A month is a long time in politics. While a lackluster Democratic presidential campaign has turned into the Kamala Harris Show, Donald Trump’s reelection bid has turned into the Crypto Show. After choosing JD Vance, a former venture capitalist and cryptocurrency advocate, as his running mate, Trump appeared at a Bitcoin conference in Nashville, where he promised to create a “strategic bitcoin stockpile” and turn the United States into the “world’s bitcoin superpower.” He also promised to fire Securities and Exchange Commission Chairman Gary Gensler, who has criticized the crypto industry for its “record of failures, frauds, and bankruptcies” and is an enemy of many crypto bros.
Of course, it’s pretty funny to see Trump, a technophobe who said in 2019 that bitcoin’s value was “based on air,” now presenting himself as its biggest advocate and trying to cash in on it politically and personally. At the Nashville event, dozens of crypto advocates, including the Winklevoss twins and Kid Rock, paid $500,000 apiece to attend a private roundtable with the former President, according to CNBC. A few days later, a company owned by Trump launched a banner with a Bitcoin symbol and a “TRUMP IS THE CRYPTO PRESIDENT.” The high-tops were listed at five hundred dollars a pair. (They later appeared on eBay for prices as high as two thousand five hundred dollars, with one listing tagged at $69,999, according to one report.)
What could be more predictable? Trump released a series of NFT trading cards featuring his superhero costumes in 2022 and 2023. Earlier this year, the last printing of the cards was pulled from sale after prices plummeted. But behind the familiar image of Trump trying to fill his campaign war chest and enrich himself, a larger and more important story is emerging. The crypto industry, which has suffered a series of legal and regulatory setbacks in recent years, including the convictions and imprisonment of some of its leading figures, has made a determined effort to escape SEC scrutiny while entering the financial mainstream. (Earlier this year, Fidelity, BlackRock, Invesco and other firms launched exchange-traded funds whose value is tied to the price of bitcoin.) If this industry maneuver succeeds—and it could if Trump wins in November and Republicans sweep Congress—the long-term consequences could be disastrous.
To understand the current situation, it is necessary to go back a few years, when the industry was in crisis. In December 2022, Sam Bankman-Fried, the founder of cryptocurrency exchange FTX and a major political donor, was arrested. He was later found guilty of defrauding FTX customers of more than $1.7 billion and sentenced to twenty-five years in prison. In November 2023, Changpeng Zhao, the founder and CEO of Binance, the world’s largest cryptocurrency exchange, was found guilty of failing to prevent money laundering on the exchange and sentenced to four months in prison.
The confirmation that criminality was at the heart of crypto trading was, of course, a major setback for the industry as a whole. But an even bigger threat came in the form of Gensler and his campaign to treat many crypto assets as investment securities like stocks or bonds, which would subject them to strict investor protection laws and government oversight. The crypto industry has long argued that investing in crypto is more akin to buying commodities like precious metals and bacon, which are regulated by the Commodity Futures Trading Commission, a much smaller agency than the SEC and historically less focused on individual investors.
In September 2022, Gensler said in a speech in Washington that he believed the “vast majority” of crypto tokens were securities, quoting Joseph Kennedy, the agency’s first chairman, who said, “No honest business needs to fear the SEC.” In the months that followed, the SEC filed lawsuits against some prominent crypto companies, including Binance and Coinbase, the largest U.S. crypto exchange. The agency accused the two companies of operating unregistered securities exchanges and other violations. The companies denied any wrongdoing and sought to have the lawsuits dismissed before trial. In March of this year, a federal judge in New York ruled against Coinbase and said most of the case could proceed. In June, a judge in Washington, D.C., said most of the Binance case could proceed as well. Last December, a federal judge in New York said there was “no real dispute” that four crypto tokens sold by Terraform Labs, a South Korean crypto company, were securities under U.S. law.
The SEC has also suffered setbacks on this important issue. In July 2023, a federal court in California ruled that XRP, a token created by San Francisco-based crypto firm Ripple Labs, was not a security when sold to the public on a crypto exchange. And in June of this year, the SEC closed an investigation into Ethereum, the second-largest blockchain network after Bitcoin. But overall, the agency has made progress in the courts. “People in the crypto industry are doubling down on political contributions,” Dennis Kelleher, president of the public interest group Better Markets, told me. “They can see a tendency to lose to the SEC in court. The legal walls are closing in, and they want Congress to say that digital assets are not securities, so the SEC doesn’t have jurisdiction over them. That’s the big demand.”
The scale of the crypto industry’s donations is staggering. According to Bloomberg, three crypto super PACThey’ve raised $170 million from donors, including Fairshake, the largest of which includes Coinbase, Ripple and venture capital firm Andreessen Horowitz. The influx of cryptocurrencies isn’t just going to Trump’s presidential campaign. It’s also going to his House and Senate campaigns. And while much of it is likely to be aimed at defeating Democrats who are critical of crypto, some of it, including Senator Sherrod Brown of Ohio and Senator John Tester of Montana, has also with Other Democrats.
In the primary election in Arizona’s Third Congressional District last week, Democrat Yassamin Ansari, a Phoenix city council member whose campaign was supported by ads paid for by a cryptocurrency-backed supermarket, PACdefeated former state Democratic Party Chair Raquel Teran. Given all the crypto floating around, it may be no coincidence that more than a dozen House Democrats recently signed a letter to Democratic National Committee Chair Jaime Harrison calling for a “forward-looking approach to digital assets and blockchain technology.” But the fact remains that the crypto industry’s biggest political supporters are Republicans.
After Trump’s recent appearance at a Bitcoin conference, Senator Cynthia Lummis of Wyoming announced that she has introduced a bill to establish a “strategic Bitcoin reserve” of about one million bitcoins. (Robert F. Kennedy, Jr., another crypto advocate, also advocates for this.) Again, there’s a funny value here. Crypto bros, many of whom describe themselves as libertarians, often argue that one of Bitcoin’s great qualities is its independence from government. Here’s a Republican senator proposing to spend more than sixty billion dollars in taxpayer money (at Bitcoin’s current price) to buy about five percent of all cryptocurrency shares.