Crypto Money Goes to Washington

and they really matter. And because they really matter, crypto executives are spending significant amounts of money to try to influence them. In two for the very first time, political spending by major figures in the crypto industry eclipsed the dollars being spent by traditional donors in big tech and big pharma. Today, Bloomberg reporter Alison verse Brill joins me to share her reporting and why crypto is emerging as a significant financial force in US politics. Alison, thank you

as always for being a guest on the show. Thanks for having me. US political lobbying a bit of a hot topic, especially right now. Lots of people who you know, spend lots of time writing checks to appropriate people or who they hope are the appropriate people to try to, if not control the outcome of a particular policy or piece of legislation, at least influence it in their favor. When we talk about US political lobbying, who are some of the biggest players historically and why is this such

a an active subsector of politics as it were? You know, when you talk about labbing, I think I think everyone kind of thinks of of big pharma and tech companies and the defense industry, private equity, um, those are some of the ones that are usually the biggest spenders, and so you know, I think they're good ones to compare to. If you're if you're talking about whether or not a new industry like crypto is making a difference. So is

crypto making a difference? What happened this yere so this year so far crypto industry is bypassing big tech, big pharma, defense. The only one that it is lagging behind, and quite significantly lacking behind, is private equity and other investment firms big wool Streets, Big Wall Street. Yes, which maybe not so surprising, but so through all the way through one and the first three months of this year, the crypto

industry gave more than twenty six million dollars. And to give you a sense of that comparing to some of these other industries. Um, that compares to the twenty million in contributions from tech firms such as Alphabet, Google, Amazon, seven million from drugmakers, and eighteen point six million from defense contractors. Like I said, I mean, private equity and investment firms still a good deal higher than that, though

they gave nearly seventy six million dollars over that period. Um. But I think you can still draw from this that crypto is becoming a major player at least in and giving money to uh these candidates, I mean, especially in the short amount of time, right Like that's like something like a five thousand percent increase compared with the same period a year ago. Like what's driving this? So I think really, I mean, so I've talked to some folks who have said, and this might actually be a record

year for crypto giving. And there are a couple of reasons for that. Um. You know, the crypto industry is facing a lot of scrutiny right now from Washington, from you know, lawmakers, from regulators, so they have an interest in trying to do some political giving maybe behind themselves some good will and get some regulations that they feel like they can they can live with. But mechanically or practically,

what are these folks hoping to achieve? Like goodwill sounds great, but you can't really like put that on a billboard necessarily, Like what what would success look like for them? So, you know, I've talked to someone who works in campaigns and he and you know, he gave kind of a rundown of what we're seeing so far in the crypto industry.

And so we do have a lot of crypto firms trying to you know, give money to candidates, some relatively unknown candidates and having them really push pro crypto policy during their races. And actually, this person who worked on campaigns was saying that may not be the most effective strategy because a lot of other entrenched industries they kind of just give the money and then let the super pack or let the candidate decide how best to use it to increase their odds of winning. So the hen

your money is actually uh going somewhere. And so so, Allison, when you say a pack, you know that's a political action committee. It's sort of a vehicle through which people can funnel money for political spending. Yes, that's correct. So the crypto folks are coming in and be like, do this specific thing. Here's five million dollars. Yes, you see, you see, you see a decent amount of that happening.

But I think it's worth noting that that the biggest donor from the industry so far, Sam Bankman Freed of of the Crypto Exchange FTX. He's been giving by far the most amount of money, and he's kind of taken a different tactic. His focus has been so far on candidates with you know, policies for preparing for the next pandemic, which he's told us is where it told me that he feels like that's inevitable and that we didn't do a very good job responding to COVID nineteen. So that's

kind of the policy that he's most focused on. This week, Bloomberg is taking a deeper look at the hunger crisis developing across the globe. The pandemic has upended food supply chains and eroded consumer purchasing power. With Sam Bankman Freed his big he's been donating a lot through Superpack. The pack gave its biggest contribution thus far to a candidate

in Oregon, over eleven million dollars. I'm running for Congress because I want every Oregonian to have prosperity, security, and stability. And stability means protection from foreseeable, preventable disasters such as pandemics and to some extent the inflation and all the effects that have come from the pandemic itself. And that did not work. Um. His name was Carrick Flynn, and he and he was a Democrat and a political newcomer,

and he ended up losing that race. I think all of this is showing that the crypto industry, while giving a lot of money, still has a lot to learn about the ins and outs of politics and the best way, you know, to get the biggest bang for your book, if you will. We're obviously not fully into the mid terms. There are many more races to run. Where else is

there crypto money slushing around? So you know, there is a lot of crypto money as well, um slashing around lobbying on Capitol Hill, people beefing up their their firms to go and you know, talk to lawmakers, maybe sway policy on the legislation that we're seeing some of the regulation that we're you know, potentially may see from out of these agencies. So a lot of money also being

spent on lobbying in addition to these political contributions. You've written as well with some other colleagues of ours, a bloomberg about state level lobbying, where you know, folks who are say, based in New York want to make sure that New York specific regulations apply to them in ways that they find amenable. Where do these lines kind of blur, Like when does something stop being kind of state specific and get more national or does national also help you

at the state level. So it's interesting, I mean, I think obviously places like New York have have gotten a lot of attention with their bit license and some of the regulation that they have in place. Yesterday, the state's top financial regulator unveiled the bit license. These are regulations designed to protect consumers and improve cybersecurity practices for the digital currency, and folks will say that, you know, the regulation at the state level could potentially influence what the

federal government does. Um, so you might see some blending of the lines in that sense. I think for a lot of these big players, they are focusing primarily on who gets into these federal seats, so US House Reps, U S senators will probably see a lot of similar trends when the presidential race comes back around. And I think that's because right now there is so much action at the federal level. We're seeing the legislation from Senators

Lemis and Jilla Brand to regulate the industry. We're expecting a lot more bills later in this year. Senators have talked about being potentially optimistic about stable coin legislation before the end of this year. I will be stunned. Called. Yeah, call me a skeptic on it, but you know, I I've been surprised before by Congress, So you know, I think we are seeing a lot of the big names giving a lot on the federal side of things. We'll be right back with more from Bloomberg Reports Alison verse

Bill on crypto's biggest political contributors. Is there anything about any of this that has surprised you? I mean, I do think the as you delicately put it, the relative inexperience of some of these folks as it relates to how politics is really really works. In his mean, but is there anything else that you have seen, They're like, that's weird. I think it's really interesting how much spending we're seeing in the primaries, right, because it's it's an

interesting strategy. I feel like there are a good number of donors who say, you know what, I'll wait till the general election. I'll wait to see when I have a better chance of putting my money towards someone who will actually end up being in one of these seats.

And you know, we I actually did ask Sam bing and Freed about this why he has put so much money into primary races, and his response was that he felt if you were very issue focused, like he says he is, with this pandemic preparedness sort of focus, that he thinks the primaries are important and that the issues that people are focused on can be very different when

you're at that level. I mean, he's not wrong from the psychology of the primary votes, like if if you are sufficiently motivated to register early, jump through the additional sets of hoops about you know, showing up at the right place at the right time, you tend to be

a certain kind of highly motivated. It is your oriented person for sure, right, And and he was making the case that if you are more focused on just having either a Democrat or a Republican win than maybe your maybe your strategy is different, Maybe your strategy is to wait till the general election. So I think that's an interesting point out of all of this, is that this is a lot of money and we haven't even gotten to the general's yet. While we shall, the crypto prices

allow folks to keep spending this kind of money. Yes, that was also a point that someone raised me, was whether or not we would continue seeing the level of spending. I will say it's interesting though. I was talking to someone who was like, well, I think I think this could make a difference for the millionaires who are donating

to the to the mid terms. But I was saying, you know, for the billionaires, people like Sam Bingman Freed, probably not going to make that much of a difference, And I did, the real money will be fine, right and I and I actually talked to the spokesman for his for the superpack that he's put his most of his money through protect our Future, and I asked, you know, have you had conversations with Sam Bingman Freed where the strategy has changed at all just because the market's gone down.

You know, he's lost some of his wealth. And the spokesperson basically said that has not entered into our conversations of yet, and that was after the terror collapse. Now I haven't had a chance to circle back since. Uh. The recent activities we're seeing in the market, it seems like, at least for these really big spenders, that we might not see too much of a difference. Have any of the folks who were spending all this money lobbying had

any successes? So I think, well, when it comes to the political spending, if you look at the uh Sam Bateman Freed's donations, yes, the biggest contribution that was made through his superpack um was unsuccessful, but there were a lot of candidates that the pack donated to that did win. So you know, they say they're changing, they change the strategy going forward, you focus on those folks that w that have one and you know, so maybe some potential

success is there. And they've also said they've learned some lessons about kind of local dynamics and some of these states that that maybe they didn't know before. On the lobbying side, I will say, you know, we we saw most of the uptick and lobbying after the Infrastructure Bill was introduced last year, the infrastructure Bill that would create millions of jobs, rebuilding the arteries of our economy, and they're just to pose the Infrastructure Bill which had crypto

elements in it. Yes, so the Infrastructure Bill would have new reporting requirements for brokers, so exchanges like coin base and you know, even maybe some DeFi exchanges. It's kind of unclear. And so basically this bill there was a big outcry after it was introduced among the industry players because they said that it was the language was way

too broad. It defined brokers in such a way that they said, oh, this could pool in crypto minors, crypto stakers, you know, folks who who validate transactions on the blockchain, and um they also said said a could pool and software developers. And so there was a really big heavy push from the industry to try to get this this lane it's rewritten, and what I will say is it

was not successful. But in the short period of time where the lobbying happened, they made much more of an impact than maybe you would have thought, Like it got very very close to passing and basically didn't get into the final version of the bill on a technicality where a senator had raised objections about unrelated military spending um and so and so, and it almost got through on unanimous consent. So every senator agreeing that there should be a change in this bill. I think that is pretty

significant for an industry that did very little lobbying before this. UH, this issue was came to the forefront um and since then we've just continued to see more and more spending and you've seen that issue is has continued to be one that some Senators and House reps have continued to take on. A change to that provision is included in the bill that Senators Lummis and jilla Brand introduced in

the Senate. We also saw Treasury put a letter out saying that in their regulations they don't intend to sweep in, you know, these other entities that the industry was so worried about, which is language that may not have existed had folks not pushed against it in the previous infrastructure bill. Oh, absolutely not. I mean, I think I think the government's the government's desire is always for something to be as broad as possible to give them kind of the biggest UH.

The biggest stick, if you will, in sort of enforcing what they want to do. And so I think it's pretty significant that we see the administration putting this let like, you know, clearly senators were also pushing on them to to provide some clarification. So I think it's pretty significant that we saw this letter and we saw this kind of you know, walk back um, even though the legislation may be broad enough for them to take a very

sweeping approach. Thank you, Allison. You can find more of her reporting on the Bloomberg terminal on bloom Berg dot com or follow her on Twitter. She's Ali ver Sprill. On the next episode of Bloomberg Crypto, one of the most closely watched fights in crypto. Might sound a little obscure,

but it's really important. It pits a company called Gray Scale Investments against the U S Securities and Exchange Commission, a crucial regulator in the space, and it involves so called exchange traded funds, an extremely popular type of investment vehicle, and especially at the center of it all is Bitcoin, the largest and most liquid of the cryptos Bloomberg reports are. Kasey Greifeld joined me to unravel why this fight is

so important to the future of crypto markets. I'm Stacy Marie Ishmael, and this is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Email your questions, comments, or suggestion for the show to Crypto at Bloomberg dot net, and you'll find us on Twitter at Crypto. The supervising producer of this episode is Vicky very Galina. Associate producer

is zan Ab Sudiki. Associate producer is Moses on Desta wonder At is our engineer. Original music by Leo Sidron. Bloomberg's head of podcasts is Francesca Levi.