cory Booker of New Jersey — he has also donated to Boozman, the Republican ranking member.
“They don’t want any regulation, or they want to help write the regulation,” said committee member Sen. Sherrod Brown, D-Ohio, to The Associated Press in May. “What else is new?”
Andrew Mayersohn, a committee researcher with OpenSecrets, told me that the uniqueness of the cryptocurrency market means that crypto’s political donations are controlled by a much smaller group of actors than in other financial industries. In banking, you see “hundreds of CEOs and political action committees making contributions,” Mayersohn said, but crypto contributors are a narrow group, which can lead to a more insular way of thinking about politics for a market that handles billions of dollars.
“It’s an unusually small number of people who are responsible for the vast majority of an industry’s contribution,” he said.
The cross-ideological donations bridge the gap between Bankman-Fried and Salame, whose American Dream Federal Action PAC supports a broad mix of Republicans, most of whom have been endorsed by former President Donald Trump. The American Dream candidates mark a noticeable difference from Bankman-Fried’s more centrist, liberal Democratic goals, which run further to the extremes. There are two notable exceptions: Johnson voted to run for Trump; and Boozman, to whom American Dream has given over $1.2 million to date, told voters on January 5, 2021 that he would support the Electoral College results. The Agriculture Committee, on which Boozman sits, oversees the CFTC.
In a statement to The Intercept, Salame said his PAC is focused on pushing the ideology he has believed in for years: free markets, liberty and conservatism.
“As a lifelong conservative, I founded the American Dream Federal Action to elect forward-thinking Republican leaders who understand the urgent need to protect our nation’s long-term prosperity, security and free enterprise system from new threats and challenges,” Salame said.
Photo: CQ-Roll Call, Inc via Getty Images
Among the recipients of Bankman-Fried money is rep. Ritchie Torres, DN.Y., who was also the recipient of crypto cash at an April fundraiser held by executives at venture capital firm Andreessen Horowitz. In June, Bankman-Fried, along with pollsters Sean McElwee and David Shor, hosted a fundraiser for Torres, who has been a controversial figure in progressive circles for some of his more right-wing views on Israel and other social issues.
Bankman-Fried spokesman Mike Levine told me that Torres was a target of the group because he “has pushed for federal funding that would lead to prototype vaccines for several families of known viruses with pandemic potential, replenish the strategic national stockpile, and support domestic production of personal protective equipment, enabling rapid testing and encouraging the development of therapeutics such as antivirals and monoclonal antibodies.” Not mentioned was Torres’ outspoken support for crypto both on social media and in the pages of the New York Daily News.
“Our strategy during this primary season has been to support champions of pandemic prevention,” Levine wrote in an email to The Intercept. He said the PACs hope to demonstrate to politicians “who are not yet champions of pandemic prevention that doing the right thing about pandemic prevention funding and security policy will help them build a coalition of political allies who will support future campaigns.”
“You’re trying to cultivate some allies who are likely to land in Congress and may look favorably on the proposal when the time comes. … That seems to be what he’s doing.”
Although the vast majority of his dollars go to Democrats and groups affiliated with the Democratic Party, Bankman-Fried has been given to Republican Senators Susan Collins of Maine and Lisa Murkowski of Alaska, “safe” Republicans who are seen as moderate and reasonable.
“You’re trying to cultivate some allies who are likely to land in Congress and can look favorably on the proposal when the time comes and develop a relationship,” said Faiz Shakir, a senior adviser to Sen. Bernie Sanders, I-Vt.. “It seems to be what he does.”
Revolving Doors Hauser is highly skeptical—even hostile—to what he sees as Bankman-Fried’s attempt to control the fate of the Democratic Party. Faced with a political landscape where big business does not have the same popular support as it did in the early decades of the 21st century, crypto tycoons like Bankman-Fried and Salame are making sure they can lock down the more populist politicians coming from the right and left. In Hauser’s view, that means finding out who is pliable.
“They need to dig deeper into the apparent left flank of the Democratic Party to weaken the economic regulation decision, because the economic regulation movement is stronger now in the Democratic Party than it was 15 to 25 years ago,” he told me.