Crypto-funded super PACs flooded the midterms with millions of dollars in campaign spending. Now some of their preferred candidates could play a crucial role in setting policy that will determine the future of the industry.
Deliberations over membership on the House Financial Services Committee have spurred some private discussions over the influence of pro-crypto forces that invested so much money toward cultivating allies in Congress. That has both parties grappling with a 21st-century update to an age-old question: whether candidates who benefitted from significant sums of money from cryptocurrency groups can serve impartially on a panel that is poised to set the first substantive regulations on the industry.
"I think that it's a conflict of interest," said Rep. Summer Lee (D-Pa.), when asked generally about crypto-funded candidates joining that committee. "And I think that the influence of money, irrespective of where it comes from, is always going to be something that we need to worry about."
One freshman, Rep. Erin Houchin (R-Ind.) who received more than $1 million from crypto-backed groups, already got a spot on the House Financial Services Committee. Meanwhile, Rep. Jasmine Crockett, Democratic freshman who received significant campaign help from crypto interests, has launched a behind-the-scenes effort to get her House leadership to place her on it as well.
Crypto groups boosted dozens of candidates from both parties during the 2022 primary season and many of them won in November, arriving in the halls of Congress just as the industry is at a crucial precipice. Everyone from President Joe Biden to House Financial Services Chair Patrick McHenry (R-N.C.) has pledged to regulate cryptocurrency, and lawmakers are poised to craft policies that will govern the crypto industry going forward, including settling foundational questions like which federal regulators will get the power to oversee crypto and whether it is classified as a security or a commodity.
"I would hope that in choosing members of the Financial Services Committee … House leadership would not select people who had received million-dollar independent expenditures on their behalf by anyone in the crypto industry," said Rep. Brad Sherman (D-Calif.), a longtime Financial Services member, though he noted there are some exceptions. "There are plenty of other committees to serve on. Once you start talking a million bucks of IEs, you're talking real money."
And Rep. Alexandria Ocasio-Cortez (D-N.Y.) said there could “potentially” be a conflict of interest for members who’d received crypto-backed donations, especially as the federal investigation into Sam Bankman-Fried and the collapse of his cryptocurrency exchange, FTX, uncovered more details. (Ocasio-Cortez noted that many lawmakers had received Bankman-Fried’s backing during the 2022 elections were unaware of his alleged malfeasance at the time.)
As is often the case, Democrats appear to be engaged in more hand-wringing over potential corporate conflicts of interest than Republicans.
Crockett, a Dallas-area Democrat who replaced longtime Rep. Eddie Bernice Johnson, has generated some unease by lobbying for a spot on the Financial Services Committee just months after winning a primary with about $2.77 million in backing from crypto-linked groups.
A former state representative, Crockett ran in a crowded 2022 primary where two crypto-aligned groups — Protect Our Future, which was primarily funded by Bankman-Fried, and Web3 Forward, which received funding from Bankman-Fried and other crypto magnates — boosted her far beyond other Democrats in a March primary and a May runoff victory, which was tantamount to winning the general election in a deep-blue open seat.
A letter circulated among Democrats representing Arizona, New Mexico and Texas recommended Crockett in her bid to join the Financial Services committee. The letter cited Dallas’ Federal Reserve Bank and called it "one of the fastest growing housing and financial services sectors."
Crockett, in a statement sent to POLITICO after this story was first published, confirmed her interest in the Financial Services panel and strongly denied any impropriety.
“Let me be unequivocal: I am seeking an assignment to the committee to be a voice for black and brown homeownership, to help right the historical wrongs of redlining, and to bring meaningful change to a financial system that has favored the wealthy," she said. "To suggest otherwise is insulting and does a disservice to these communities of color."
Democratic leaders are expected to announce their committee roster soon. In interviews, several members who’d served on Financial Services last Congress said they wouldn't necessarily be opposed to crypto-funded freshmen joining — as long as that member was not influenced by the industry.
"I don't buy into the notion that everyone that you receive money from, you're here to carry their water," said Rep. Nikema Williams (D-Ga.), responding generally and not specifically about Crockett. "Organizations like AIPAC spend a lot of money to get candidates elected. But does that mean that they then shouldn't be engaged in policies that impact Israel?"
And even California’s Sherman, a prominent crypto critic, said he was "comfortable" with Crockett joining the committee because he believed she would have won her primary without the crypto-funded super PAC help.
"My staff had already talked to her staff. I am very confident that she will be with me on crypto issues," he said.
Web3 Forward and Protect Our Future spent for a wide array of Democratic candidates in 2022. But Crockett, in particular, was among the top beneficiaries of both groups’ outside spending, according to Open Secrets.
Candidates cannot coordinate or solicit help from super PACs under campaign finance law. But special-interest groups can, for example, ask candidates to fill out a survey indicating certain policy positions before they spend.
A Web3 Forward candidate survey, which was obtained by POLITICO, asks candidates to indicate which proposed legislation regulating cryptocurrency they would support — including a bill that would exempt cryptocurrency from being defined as a security.
Crypto-funded groups spent for candidates on both sides of the aisle, including Rep. Val Hoyle (D-Ore.), Robert Garcia (D-Calif.), Morgan McGarvey (D-Ky.), Brad Finstad (R-Minn.) and Eli Crane (R-Ariz.). Crypto Innovation PAC, a GOP-focused group, spent $167,000 on McHenry, the new chairman of the Financial Services Committee.
American Dream Federal Action PAC, a group launched by cryptocurrency executive Ryan Salame, Bankman-Fried’s business partner, spent just over $1 million for Houchin in her bid for an open district in southern Indiana. Houchin’s campaign was not very familiar with the group before it spent in the race — when it first booked airtime in the district, her team worried it would be opposing her candidacy. She beat former Rep. Mike Sodrel and others in a crowded primary for the safe GOP seat.
A spokesman for Houchin said she made no pledges to the group on crypto policy stances and that her interest in the Financial Services Committee was entirely unrelated to their spending.
The spending for Crockett is notable because of the scope. She was the single highest recipient of outside spending from Web3 Forward, according to Open Secrets, and the third-highest recipient from Protect Our Future.
In a February 2022 interview with POLITICO, Crockett said she was unsure why Web3 Forward endorsed her bid.
“I don't know a lot about crypto,” Crockett said then, adding that the endorsement might be an acknowledgement that she is a “common sense type of lawmaker” on business policies. “I do think that we have to figure out: What is the future of currency? I think that that is going to be the job of those of us in D.C. because we're talking about the world's economy.”
