Campaign Spending By Crypto Billionaires Illustrates Danger of Tycoon Political Power

What’s different about this election year is a new type of billionaire political contributor has appeared on the scene: the crypto billionaire

By William Rice

Billionaires have been pumping more and more of their fortunes into our elections since the Supreme Court gave them license to do so in its 2010 Citizens United decision. That trend has continued in the current campaign, as outlined in the most recent report on the topic from Americans for Tax Fairness (ATF), which found 150 billionaire families had as of late August already contributed a record $1.4 billion (that figure is undoubtedly much higher now). What’s different about this election year is a new type of billionaire political contributor has appeared on the scene: the crypto billionaire. 

These are billionaires who got rich through investments in digital currencies like Bitcoin, Ethereum and many others. Backers of cryptocurrency claim it will transform and democratize finance, but many knowledgeable observers question its purpose and safety, including Nobel Prize winning economist Paul Krugman. As the industry has grown, so have calls to better regulate it – which crypto titans, like the leaders of most industries, want to avoid. One of the best ways to avoid government interference is to elect candidates who promise to keep their hands off. 

Because there are still limits on how much money billionaires (or anyone else) can contribute directly to candidates, political parties and political action committees (PACs), the only way the super-rich can really flex their political muscles is through so-called super PACs. A super PAC is allowed to collect unlimited amounts from every donor, with the only catch being that the super PAC is not supposed to “coordinate” its activities with the candidates it supports. But that rule is routinely evaded in the absence of effective enforcement of campaign-finance laws. 

Fairshake is the main super PAC backing candidates based on how permissive they promise to be on crypto regulation. As of late August, about one-quarter, or $50 million, of its funding had come from just six crypto billionaires, with almost all the rest from three cryptocurrency corporations closely connected with their billionaire founders. 

This new focus of billionaire political spending differs from the rest in one important respect. The ATF report revealed that of the cash from billionaire clans who’ve donated the most to all super PACs, two-thirds had as of late August backed Republican and conservative hopefuls. In the seven most competitive U.S. senate races, the partisan tilt was even more pronounced: seven times more billionaire bucks went to support GOP candidates than Democratic ones. Presumably one of the reasons for the Republicans’ greater popularity among billionaire families is that the GOP plans to lower taxes on the rich while Democrats want to raise them. 

But crypto-billionaire political spending has been much more balanced between the two parties. Fairshake funnels a lot of its money through two other super PACs the industry established, one of which (Project Progress) supports Democrats and the other (Defend American Jobs), Republicans. Building goodwill with both parties to maintain influence no matter which one is in power is a time-honored tradition of special interests. 

And the tactic seems to be working. Democrats have until recently been much more skeptical of the crypto industry than have Republicans, but that dynamic is starting to change as crypto cash pours into campaigns. Majorities of both parties in Congress now seem convinced that crypto needs only light regulation. The growing involvement in our elections of this billionaire subset–the crypto billionaire– demonstrates one of the dangers of unrestrained political spending by a handful of the nation’s richest households. Cryptocurrency may someday have a big impact on the financial well being of all Americans, whether they invest in it or not. Billionaire campaign donations seem to be making it less likely that the government will be able to keep close tabs on how this new industry is impacting our economy. 

As the ATF report recommends, we need to both rejuvenate our campaign-finance laws and better tax billionaires to prevent this kind of policy manipulation by the ultimate wealthy.