With nearly $100 million in cash, how do crypto financiers influence the US election?

The cryptocurrency lobby is issuing a warning to U.S. political candidates: Get on our side or you risk being defeated at the polls.

Last week, Democratic Representative Katie Porter lost her California Senate primary.

Deep-pocketed crypto industry players have poured $10 million into advertising and get-out-the-vote efforts to block Porter’s election to the Senate, paving a clearer path for another of her Democratic colleagues, Adam Schiff, who is widely seen as more crypto-friendly, to take office in November.

Crypto billionaires are pouring tons of support and money into the US election.

Fairshake, a pro-cryptocurrency super PAC, has amassed a total of approximately $75 million in funds for use in the U.S. elections.

Backers include Coinbase CEO Brian Armstrong , digital asset exchange Gemini founders Cameron Winklevoss and Tyler Winklevoss , and a16z co-founder Marc Andreessen .

Crypto supporters acknowledge their chances of unseating one of the industry’s harshest critics, veteran U.S. Sen. Elizabeth Warren, who is up for reelection this year in a relatively safe seat, are slim. But they plan to use the example of Porter’s defeat to pressure the Democratic senator’s more vulnerable allies.

Kristin Smith, CEO of the Blockchain Association, a cryptocurrency trade group, said in an interview that working with Warren “is going to make it harder for you to win an election.”

One of the candidates Smith’s team has said it is eyeing is Sen. Sherrod Brown , an Ohio Democrat who chairs the Senate Banking Committee and has been at the forefront of a group of lawmakers calling for tighter restrictions on cryptocurrencies.

“It’s an open question what action, if any, he will take on cryptocurrencies during the remainder of the year,” Smith said of Brown.

A spokesman for Senator Brown's campaign declined to comment.

New legislation

The crypto industry is focused on legislative proposals aimed at combating illicit finance. Two bills, one sponsored by Warren and Republican Senator Roger Marshall and the other by Senators Mark Warner, Jack Reed, Mitt Romney and Mike Rounds, seek to apply existing anti-money laundering rules for banks and other financial institutions to cryptocurrency companies.

Criminal networks use cryptocurrencies to move illicit funds and take advantage of tools to make transactions more anonymous.

Groups such as the Blockchain Association and the Chamber of Digital Commerce say the current bill would impose unworkable requirements and stifle crypto innovation.

An attendee at a "Pro-Crypto" rally in Los Angeles the day before the Super Tuesday primary elections

The political tough talk represents a notable evolution from a year ago, when a series of scandals and business failures left the cryptocurrency industry facing a credibility crisis and one of its star figures, Sam Bankman-Fried (SBF), was convicted on criminal charges.

Other optimism surrounding cryptocurrencies appears to be illusory amid regulatory scrutiny and struggles to implement the technology for real-world use, as regulators continue to crack down on the industry from all sides.

Rep. Brad Sherman, the ranking Democrat on the House Financial Services Committee who has often questioned the usefulness of cryptocurrencies, said the industry’s influence on elections may be overstated, but its ability to pump millions of dollars into campaigns will not escape the attention of lawmakers.

“Whether they were actually decisive is probably less important than shooting more than 430 members of Congress whose campaigns they were not involved in,” he said in an interview.

Super Tuesday is the first major test for the Fairshake super PAC.

Spokesman Josh Vlasto said the key races that could come next are the Democratic Senate primaries in Michigan and Maryland — seats currently held by retiring Debbie Stabenow and Ben Cardin — and the race in Montana for Senate Banking Committee member Jon Tester.

ETF Turning Point

Crypto markets are rebounding, thanks in large part to the U.S. regulator ’s approval of a spot Bitcoin ETF in January, a decision that added legitimacy to the industry.

A series of business failures in 2022 culminated in the bankruptcy of FTX , one of the industry’s most high-profile companies. It won’t be easy to completely shake off the impact of this scandal. The company’s co-founder SBF was convicted of defrauding customers last year and is currently awaiting sentencing.

Other players in the crypto industry are left to rebuild relationships on Capitol Hill as lawmakers weigh a raft of bills to regulate the market, including measures to combat illicit finance and control stablecoins, crypto tokens pegged to assets like the dollar. If the bills are adopted, new rules could change how businesses operate.

Meanwhile, the industry is waiting to see whether the U.S. SEC will approve an ETF that tracks Ethereum, the world’s second-largest cryptocurrency.

Critics say they remain skeptical about the industry’s ability to influence elections. They point out that some television ads paid for by cryptocurrency-related PACs ahead of Super Tuesday deliberately avoided mentioning cryptocurrencies and instead focused on hot-button issues such as abortion and gun safety in pro-Democratic messaging, or promoted lower taxes and inflation for Republican candidates.

“They know that public perception of crypto is like kryptonite and that it will only turn off more voters than excite them,” said Dennis Kelleher, president and CEO of Better Markets , an organization that pushes for greater market regulation. “But you can bet that wherever the crypto industry is and how much money it spends, they will claim that they influenced the election and expect victory to reward them.”