How cryptocurrency executives helped decide the California Senate primary

In the days leading up to the California Senate primary, political ads calling Rep. Katie Porter (D-Irvine) a fake, an actress and a hypocrite flooded social media platforms and television shows.

He 10 million dollar bill for the ads, which were designed to knock Porter out of the running for a rare open Senate seatIt was backed by a super PAC called Fairshake that is funded by cryptocurrency companies and their executives.

As the primary results came in, it was shown that Porter a distant third behind Representative Adam B. Schiff of Burbank and Republican Steve GarveyFairshake boasted that the Orange County lawmaker's alliance with his mentor, Sen. Elizabeth Warren (D-Mass.), an outspoken cryptocurrency skeptic, had "ended his career in Congress."

Porter later attributed his loss to "an avalanche of billionaires who spent millions to rig this election," a not-so-subtle allusion to the crypto group's major donors.

After two years of bad headlines, including the conviction of FTX founder Sam Bankman-Fried on fraud chargesthe cryptocurrency industry is back in the political arena, showing off its significant cash reserves in the 2024 election cycle. The California Senate race is one of many where the industry has signaled it will boost candidates who support more favorable crypto laws in Washington and will expel those who do not.

"That amount of money buys you a seat at the political table in Washington, D.C., and that's their goal," said Dennis Kelleher, CEO and co-founder of Better Markets, a financial watchdog group that has been a frequent opponent of the crypto industry in Washington.

The Securities and Exchange Commission has argued in court that cryptocurrencies should be regulated like stocks and bonds, which would require trading companies to follow a wide range of disclosure and investor protection laws. The industry has pushed for more favorable regulationsincluding allowing markets to be regulated by the smaller Commodity Futures Trading Commission.

Fairshake was the largest external spender in the Senate primaries, but to what extent the situation changed is a matter of debate. Schiff and his allies spent lavishly to boost Garvey among Republican voters, blanketing the state with ads that described the retired baseball star as a two-time Trump voter and “too conservative for California.”

Under California's unusual primary system, the two candidates who receive the most votes in the primary advance to the November election, regardless of their political affiliation. Schiff's team bet that in a deeply Democratic state, his path to victory would be easier if he faced a Republican.

“When you look at everything else going on in that race, I'm extremely skeptical that they had any impact,” Kelleher said of the cryptocurrency announcements. He cited Schiff's campaign strategy of boosting Garvey and significant support from Democratic Party leaders, including Speaker Emeritus Nancy Pelosi (D-San Francisco), as well as Schiff's long resume and Porter's status as a relative newcomer. in Democratic politics.

Polls the week before the election found Garvey and Schiff in a fight for first, although Porter received a smaller proportion of the vote than polls predicted. The November vote will decide who will fill the remainder of the late Dianne Feinstein's term in the Senate, as well as a six-year term that begins in 2025.

Sawyer Hackett, spokesman for the Progressive Change Campaign Committee, which endorsed Porter, said the $10 million ad buy "likely contributed a significant amount" to Porter's loss. In California's expensive media markets, he said, $10 million doesn't win or lose a race, but "it's certainly an important factor, especially when you're talking about the final weeks of the election, when Democratic voters are considering their options." they have ahead of them." from them."

He said he wasn't surprised to see the cryptocurrency industry turn out against Porter, who has a "somewhat minor" track record on cryptocurrency issues but has proven willing to take on major industries to defend consumers. The crypto industry, she said, is "targeting candidates with an overall brand that appears to focus on antitrust and pro-consumer policies."

Fairshake's top donors include venture capital giants Marc Andreessen and Ben Horowitz, who have invested in dozens of crypto companies; cryptocurrency investors Cameron and Tyler Winklevoss; and Brian Armstrong, CEO of Nasdaq-listed Coinbase. .

Coinbase, which has the highest trading volume of any crypto exchange in the US, is working this year to ensure that "candidates and incumbents continue to think about cryptocurrencies as an opportunity to really make a difference for change, protect jobs, protect national security,” said Kara Calvert, the company’s head of U.S. policy.

Coinbase will work to “educate” members of Congress through November, he said, so that “when they are asked about cryptocurrencies at a town hall, or when Fairshake or any of the rest of these organizations ask them about cryptocurrencies, they know what they are talking".

The afternoon before Election Day, a group called Stand With Crypto organized a rally to get out the vote for cryptocurrency owners in Los Angeles. A line stretched around the block on the Hollywood Walk of Fame outside the Bourbon Room bar for an event headlined by rapper Nas, who was an early investor in Coinbase.

Inside, as guests ate sandwiches and drank Sofia Coppola wine, Armstrong told the crowd they needed to vote to send a "very clear message" for the November election that "you have to understand innovation, you have to be professional". -technology, pro-innovation, pro-crypto, to be elected and represent our values ​​in California.”

Armstrong did not name any California Senate candidates, instead directing voters to a guide prepared by Stand With Crypto, which, as a 501(c)4 political nonprofit, is not required to disclose its donors. The guide described Schiff as “strongly supportive” of cryptocurrencies and Porter as “strongly against.” Garvey and Rep. Barbara Lee of Oakland, the other candidates in the race, are listed as “pending,” with a question mark icon.

Porter's "F" grade cited three references, including a post on X, formerly Twitter, in which he called Fairshake's sponsors "shady crypto millionaires"due to his ad campaign against him, as well as his signature on a 2022 letter Warren sent to the Texas power grid authority, interrogation its practice of paying crypto mining companies to turn off power during peak periods. Some companies reported earning more from payments than from their mining operations, Warren wrote.

Stand With Crypto also said Porter voted "no" last summer in the House finance committee on an industry-favored cryptocurrency bill. But Porter is not a member of that committee and his name does not appear on the voting sheet. Porter did not vote on the legislation, his spokeswoman said.

Schiff's "A" grade on crypto issues was attributed to a single statement on his campaign website that said the US needs to "develop comprehensive regulatory frameworks" to ensure cryptocurrency and blockchain companies "stay here." and grow here, and that the United States remains the world leader in these important new technologies.”

Schiff told reporters during a campaign stop in San Francisco last week that he supports “clear rules of the road” and “robust regulation” for cryptocurrency companies that protect consumers but keep the companies in the US. .

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