Crypto’s $134 Million Investment in the 2024 Elections Are Shaping US Politics

Tags: us

Key Takeaways:

• With 2024 US elections so crucial for crypto, firms spent significant sums—raising influence issues.
• This spending aims to establish clearer regulatory principles, but risks of public mistrust and regulatory capture remain significant.
• The debate highlights the challenges of integrating a disruptive industry into the existing political system.

The cryptocurrency industry dove straight into the US political scene during the 2024 elections cycle, together pouring more than $134 million into campaign contributions, lobbying, and donations to political action committees (PACs). This unprecedented financial commitment has sparked a fierce debate: Is it a genuine attempt to educate policymakers and cultivate a more favorable regulatory climate or a shrewd effort to buy political access and sway the system in their favor?

Crypto’s Rising Political Profile: A Cause for Concern?

The unprecedented magnitude of crypto’s financial foray into politics has naturally alarmed watchdogs and observers.

The CPA issued its stark warning, its report depicting an industry flexing its financial muscle to potentially sway policy decisions. “While the companies making these contributions may be seeking a favorable regulatory environment,” the CPA’s report states, “these political donations further erode public trust and expose companies to legal, reputational, and business risks that cannot be ignored.”

The concern is more than just financial contributions. It includes a disproportionate influence over the political process — where the voices of smaller players and average citizens are drowned out by the amplifier that is the well-capitalized industrial behemoth. The concern is that policymakers will prioritize the crypto industry over consumers, investors and the broader financial system, whether through design or a lack of awareness. Is it wise to allow an industry under so much scrutiny to so heavily influence the rules that govern its operation?

Fairshake: Leading the Charge for Crypto

Leading the charge is Fairshake, which has turned into a household name in Washington when people think about crypto’s lobbying efforts. The PAC — supported by industry giants Coinbase, Ripple and Andreessen Horowitz — isn’t hiding what it wants. Fairshake reportedly channeled over $40 million into supporting candidates who have publicly supported pro-crypto policies.

Fairshare — Contributions to the 2024 US Elections Source: politicalaccountability.net

Advising on key congressional races and working to meaningfully shape legislation in favor of the digital asset ecosystem was Fairshake’s stated objective. It took a multi-pronged approach.

Fairshake ran lots of ads to influence public opinion and advance pro-crypto legislation. They also organized grassroots initiatives, trying to galvanize voters and push elected officials to act. And, most critically, they lobbied lawmakers directly, trying to sway them to support certain legislative proposals. Theirs was a message carefully crafted to frame the potential benefits of cryptocurrencies often in terms of innovation, job creation and the United States’ position in the global economy.

Regulators Take Notice and Consider Responses

The sheer scale of crypto’s financial involvement in politics has sent ripples through the regulatory landscape. Agencies charged with oversight and consumer protection are scrutinizing the industry’s actions as it works under the public eye of sectors that might deal the industry undue influence.

A prominent example is Public Citizen’s formal complaint with the Federal Election Commission (FEC) in August 2024. That restriction applies to Fairshake but also, most notably, to Coinbase, one of the largest players in the industry. The company has been accused of violating federal election law by contributing to Fairshake and the Congressional Leadership Fund despite being a federal contractor. Coinbase’s actions could be seen as an effort to circumvent campaign finance regulations and gain disproportionate influence over elected officials, Public Citizen claims. This lawsuit comes on the heels of heightened scrutiny of the industry by the regulators and potential legal challenges as they work to understand and respond to changes in the political landscape.

That complaint also led to more scrutiny of the company, and despite that scrutiny, the company did commit another $25 million to Fairshake for helping with the 2026 midterm election cycle.

And now it signals a clear message: Coinbase is not backing down. It considers political engagement to be an important part of its long-term strategy — and it is prepared to spend hundreds of millions to pursue the most favorable regulatory environment. It has publicly justified its actions, maintaining that regulatory clarity is key to the long-term success and progress of the crypto sector.

Building Blocks In Development: Justification Or Pretext?

The chief argument for the crypto industry’s political engagement is often framed around the need for regulatory clarity. In the US, we have a regulatory patchwork today that creates uncertainty and stifles innovation. Such ambiguity results in great difficulties for business to operate, and convince investors to stay in the market, because of multiple legal challenges and compliance costs.

Anndy Lian, an intergovernmental blockchain expert and author, argues that strategic political spending is “necessary for regulatory clarity, crucial for stability and growth.” Regulation, according to him, can eliminate uncertainty and encourage more mainstream participation in crypto, thereby boosting investor confidence. “It seems likely to boost investor confidence by reducing uncertainty, as seen in pro-crypto candidate wins boosting market sentiment, like bitcoin’s post-election high,” Lian suggested, demonstrating the potential economic benefit of a more clear and regulated marketplace.

But the search for regulatory clarity also casts the shadow of regulatory capture. This happens when government agencies that exist to protect the public get captured by the industries they are supposed to regulate. This could result in more regulations that support the industry over consumers and fair competition. For critics, crypto’s considerable financial might has the potential to warp the regulatory environment from the outset, as bigger players push in the direction of regulations that undermine smaller competitors and suppress innovation. The worry is that the industry will use that to advance rules that cement their market power and make it harder for newcomers to usurp their position.

The industry’s motives were also plagued by past disasters like the Libra (LIBRA) token debacle. A rug-pull also allegedly saw insiders siphon more than US$107 million in liquidity, as a 94% price collapse wiped out US$4 billion worth of investor value. The CPA report highlights that since the Libra scandal, over 100 governmental fraud complaints have been filed in Argentina on account of “any kind of unregulated security” being promoted by a country’s executive branch.

Navigating the Future

It is essential to find equilibrium between innovation, protection of consumers, and equality of competition. As the political influence of crypto grows, transparency, accountability, and ethical engagement matter. The next few years will be pivotal for the future of digital assets and politics’ role in their evolution.