Coinbase, crypto billionaires and the 2022 midterm elections

The crypto industry is constantly trying to sell us something new. This election season sees the rise of the bitcoin voter, a new political constituency supposedly ready to vote for anything pro-crypto.

The Crypto Council for Innovation, a pro-crypto trade group representing platforms such as Fidelity and Gemini, released data last Wednesday that allegedly indicates one in seven voters “holds crypto and says they are ready to vote for pro-crypto candidates.” Coinbase, a crypto trading platform with more than 100 million users worldwide, has launched its own voter registration initiative, ranking candidates on their friendliness towards crypto issues. At the same time, a small but growing number of political campaigns have begun accepting bitcoin donations in an effort to demonstrate their crypto credentials.

All of this is in service of the idea that one day there may be a large contingent of voters supporting pro-crypto candidates through their donations and ballots. To be clear, it’s still early days. The people behind the major campaign to mobilize crypto voters told Recode that the upcoming midterms are essentially a practice round, although the ultimate goal is to develop a voting block ready to vote in the interest of the crypto industry.

Still, it’s not clear that this strategy will necessarily work, since the people who own crypto are already stretched across the political spectrum. Some critics also point out that the libertarian ideology behind the crypto movement does not necessarily align with the outlook of major crypto companies encouraging people to engage in the traditional political process.

“To the extent that such a person exists, they are likely to be someone who is already deeply invested in the cryptocurrency space in one way or another,” said David Golumbia, a professor at Virginia Commonwealth University who has written about the politics of bitcoin. “The irony is that the whole room is so saturated with anti-government sentiment and anti-democratic ideas.”

The people leading this effort have an idea of ​​who these crypto voters might be. In the US, people under the age of 50, as well as people with higher incomes, are more likely to use crypto, according to Pew research published in August. Men are about 14 percent more likely to use crypto than women, and black, Hispanic, and Asian Americans are slightly more likely to use crypto than white Americans. While it’s far from clear that crypto usage is enough to make anyone want to vote for pro-crypto causes, some strategists say enough people now own crypto for the group to have political influence. As of now, about 16 percent of American adults have used cryptocurrency at least once.

“One of the ways you can accelerate the momentum of politics on Web3 is the moment candidates start polling on Web3 and see how many people have it,” said Chris Lehane, a prominent Democratic consultant who now works for Haun Ventures, which was founded by former Andreessen-Horowitz partner Kathryn Haun. “When you get out of politics, you just don’t see cohorts of this size.”

Right now, crypto doesn’t fall along party lines the way big issues like gun reform, climate change, and abortion do. Republican and Democratic candidates have supported and criticized crypto, and there are members of both parties on the Congressional Blockchain Caucus, a group of lawmakers studying the technology. A poll conducted by Morning Consult late last year found that similar shares of Democrats and Republicans favor fewer regulations on crypto, and surveys commissioned by pro-crypto firms have produced comparable findings.

Haun Ventures recently commissioned a Morning Consult survey showing that likely swing state voters support the ideology behind Web3, a term some use to refer to technologies like cryptocurrencies and the blockchain, and found that “Web3 voters” in New Hampshire, Nevada, Ohio, and Pennsylvania leaned slightly Democratic. GMI PAC, a super PAC backed by several crypto-focused venture capital and investment firms as well as the hedge fund led by Trump-era minor character Anthony Scaramucci, also published a poll this month that underscores that many voters are now actively using or may want to use cryptocurrencies.

“You see the industry funneling tens of billions of dollars to really push their regulatory agenda to the ground,” Stephen Diehl, a prominent critic of crypto and co-founder of the Center for Emerging Technology Policy, told Recode. “It’s a pretty natural extension that they would try to get the voters.”

While crypto users don’t seem to be completely at home in one party, crypto companies are still trying to get them to vote for pro-crypto candidates. After launching its voter registration initiative last summer, Coinbase established a “Legislative Portal” within its app, which is typically used to monitor crypto prices and trading of various cryptocurrencies. This portal ranks politicians on their support for crypto using data collected on their public statements, legislation and whether or not they accept crypto campaign donations. The rating for Majority Leader Chuck Schumer, for example, leans negative, while the rating for New York’s other senator, Kirsten Gillibrand, is very positive.

“We’re trying to build things that are educational infrastructure that survive this midterm, that survive the 2024 election, that give people a way to engage in the process, not just in October and in an election year, but [in] March of an off year,” said Miti Sathe, who leads community engagement at Coinbase and previously worked on the Obama campaign. “We’re keeping up the enthusiasm around the crypto issues for our community because that’s what we’re hearing from the community. ”

Right now, many of the politicians listed in Coinbase’s systems don’t have ratings at all, though Sathe hopes crypto politics will soon become a significant enough voting issue for more officials to take a public stand. Meanwhile, the app also directs Coinbase users to a website that sends an email form to politicians urging them to support “pro-crypto policies.” Brian Armstrong, Coinbase’s CEO, has so that the app could eventually help politicians solicit donations and expand to elections outside the US. However, in the wake of employee discussions about racial justice and the 2020 killing of George Floyd, Armstrong banned internal debates about politics, saying the company would “minimally focus on causes” unrelated to its core business.

Beyond engaging voters directly, there is movement among some pro-crypto politicians to accept cryptocurrency donations. There isn’t much of a difference between someone sending a campaign cryptocurrency that they then convert into dollars they can easily use, and a person converting the crypto themselves before making a donation. Still, politicians can now accept crypto via several platforms, including Coinbase, BitPay and a service called Engage Raise, which focuses specifically on politics. Sixteen candidates have signed up to accept cryptocurrencies such as bitcoin, ethereum and dogecoin donations with Engage Raise, and others are asking for crypto directly on their campaign websites.

The results have been mixed. Martin Dobelle, CEO of the company that runs Engage Raise, told Recode that they have received crypto donations from “probably about halfway” between 10 and 100 people. BitPay CEO Bill Zielke told Recode in an email that the platform has processed “more than 500 crypto donations” this year, but would not say how many of those were specifically for political campaigns, compared to other causes. Meanwhile, Blake Masters, a Trump-backed Republican venture capitalist running for Senate in Arizona, raised more than half a million dollars by auctioning off 99 NFT versions of the book he co-wrote with Republican donor Peter Thiel, along with the possibility of to attend social events.

Data from the Federal Election Commission shared with Recode suggests that campaigns have disclosed at least 350 receipts for cryptocurrency transactions between the beginning of 2021 and the end of September this year, although this number may not include all the donations made in the third quarter of 2022. Still, a single campaigns process several times more receipts in traditional currency during an election cycle, and only a handful of campaigns represented crypto receipts that the FEC’s data highlighted, including Masters, Sen. Ron Wyden and a Democratic candidate named Matt West in Oregon. The FEC allows crypto donations, but has issued recommendations on how crypto contributions should be disclosed.

“States are writing guidance on this, but it’s early,” Sarah Bryner, director of research and strategy at OpenSecrets, told Recode. “So I think candidates and political committees are a little cautious with good reason to accept or ask for money of this kind.”

However, crypto’s greatest influence on politics is not expressed in bitcoin or ethereum. It’s about US dollars – and lots of them. A series of pro-crypto PACs have emerged with cash to support pro-crypto politicians in both parties, including the Blockchain Association, Web3 Forward and Crypto Innovation. A number of think tanks and lobbying firms have already arrived in the Beltway, eager to influence how politicians put together new crypto regulations. And then there’s the new crypto donor class: Sam Bankman-Fried, billionaire founder and CEO of crypto platform FTX, has suggested he might spend as much as $1 billion on the 2024 election — though he’s recently backtracked on the idea — and ranks among the most influential individual donors this election cycle.

Still, while the effort to mobilize voters in favor of crypto is only part of a broader movement to incorporate crypto into institutional politics, the people behind the effort said they hope that crypto holders can become a real force in future elections. While crypto companies are understandably excited about the idea, others are already worried about what an influential crypto voting base could eventually mean.

“You go to someone and say, ‘Well, who are you voting for?’ And they say, ‘Well, which one is best for crypto?'” said Rohan Grey, a law professor at Willamette University who advised Rep. Rashida Tlaib on stablecoin regulation. “But when a non-trivial number of those running for office don’t actually believe in the electoral process or are downright fascist in their goals, being a single-issue voter around crypto is especially dangerous for democracy.”