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Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News,

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Speaker 1: And this is Bloomberg Crypto, a daily Bloomberg I Heart podcast.

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Speaker 1: It's Thursday, June. It might feel like there's always some

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Speaker 1: kind of election happening in the US, and that's because

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Speaker 1: there is. State and local elections can happen every day,

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Speaker 1: while congressional midterms occur every other year, including this one.

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Speaker 1: These elections allow US voters to decide who will represent them,

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Speaker 1: and they really matter. And because they really matter, crypto

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Speaker 1: executives are spending significant amounts of money to try to

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Speaker 1: influence them. In two for the very first time, political

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Speaker 1: spending by major figures in the crypto industry eclipsed the

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Speaker 1: dollars being spent by traditional donors in big tech and

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Speaker 1: big pharma. Today, Bloomberg reporter Alison verse Brill joins me

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Speaker 1: to share her reporting and why crypto is emerging as

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Speaker 1: a significant financial force in US politics. Alison, thank you

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Speaker 1: as always for being a guest on the show. Thanks

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Speaker 1: for having me. US political lobbying a bit of a

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Speaker 1: hot topic, especially right now. Lots of people who you know,

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Speaker 1: spend lots of time writing checks to appropriate people or

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Speaker 1: who they hope are the appropriate people to try to,

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Speaker 1: if not control the outcome of a particular policy or

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Speaker 1: piece of legislation, at least influence it in their favor.

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Speaker 1: When we talk about US political lobbying, who are some

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Speaker 1: of the biggest players historically and why is this such

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Speaker 1: a an active subsector of politics as it were? You know,

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Speaker 1: when you talk about labbing, I think I think everyone

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Speaker 1: kind of thinks of of big pharma and tech companies

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Speaker 1: and the defense industry, private equity, um, those are some

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Speaker 1: of the ones that are usually the biggest spenders, and

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Speaker 1: so you know, I think they're good ones to compare to.

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Speaker 1: If you're if you're talking about whether or not a

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Speaker 1: new industry like crypto is making a difference. So is

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Speaker 1: crypto making a difference? What happened this yere so this

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Speaker 1: year so far crypto industry is bypassing big tech, big pharma, defense.

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Speaker 1: The only one that it is lagging behind, and quite

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Speaker 1: significantly lacking behind, is private equity and other investment firms

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Speaker 1: big wool Streets, Big Wall Street. Yes, which maybe not

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Speaker 1: so surprising, but so through all the way through one

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Speaker 1: and the first three months of this year, the crypto

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Speaker 1: industry gave more than twenty six million dollars. And to

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Speaker 1: give you a sense of that comparing to some of

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Speaker 1: these other industries. Um, that compares to the twenty million

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Speaker 1: in contributions from tech firms such as Alphabet, Google, Amazon,

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Speaker 1: seven million from drugmakers, and eighteen point six million from

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Speaker 1: defense contractors. Like I said, I mean, private equity and

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Speaker 1: investment firms still a good deal higher than that, though

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Speaker 1: they gave nearly seventy six million dollars over that period. Um.

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Speaker 1: But I think you can still draw from this that

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Speaker 1: crypto is becoming a major player at least in and

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Speaker 1: giving money to uh these candidates, I mean, especially in

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Speaker 1: the short amount of time, right Like that's like something

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Speaker 1: like a five thousand percent increase compared with the same

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Speaker 1: period a year ago. Like what's driving this? So I

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Speaker 1: think really, I mean, so I've talked to some folks

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Speaker 1: who have said, and this might actually be a record

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Speaker 1: year for crypto giving. And there are a couple of

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Speaker 1: reasons for that. Um. You know, the crypto industry is

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Speaker 1: facing a lot of scrutiny right now from Washington, from

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Speaker 1: you know, lawmakers, from regulators, so they have an interest

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Speaker 1: in trying to do some political giving maybe behind themselves

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Speaker 1: some good will and get some regulations that they feel

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Speaker 1: like they can they can live with. But mechanically or practically,

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Speaker 1: what are these folks hoping to achieve? Like goodwill sounds great,

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Speaker 1: but you can't really like put that on a billboard necessarily,

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Speaker 1: Like what what would success look like for them? So,

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Speaker 1: you know, I've talked to someone who works in campaigns

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Speaker 1: and he and you know, he gave kind of a

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Speaker 1: rundown of what we're seeing so far in the crypto industry.

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Speaker 1: And so we do have a lot of crypto firms

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Speaker 1: trying to you know, give money to candidates, some relatively

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Speaker 1: unknown candidates and having them really push pro crypto policy

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Speaker 1: during their races. And actually, this person who worked on

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Speaker 1: campaigns was saying that may not be the most effective

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Speaker 1: strategy because a lot of other entrenched industries they kind

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Speaker 1: of just give the money and then let the super

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Speaker 1: pack or let the candidate decide how best to use

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Speaker 1: it to increase their odds of winning. So the hen

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Speaker 1: your money is actually uh going somewhere. And so so, Allison,

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Speaker 1: when you say a pack, you know that's a political

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Speaker 1: action committee. It's sort of a vehicle through which people

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Speaker 1: can funnel money for political spending. Yes, that's correct. So

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Speaker 1: the crypto folks are coming in and be like, do

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Speaker 1: this specific thing. Here's five million dollars. Yes, you see,

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Speaker 1: you see, you see a decent amount of that happening.

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Speaker 1: But I think it's worth noting that that the biggest

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Speaker 1: donor from the industry so far, Sam Bankman Freed of

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Speaker 1: of the Crypto Exchange FTX. He's been giving by far

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Speaker 1: the most amount of money, and he's kind of taken

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Speaker 1: a different tactic. His focus has been so far on

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Speaker 1: candidates with you know, policies for preparing for the next pandemic,

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Speaker 1: which he's told us is where it told me that

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Speaker 1: he feels like that's inevitable and that we didn't do

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Speaker 1: a very good job responding to COVID nineteen. So that's

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Speaker 1: kind of the policy that he's most focused on. This week,

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Speaker 1: Bloomberg is taking a deeper look at the hunger crisis

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Speaker 1: developing across the globe. The pandemic has upended food supply

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Speaker 1: chains and eroded consumer purchasing power. With Sam Bankman Freed

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Speaker 1: his big he's been donating a lot through Superpack. The

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Speaker 1: pack gave its biggest contribution thus far to a candidate

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Speaker 1: in Oregon, over eleven million dollars. I'm running for Congress

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Speaker 1: because I want every Oregonian to have prosperity, security, and stability.

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Speaker 1: And stability means protection from foreseeable, preventable disasters such as

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Speaker 1: pandemics and to some extent the inflation and all the

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Speaker 1: effects that have come from the pandemic itself. And that

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Speaker 1: did not work. Um. His name was Carrick Flynn, and

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Speaker 1: he and he was a Democrat and a political newcomer,

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Speaker 1: and he ended up losing that race. I think all

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Speaker 1: of this is showing that the crypto industry, while giving

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Speaker 1: a lot of money, still has a lot to learn

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Speaker 1: about the ins and outs of politics and the best way,

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Speaker 1: you know, to get the biggest bang for your book,

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Speaker 1: if you will. We're obviously not fully into the mid terms.

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Speaker 1: There are many more races to run. Where else is

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Speaker 1: there crypto money slushing around? So you know, there is

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Speaker 1: a lot of crypto money as well, um slashing around

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Speaker 1: lobbying on Capitol Hill, people beefing up their their firms

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Speaker 1: to go and you know, talk to lawmakers, maybe sway

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Speaker 1: policy on the legislation that we're seeing some of the

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Speaker 1: regulation that we're you know, potentially may see from out

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Speaker 1: of these agencies. So a lot of money also being

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Speaker 1: spent on lobbying in addition to these political contributions. You've

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Speaker 1: written as well with some other colleagues of ours, a

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Speaker 1: bloomberg about state level lobbying, where you know, folks who

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Speaker 1: are say, based in New York want to make sure

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Speaker 1: that New York specific regulations apply to them in ways

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Speaker 1: that they find amenable. Where do these lines kind of blur,

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Speaker 1: Like when does something stop being kind of state specific

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Speaker 1: and get more national or does national also help you

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Speaker 1: at the state level. So it's interesting, I mean, I

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Speaker 1: think obviously places like New York have have gotten a

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Speaker 1: lot of attention with their bit license and some of

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Speaker 1: the regulation that they have in place. Yesterday, the state's

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Speaker 1: top financial regulator unveiled the bit license. These are regulations

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Speaker 1: designed to protect consumers and improve cybersecurity practices for the

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Speaker 1: digital currency, and folks will say that, you know, the

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Speaker 1: regulation at the state level could potentially influence what the

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Speaker 1: federal government does. Um, so you might see some blending

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Speaker 1: of the lines in that sense. I think for a

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Speaker 1: lot of these big players, they are focusing primarily on

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Speaker 1: who gets into these federal seats, so US House Reps,

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Speaker 1: U S senators will probably see a lot of similar

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Speaker 1: trends when the presidential race comes back around. And I

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Speaker 1: think that's because right now there is so much action

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Speaker 1: at the federal level. We're seeing the legislation from Senators

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Speaker 1: Lemis and Jilla Brand to regulate the industry. We're expecting

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Speaker 1: a lot more bills later in this year. Senators have

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Speaker 1: talked about being potentially optimistic about stable coin legislation before

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Speaker 1: the end of this year. I will be stunned. Called. Yeah,

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Speaker 1: call me a skeptic on it, but you know, I

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Speaker 1: I've been surprised before by Congress, So you know, I

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Speaker 1: think we are seeing a lot of the big names

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Speaker 1: giving a lot on the federal side of things. We'll

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Speaker 1: be right back with more from Bloomberg Reports Alison verse

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Speaker 1: Bill on crypto's biggest political contributors. Is there anything about

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Speaker 1: any of this that has surprised you? I mean, I

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Speaker 1: do think the as you delicately put it, the relative

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Speaker 1: inexperience of some of these folks as it relates to

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Speaker 1: how politics is really really works. In his mean, but

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Speaker 1: is there anything else that you have seen, They're like,

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Speaker 1: that's weird. I think it's really interesting how much spending

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Speaker 1: we're seeing in the primaries, right, because it's it's an

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Speaker 1: interesting strategy. I feel like there are a good number

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Speaker 1: of donors who say, you know what, I'll wait till

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Speaker 1: the general election. I'll wait to see when I have

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Speaker 1: a better chance of putting my money towards someone who

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Speaker 1: will actually end up being in one of these seats.

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Speaker 1: And you know, we I actually did ask Sam bing

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Speaker 1: and Freed about this why he has put so much

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Speaker 1: money into primary races, and his response was that he

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Speaker 1: felt if you were very issue focused, like he says

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Speaker 1: he is, with this pandemic preparedness sort of focus, that

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Speaker 1: he thinks the primaries are important and that the issues

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Speaker 1: that people are focused on can be very different when

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Speaker 1: you're at that level. I mean, he's not wrong from

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Speaker 1: the psychology of the primary votes, like if if you

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Speaker 1: are sufficiently motivated to register early, jump through the additional

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Speaker 1: sets of hoops about you know, showing up at the

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Speaker 1: right place at the right time, you tend to be

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Speaker 1: a certain kind of highly motivated. It is your oriented

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Speaker 1: person for sure, right, And and he was making the

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Speaker 1: case that if you are more focused on just having

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Speaker 1: either a Democrat or a Republican win than maybe your

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Speaker 1: maybe your strategy is different, Maybe your strategy is to

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Speaker 1: wait till the general election. So I think that's an

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Speaker 1: interesting point out of all of this, is that this

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Speaker 1: is a lot of money and we haven't even gotten

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Speaker 1: to the general's yet. While we shall, the crypto prices

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Speaker 1: allow folks to keep spending this kind of money. Yes,

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Speaker 1: that was also a point that someone raised me, was

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Speaker 1: whether or not we would continue seeing the level of spending.

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Speaker 1: I will say it's interesting though. I was talking to

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Speaker 1: someone who was like, well, I think I think this

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Speaker 1: could make a difference for the millionaires who are donating

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Speaker 1: to the to the mid terms. But I was saying,

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Speaker 1: you know, for the billionaires, people like Sam Bingman Freed,

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Speaker 1: probably not going to make that much of a difference,

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Speaker 1: And I did, the real money will be fine, right

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Speaker 1: and I and I actually talked to the spokesman for

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Speaker 1: his for the superpack that he's put his most of

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Speaker 1: his money through protect our Future, and I asked, you know,

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Speaker 1: have you had conversations with Sam Bingman Freed where the

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Speaker 1: strategy has changed at all just because the market's gone down.

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Speaker 1: You know, he's lost some of his wealth. And the

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Speaker 1: spokesperson basically said that has not entered into our conversations

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Speaker 1: of yet, and that was after the terror collapse. Now

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Speaker 1: I haven't had a chance to circle back since. Uh.

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Speaker 1: The recent activities we're seeing in the market, it seems like,

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Speaker 1: at least for these really big spenders, that we might

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Speaker 1: not see too much of a difference. Have any of

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Speaker 1: the folks who were spending all this money lobbying had

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Speaker 1: any successes? So I think, well, when it comes to

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Speaker 1: the political spending, if you look at the uh Sam

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Speaker 1: Bateman Freed's donations, yes, the biggest contribution that was made

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Speaker 1: through his superpack um was unsuccessful, but there were a

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Speaker 1: lot of candidates that the pack donated to that did win.

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Speaker 1: So you know, they say they're changing, they change the

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Speaker 1: strategy going forward, you focus on those folks that w

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Speaker 1: that have one and you know, so maybe some potential

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Speaker 1: success is there. And they've also said they've learned some

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Speaker 1: lessons about kind of local dynamics and some of these

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Speaker 1: states that that maybe they didn't know before. On the

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Speaker 1: lobbying side, I will say, you know, we we saw

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Speaker 1: most of the uptick and lobbying after the Infrastructure Bill

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Speaker 1: was introduced last year, the infrastructure Bill that would create

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Speaker 1: millions of jobs, rebuilding the arteries of our economy, and

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Speaker 1: they're just to pose the Infrastructure Bill which had crypto

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Speaker 1: elements in it. Yes, so the Infrastructure Bill would have

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Speaker 1: new reporting requirements for brokers, so exchanges like coin base

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Speaker 1: and you know, even maybe some DeFi exchanges. It's kind

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Speaker 1: of unclear. And so basically this bill there was a

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Speaker 1: big outcry after it was introduced among the industry players

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Speaker 1: because they said that it was the language was way

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Speaker 1: too broad. It defined brokers in such a way that

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Speaker 1: they said, oh, this could pool in crypto minors, crypto stakers,

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Speaker 1: you know, folks who who validate transactions on the blockchain,

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Speaker 1: and um they also said said a could pool and

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Speaker 1: software developers. And so there was a really big heavy

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Speaker 1: push from the industry to try to get this this

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Speaker 1: lane it's rewritten, and what I will say is it

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Speaker 1: was not successful. But in the short period of time

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Speaker 1: where the lobbying happened, they made much more of an

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Speaker 1: impact than maybe you would have thought, Like it got

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Speaker 1: very very close to passing and basically didn't get into

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Speaker 1: the final version of the bill on a technicality where

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Speaker 1: a senator had raised objections about unrelated military spending um

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Speaker 1: and so and so, and it almost got through on

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Speaker 1: unanimous consent. So every senator agreeing that there should be

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Speaker 1: a change in this bill. I think that is pretty

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Speaker 1: significant for an industry that did very little lobbying before this. UH,

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Speaker 1: this issue was came to the forefront um and since

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Speaker 1: then we've just continued to see more and more spending

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Speaker 1: and you've seen that issue is has continued to be

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Speaker 1: one that some Senators and House reps have continued to

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Speaker 1: take on. A change to that provision is included in

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Speaker 1: the bill that Senators Lummis and jilla Brand introduced in

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Speaker 1: the Senate. We also saw Treasury put a letter out

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Speaker 1: saying that in their regulations they don't intend to sweep in,

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Speaker 1: you know, these other entities that the industry was so

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Speaker 1: worried about, which is language that may not have existed

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Speaker 1: had folks not pushed against it in the previous infrastructure bill. Oh,

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Speaker 1: absolutely not. I mean, I think I think the government's

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Speaker 1: the government's desire is always for something to be as

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Speaker 1: broad as possible to give them kind of the biggest UH.

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Speaker 1: The biggest stick, if you will, in sort of enforcing

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Speaker 1: what they want to do. And so I think it's

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Speaker 1: pretty significant that we see the administration putting this let like,

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Speaker 1: you know, clearly senators were also pushing on them to

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Speaker 1: to provide some clarification. So I think it's pretty significant

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Speaker 1: that we saw this letter and we saw this kind

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Speaker 1: of you know, walk back um, even though the legislation

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Speaker 1: may be broad enough for them to take a very

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Speaker 1: sweeping approach. Thank you, Allison. You can find more of

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Speaker 1: her reporting on the Bloomberg terminal on bloom Berg dot

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Speaker 1: com or follow her on Twitter. She's Ali ver Sprill.

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Speaker 1: On the next episode of Bloomberg Crypto, one of the

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Speaker 1: most closely watched fights in crypto. Might sound a little obscure,

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Speaker 1: but it's really important. It pits a company called Gray

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Speaker 1: Scale Investments against the U S Securities and Exchange Commission,

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Speaker 1: a crucial regulator in the space, and it involves so

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Speaker 1: called exchange traded funds, an extremely popular type of investment vehicle,

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Speaker 1: and especially at the center of it all is Bitcoin,

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Speaker 1: the largest and most liquid of the cryptos Bloomberg reports are.

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Speaker 1: Kasey Greifeld joined me to unravel why this fight is

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Speaker 1: so important to the future of crypto markets. I'm Stacy

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Speaker 1: Marie Ishmael, and this is Bloomberg Crypto, a daily podcast

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Speaker 1: from Bloomberg and I Heart Radio. For more shows from

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Speaker 1: I Heart Radio, visit the I Heart Radio app, Apple Podcasts,

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Speaker 1: or wherever you get your podcasts. Email your questions, comments,

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Speaker 1: or suggestion for the show to Crypto at Bloomberg dot net,

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Speaker 1: and you'll find us on Twitter at Crypto. The supervising

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Speaker 1: producer of this episode is Vicky very Galina. Associate producer

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Speaker 1: is zan Ab Sudiki. Associate producer is Moses on Desta

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Speaker 1: wonder At is our engineer. Original music by Leo Sidron.

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Speaker 1: Bloomberg's head of podcasts is Francesca Levi.