Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News,
Speaker 1: And this is Bloomberg Crypto, a daily Bloomberg I Heart podcast.
Speaker 1: It's Thursday, June. It might feel like there's always some
Speaker 1: kind of election happening in the US, and that's because
Speaker 1: there is. State and local elections can happen every day,
Speaker 1: while congressional midterms occur every other year, including this one.
Speaker 1: These elections allow US voters to decide who will represent them,
Speaker 1: and they really matter. And because they really matter, crypto
Speaker 1: executives are spending significant amounts of money to try to
Speaker 1: influence them. In two for the very first time, political
Speaker 1: spending by major figures in the crypto industry eclipsed the
Speaker 1: dollars being spent by traditional donors in big tech and
Speaker 1: big pharma. Today, Bloomberg reporter Alison verse Brill joins me
Speaker 1: to share her reporting and why crypto is emerging as
Speaker 1: a significant financial force in US politics. Alison, thank you
Speaker 1: as always for being a guest on the show. Thanks
Speaker 1: for having me. US political lobbying a bit of a
Speaker 1: hot topic, especially right now. Lots of people who you know,
Speaker 1: spend lots of time writing checks to appropriate people or
Speaker 1: who they hope are the appropriate people to try to,
Speaker 1: if not control the outcome of a particular policy or
Speaker 1: piece of legislation, at least influence it in their favor.
Speaker 1: When we talk about US political lobbying, who are some
Speaker 1: of the biggest players historically and why is this such
Speaker 1: a an active subsector of politics as it were? You know,
Speaker 1: when you talk about labbing, I think I think everyone
Speaker 1: kind of thinks of of big pharma and tech companies
Speaker 1: and the defense industry, private equity, um, those are some
Speaker 1: of the ones that are usually the biggest spenders, and
Speaker 1: so you know, I think they're good ones to compare to.
Speaker 1: If you're if you're talking about whether or not a
Speaker 1: new industry like crypto is making a difference. So is
Speaker 1: crypto making a difference? What happened this yere so this
Speaker 1: year so far crypto industry is bypassing big tech, big pharma, defense.
Speaker 1: The only one that it is lagging behind, and quite
Speaker 1: significantly lacking behind, is private equity and other investment firms
Speaker 1: big wool Streets, Big Wall Street. Yes, which maybe not
Speaker 1: so surprising, but so through all the way through one
Speaker 1: and the first three months of this year, the crypto
Speaker 1: industry gave more than twenty six million dollars. And to
Speaker 1: give you a sense of that comparing to some of
Speaker 1: these other industries. Um, that compares to the twenty million
Speaker 1: in contributions from tech firms such as Alphabet, Google, Amazon,
Speaker 1: seven million from drugmakers, and eighteen point six million from
Speaker 1: defense contractors. Like I said, I mean, private equity and
Speaker 1: investment firms still a good deal higher than that, though
Speaker 1: they gave nearly seventy six million dollars over that period. Um.
Speaker 1: But I think you can still draw from this that
Speaker 1: crypto is becoming a major player at least in and
Speaker 1: giving money to uh these candidates, I mean, especially in
Speaker 1: the short amount of time, right Like that's like something
Speaker 1: like a five thousand percent increase compared with the same
Speaker 1: period a year ago. Like what's driving this? So I
Speaker 1: think really, I mean, so I've talked to some folks
Speaker 1: who have said, and this might actually be a record
Speaker 1: year for crypto giving. And there are a couple of
Speaker 1: reasons for that. Um. You know, the crypto industry is
Speaker 1: facing a lot of scrutiny right now from Washington, from
Speaker 1: you know, lawmakers, from regulators, so they have an interest
Speaker 1: in trying to do some political giving maybe behind themselves
Speaker 1: some good will and get some regulations that they feel
Speaker 1: like they can they can live with. But mechanically or practically,
Speaker 1: what are these folks hoping to achieve? Like goodwill sounds great,
Speaker 1: but you can't really like put that on a billboard necessarily,
Speaker 1: Like what what would success look like for them? So,
Speaker 1: you know, I've talked to someone who works in campaigns
Speaker 1: and he and you know, he gave kind of a
Speaker 1: rundown of what we're seeing so far in the crypto industry.
Speaker 1: And so we do have a lot of crypto firms
Speaker 1: trying to you know, give money to candidates, some relatively
Speaker 1: unknown candidates and having them really push pro crypto policy
Speaker 1: during their races. And actually, this person who worked on
Speaker 1: campaigns was saying that may not be the most effective
Speaker 1: strategy because a lot of other entrenched industries they kind
Speaker 1: of just give the money and then let the super
Speaker 1: pack or let the candidate decide how best to use
Speaker 1: it to increase their odds of winning. So the hen
Speaker 1: your money is actually uh going somewhere. And so so, Allison,
Speaker 1: when you say a pack, you know that's a political
Speaker 1: action committee. It's sort of a vehicle through which people
Speaker 1: can funnel money for political spending. Yes, that's correct. So
Speaker 1: the crypto folks are coming in and be like, do
Speaker 1: this specific thing. Here's five million dollars. Yes, you see,
Speaker 1: you see, you see a decent amount of that happening.
Speaker 1: But I think it's worth noting that that the biggest
Speaker 1: donor from the industry so far, Sam Bankman Freed of
Speaker 1: of the Crypto Exchange FTX. He's been giving by far
Speaker 1: the most amount of money, and he's kind of taken
Speaker 1: a different tactic. His focus has been so far on
Speaker 1: candidates with you know, policies for preparing for the next pandemic,
Speaker 1: which he's told us is where it told me that
Speaker 1: he feels like that's inevitable and that we didn't do
Speaker 1: a very good job responding to COVID nineteen. So that's
Speaker 1: kind of the policy that he's most focused on. This week,
Speaker 1: Bloomberg is taking a deeper look at the hunger crisis
Speaker 1: developing across the globe. The pandemic has upended food supply
Speaker 1: chains and eroded consumer purchasing power. With Sam Bankman Freed
Speaker 1: his big he's been donating a lot through Superpack. The
Speaker 1: pack gave its biggest contribution thus far to a candidate
Speaker 1: in Oregon, over eleven million dollars. I'm running for Congress
Speaker 1: because I want every Oregonian to have prosperity, security, and stability.
Speaker 1: And stability means protection from foreseeable, preventable disasters such as
Speaker 1: pandemics and to some extent the inflation and all the
Speaker 1: effects that have come from the pandemic itself. And that
Speaker 1: did not work. Um. His name was Carrick Flynn, and
Speaker 1: he and he was a Democrat and a political newcomer,
Speaker 1: and he ended up losing that race. I think all
Speaker 1: of this is showing that the crypto industry, while giving
Speaker 1: a lot of money, still has a lot to learn
Speaker 1: about the ins and outs of politics and the best way,
Speaker 1: you know, to get the biggest bang for your book,
Speaker 1: if you will. We're obviously not fully into the mid terms.
Speaker 1: There are many more races to run. Where else is
Speaker 1: there crypto money slushing around? So you know, there is
Speaker 1: a lot of crypto money as well, um slashing around
Speaker 1: lobbying on Capitol Hill, people beefing up their their firms
Speaker 1: to go and you know, talk to lawmakers, maybe sway
Speaker 1: policy on the legislation that we're seeing some of the
Speaker 1: regulation that we're you know, potentially may see from out
Speaker 1: of these agencies. So a lot of money also being
Speaker 1: spent on lobbying in addition to these political contributions. You've
Speaker 1: written as well with some other colleagues of ours, a
Speaker 1: bloomberg about state level lobbying, where you know, folks who
Speaker 1: are say, based in New York want to make sure
Speaker 1: that New York specific regulations apply to them in ways
Speaker 1: that they find amenable. Where do these lines kind of blur,
Speaker 1: Like when does something stop being kind of state specific
Speaker 1: and get more national or does national also help you
Speaker 1: at the state level. So it's interesting, I mean, I
Speaker 1: think obviously places like New York have have gotten a
Speaker 1: lot of attention with their bit license and some of
Speaker 1: the regulation that they have in place. Yesterday, the state's
Speaker 1: top financial regulator unveiled the bit license. These are regulations
Speaker 1: designed to protect consumers and improve cybersecurity practices for the
Speaker 1: digital currency, and folks will say that, you know, the
Speaker 1: regulation at the state level could potentially influence what the
Speaker 1: federal government does. Um, so you might see some blending
Speaker 1: of the lines in that sense. I think for a
Speaker 1: lot of these big players, they are focusing primarily on
Speaker 1: who gets into these federal seats, so US House Reps,
Speaker 1: U S senators will probably see a lot of similar
Speaker 1: trends when the presidential race comes back around. And I
Speaker 1: think that's because right now there is so much action
Speaker 1: at the federal level. We're seeing the legislation from Senators
Speaker 1: Lemis and Jilla Brand to regulate the industry. We're expecting
Speaker 1: a lot more bills later in this year. Senators have
Speaker 1: talked about being potentially optimistic about stable coin legislation before
Speaker 1: the end of this year. I will be stunned. Called. Yeah,
Speaker 1: call me a skeptic on it, but you know, I
Speaker 1: I've been surprised before by Congress, So you know, I
Speaker 1: think we are seeing a lot of the big names
Speaker 1: giving a lot on the federal side of things. We'll
Speaker 1: be right back with more from Bloomberg Reports Alison verse
Speaker 1: Bill on crypto's biggest political contributors. Is there anything about
Speaker 1: any of this that has surprised you? I mean, I
Speaker 1: do think the as you delicately put it, the relative
Speaker 1: inexperience of some of these folks as it relates to
Speaker 1: how politics is really really works. In his mean, but
Speaker 1: is there anything else that you have seen, They're like,
Speaker 1: that's weird. I think it's really interesting how much spending
Speaker 1: we're seeing in the primaries, right, because it's it's an
Speaker 1: interesting strategy. I feel like there are a good number
Speaker 1: of donors who say, you know what, I'll wait till
Speaker 1: the general election. I'll wait to see when I have
Speaker 1: a better chance of putting my money towards someone who
Speaker 1: will actually end up being in one of these seats.
Speaker 1: And you know, we I actually did ask Sam bing
Speaker 1: and Freed about this why he has put so much
Speaker 1: money into primary races, and his response was that he
Speaker 1: felt if you were very issue focused, like he says
Speaker 1: he is, with this pandemic preparedness sort of focus, that
Speaker 1: he thinks the primaries are important and that the issues
Speaker 1: that people are focused on can be very different when
Speaker 1: you're at that level. I mean, he's not wrong from
Speaker 1: the psychology of the primary votes, like if if you
Speaker 1: are sufficiently motivated to register early, jump through the additional
Speaker 1: sets of hoops about you know, showing up at the
Speaker 1: right place at the right time, you tend to be
Speaker 1: a certain kind of highly motivated. It is your oriented
Speaker 1: person for sure, right, And and he was making the
Speaker 1: case that if you are more focused on just having
Speaker 1: either a Democrat or a Republican win than maybe your
Speaker 1: maybe your strategy is different, Maybe your strategy is to
Speaker 1: wait till the general election. So I think that's an
Speaker 1: interesting point out of all of this, is that this
Speaker 1: is a lot of money and we haven't even gotten
Speaker 1: to the general's yet. While we shall, the crypto prices
Speaker 1: allow folks to keep spending this kind of money. Yes,
Speaker 1: that was also a point that someone raised me, was
Speaker 1: whether or not we would continue seeing the level of spending.
Speaker 1: I will say it's interesting though. I was talking to
Speaker 1: someone who was like, well, I think I think this
Speaker 1: could make a difference for the millionaires who are donating
Speaker 1: to the to the mid terms. But I was saying,
Speaker 1: you know, for the billionaires, people like Sam Bingman Freed,
Speaker 1: probably not going to make that much of a difference,
Speaker 1: And I did, the real money will be fine, right
Speaker 1: and I and I actually talked to the spokesman for
Speaker 1: his for the superpack that he's put his most of
Speaker 1: his money through protect our Future, and I asked, you know,
Speaker 1: have you had conversations with Sam Bingman Freed where the
Speaker 1: strategy has changed at all just because the market's gone down.
Speaker 1: You know, he's lost some of his wealth. And the
Speaker 1: spokesperson basically said that has not entered into our conversations
Speaker 1: of yet, and that was after the terror collapse. Now
Speaker 1: I haven't had a chance to circle back since. Uh.
Speaker 1: The recent activities we're seeing in the market, it seems like,
Speaker 1: at least for these really big spenders, that we might
Speaker 1: not see too much of a difference. Have any of
Speaker 1: the folks who were spending all this money lobbying had
Speaker 1: any successes? So I think, well, when it comes to
Speaker 1: the political spending, if you look at the uh Sam
Speaker 1: Bateman Freed's donations, yes, the biggest contribution that was made
Speaker 1: through his superpack um was unsuccessful, but there were a
Speaker 1: lot of candidates that the pack donated to that did win.
Speaker 1: So you know, they say they're changing, they change the
Speaker 1: strategy going forward, you focus on those folks that w
Speaker 1: that have one and you know, so maybe some potential
Speaker 1: success is there. And they've also said they've learned some
Speaker 1: lessons about kind of local dynamics and some of these
Speaker 1: states that that maybe they didn't know before. On the
Speaker 1: lobbying side, I will say, you know, we we saw
Speaker 1: most of the uptick and lobbying after the Infrastructure Bill
Speaker 1: was introduced last year, the infrastructure Bill that would create
Speaker 1: millions of jobs, rebuilding the arteries of our economy, and
Speaker 1: they're just to pose the Infrastructure Bill which had crypto
Speaker 1: elements in it. Yes, so the Infrastructure Bill would have
Speaker 1: new reporting requirements for brokers, so exchanges like coin base
Speaker 1: and you know, even maybe some DeFi exchanges. It's kind
Speaker 1: of unclear. And so basically this bill there was a
Speaker 1: big outcry after it was introduced among the industry players
Speaker 1: because they said that it was the language was way
Speaker 1: too broad. It defined brokers in such a way that
Speaker 1: they said, oh, this could pool in crypto minors, crypto stakers,
Speaker 1: you know, folks who who validate transactions on the blockchain,
Speaker 1: and um they also said said a could pool and
Speaker 1: software developers. And so there was a really big heavy
Speaker 1: push from the industry to try to get this this
Speaker 1: lane it's rewritten, and what I will say is it
Speaker 1: was not successful. But in the short period of time
Speaker 1: where the lobbying happened, they made much more of an
Speaker 1: impact than maybe you would have thought, Like it got
Speaker 1: very very close to passing and basically didn't get into
Speaker 1: the final version of the bill on a technicality where
Speaker 1: a senator had raised objections about unrelated military spending um
Speaker 1: and so and so, and it almost got through on
Speaker 1: unanimous consent. So every senator agreeing that there should be
Speaker 1: a change in this bill. I think that is pretty
Speaker 1: significant for an industry that did very little lobbying before this. UH,
Speaker 1: this issue was came to the forefront um and since
Speaker 1: then we've just continued to see more and more spending
Speaker 1: and you've seen that issue is has continued to be
Speaker 1: one that some Senators and House reps have continued to
Speaker 1: take on. A change to that provision is included in
Speaker 1: the bill that Senators Lummis and jilla Brand introduced in
Speaker 1: the Senate. We also saw Treasury put a letter out
Speaker 1: saying that in their regulations they don't intend to sweep in,
Speaker 1: you know, these other entities that the industry was so
Speaker 1: worried about, which is language that may not have existed
Speaker 1: had folks not pushed against it in the previous infrastructure bill. Oh,
Speaker 1: absolutely not. I mean, I think I think the government's
Speaker 1: the government's desire is always for something to be as
Speaker 1: broad as possible to give them kind of the biggest UH.
Speaker 1: The biggest stick, if you will, in sort of enforcing
Speaker 1: what they want to do. And so I think it's
Speaker 1: pretty significant that we see the administration putting this let like,
Speaker 1: you know, clearly senators were also pushing on them to
Speaker 1: to provide some clarification. So I think it's pretty significant
Speaker 1: that we saw this letter and we saw this kind
Speaker 1: of you know, walk back um, even though the legislation
Speaker 1: may be broad enough for them to take a very
Speaker 1: sweeping approach. Thank you, Allison. You can find more of
Speaker 1: her reporting on the Bloomberg terminal on bloom Berg dot
Speaker 1: com or follow her on Twitter. She's Ali ver Sprill.
Speaker 1: On the next episode of Bloomberg Crypto, one of the
Speaker 1: most closely watched fights in crypto. Might sound a little obscure,
Speaker 1: but it's really important. It pits a company called Gray
Speaker 1: Scale Investments against the U S Securities and Exchange Commission,
Speaker 1: a crucial regulator in the space, and it involves so
Speaker 1: called exchange traded funds, an extremely popular type of investment vehicle,
Speaker 1: and especially at the center of it all is Bitcoin,
Speaker 1: the largest and most liquid of the cryptos Bloomberg reports are.
Speaker 1: Kasey Greifeld joined me to unravel why this fight is
Speaker 1: so important to the future of crypto markets. I'm Stacy
Speaker 1: Marie Ishmael, and this is Bloomberg Crypto, a daily podcast
Speaker 1: from Bloomberg and I Heart Radio. For more shows from
Speaker 1: I Heart Radio, visit the I Heart Radio app, Apple Podcasts,
Speaker 1: or wherever you get your podcasts. Email your questions, comments,
Speaker 1: or suggestion for the show to Crypto at Bloomberg dot net,
Speaker 1: and you'll find us on Twitter at Crypto. The supervising
Speaker 1: producer of this episode is Vicky very Galina. Associate producer
Speaker 1: is zan Ab Sudiki. Associate producer is Moses on Desta
Speaker 1: wonder At is our engineer. Original music by Leo Sidron.
Speaker 1: Bloomberg's head of podcasts is Francesca Levi.