Crypto Cash runs Kyrsten Sinema’s re-election campaign

After leaving Democratic Party stalwart Kyrsten Sinema will run for re-election to the US Senate as an independent in 2024, according to a Wall Street Journal report earlier this month. In his bid for re-election as Arizona’s senior senator, Sinema faces dismal approval ratings in his home state and must fend off a challenge from Democratic Rep. Ruben Gallego, who has launched an aggressive challenge to the incumbent.

In a hyperpolarized state, winning as an independent can be daunting. But Sinema has amassed a solid war chest, thanks in part to six-figure contributions from crypto stakeholders pouring in since she joined a congressional panel seeking to explore issues that would affect their industry.

The windfall from the crypto industry completes a two-year arc for Sinema, which went from being an advocate for regulations that some crypto giants opposed to a force for compromise with the industry. The softened legislation on regulations fell by the wayside, although Sinema’s crypto donations continued to pour in.

In the last three years, Sinema has taken in almost half a million dollars from crypto companies and investors. In 2021, as her position on crypto regulation eased, she raised at least $175,000 in campaign cash from the industry. Between 2022 and 2023, her campaign has received more than $330,000 from crypto companies and firms with crypto holdings.

“There’s not a lot of money in being a crypto-skeptic,” said Mark Hays, a senior policy analyst at Americans for Financial Reform and Demand Progress.

Some of the biggest contributions to the Sinema campaign over the past four years came from employees of massive private equity firms that began investing heavily in crypto and blockchain technologies ahead of the formation of Sinema’s new caucus. These include Apollo Global Management and Andreessen Horowitz, both of which started crypto funds worth hundreds of millions.

According to Sinema’s latest financial disclosures, fundraising from crypto-aligned interests is not slowing down. Donald Trump’s spokesperson-turned-crypto-evangelist Anthony Scaramucci donated $6,600 to Sinema’s campaign in February, despite suffering a huge loss from the implosion of crypto exchange FTX last year. (Scaramucci remains bullish on crypto.)

“I’m not one of these religious figures who’s going to sing ‘Bitcoin über alles’ no matter what happens in life,” Scaramucci said earlier this month. “So I’ll put it in from that perspective, and then tell you that I’m more bullish now than I’ve ever been.”

Caucus for Financial Innovation

At the start, the path of Sinema’s cryptocaucus was not set in stone. In May 2021, Sinema and Sen. Cynthia Lummis, R-Wyo., launched a coalition to support financial innovations including blockchain technology and central bank digital currencies to promote “financial inclusion and opportunity for all.”

The Financial Innovation Caucus has nine members, including Sinema, Lummis, six Republicans and Sen. John Hickenlooper, D-Colo. (The caucus website still lists Sinema as a Democrat.)

The caucus got underway during a congressional debate on the bipartisan infrastructure bill in August 2021. Sinema — along with Sens. Rob Portman, R-Ohio, and Mark Warner, D-Va. — proposed an amendment that would have strengthened cryptocurrency reporting requirements by limiting certain exemptions.

The change was supported by the White House, but drew immediate criticism from the cryptocurrency industry, which preferred an alternative proposal that would have relaxed reporting requirements. The president of the Blockchain Association, a trade group that advocates for “the future of crypto,” called the Sinema change “terrible.” A spokesperson for Andreessen Horowitz, a venture capital firm that launched a $2.2 billion crypto fund in June, said the proposal would be a “stunning loss for America.”

Several days later, Sinema and her co-authors came up with the change around some of the crypto industry’s concerns. Sinema, Warner, Portman, Lummis and former Sen. Pat Toomey, R-Pa., announced they had compromised on a proposal to exempt certain groups such as software developers and crypto miners from enhanced reporting requirements. Both Blockchain Association and the White House supported the compromise, but the bill failed in the Senate.

“The whole goal was to move the bipartisan infrastructure law forward,” a spokesperson for Sinema told the Intercept. “Working with the White House, we found a path forward for the bill to ensure it wasn’t held up or derailed by separate concerns about cryptocurrency from a few senators.”

The spokesman contested the characterization of Sinema’s revised bill as a softer proposal for regulation. “The amendment does not ‘loosen the reporting requirements,'” the spokesperson said. “It clarifies who is a broker, so that people who are not actually brokers and cannot meet the reporting requirements are not subject to reporting.”

As Congress debated the competing amendments in the third quarter of 2021, employees of crypto companies, along with venture capital and investment firms with nascent crypto holdings, contributed more than $175,000 in total to Sinema’s congressional campaign committees, which raised $2 million that quarter.

Those donors include employees of Andreessen Horowitz, as well as Apollo Global Management, a private equity firm that began offering crypto services in October 2022. Apollo would emerge as the second largest donor base to Sinema’s campaign committee between 2017 and 2022.

Sinema’s congressional campaign committees received more than $51,000 from Andreessen Horowitz and Apollo. The $24,200 she received from Andreessen Horowitz employees — including one from co-founder Benjamin Horowitz — mostly came from employees who had not previously contributed to her campaigns.

Her campaign also received $27,300 in near-maximum contributions from Apollo employees, including COO Stuart Rothstein. Employees at Apollo had contributed to her campaigns in previous years, but less frequently and in smaller amounts. In 2022, Sinema’s campaign received more than $151,000 from Apollo employees.

Scrutiny of Crypto

In the summer of 2022, as the cryptocurrency industry faced increasing scrutiny amid layoffs and failed pilot projects, industry leaders found steady support from Sinema and her colleagues in Congress. Sinema was the sole co-sponsor of Toomey’s July 2022 Virtual Currency Tax Fairness Act, which would have exempted small personal crypto transactions from taxation and was widely celebrated by the industry.

Last August, Sinema and her colleagues reintroduced an identical version of the failed 2021 compromise proposal with support from industry leaders such as the Crypto Council for Innovation, the Coin Center and the Chamber of Digital Commerce. The bill has disappeared.

Efforts to regulate crypto have since slowed thanks to the recent collapse of Silicon Valley Bank, or SVB, and its effect on national banks, said Hilary Allen, professor of financial regulation at American University Washington College of Law.

“Any momentum that was built to enact crypto legislation has to some extent been diverted to dealing with the more current crisis,” Allen said. She was already skeptical that there was a potential crypto bill that could pass both the House and the Senate. “Now, given the fact that SVB is such a clear focus of the Senate Banking or House Finance Committee, I think that’s going to make it even less likely that legislation will pass.”

In addition to the campaign contributions, the crypto industry has touched Sinema’s privacy as well. In April 2021, Sinema’s romantic partner Lindsey Buckman received a home loan from Figure, a blockchain-powered loan provider, on a property in Arizona – the same property where Sinema is actively registered to vote. (Buckman did not respond to a request for comment.)

In July 2021, Apollo – the company whose employees continued to donate to Sinema – entered into an agreement with Figure Technologies, the company behind the loan provider,

With the agreement between the two companies, Apollo invested funds to further develop Figure’s technology, and last year began experimenting with loan transfers using Figure’s blockchain. (There is no evidence that Apollo’s investment in Figur had any bearing on Buckman’s loan.)

When reached for comment, Sinema’s spokesperson told The Intercept, “Lindsey is a private citizen who is not involved in politics. She deserves to make her own financial decisions without public scrutiny, just like any other private citizen.”