Why crypto matters in the midterms

Politico

22-07-2025

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Quick Fix
An esoteric financial regulatory issue has suddenly become an urgent consideration for lawmakers facing competitive races in the 2026 midterm elections.
Super PAC money amassed by cryptocurrency companies that are lobbying for legislation aimed at making digital assets mainstream is threatening to shake up congressional races across the country and inject sensitive political considerations into Capitol Hill's crypto policy debate.
The peril posed by the campaign cash helped deliver digital asset companies a pair of big wins last week when a larger-than-expected bloc of Democrats sided with Republicans on the House floor to help advance legislation that would legitimize digital assets. One bill creating new rules for so-called stablecoins is now law, but the campaign money is still looming large over Capitol Hill as lawmakers consider a second, broader market structure measure that is pending in the Senate.
'They make oil look like salad oil when it comes to the amount of money they spend,' said Rep. Brad Sherman (D-Calif.), a leading critic of the crypto sector who could become a target of the industry's campaign spending next year. 'They're the biggest by far.'
The campaign finance strategy illustrates how crypto firms have brazenly used political spending to ascend as a major force in Washington, where regulators and lawmakers alike are embracing digital assets more than ever before.
The crypto funds are primarily wielded by a super PAC network known as Fairshake, which said prior to the House votes last week that it will enter the midterms with more than $140 million in the bank. The group — which includes three affiliated super PACs — emerged as a major force in the 2024 elections, when it spent more than $130 million supporting industry allies and taking down critics in congressional races across the country.
Republicans are almost uniformly on board with the industry's legislative agenda, so the money now looms especially large for Democrats, who are split over the issue. Dozens of Democrats benefited from crypto PAC spending last year, but the industry also went after members of the party who were seen as roadblocks to the industry's agenda. The group spent more than $40 million to help defeat former Senate Banking Chair Sherrod Brown, a key crypto critic who lost his Ohio re-election campaign to Republican Bernie Moreno — a crypto enthusiast.
Lawmakers who are facing competitive 2026 re-election campaigns or seeking higher office now have to weigh the possibility that the replenished PAC war chest could be wielded against them if they oppose the industry's goals — or in support of their campaigns if they get on board.
Seventy-eight Democrats voted last week for a crypto market structure proposal that Fairshake and its affiliates have signaled will be their primary consideration when they deploy their 2026 haul. A similar measure passed in the House last year got 71 Democratic votes. The Democratic 'yes' votes on the bill included many so-called front-liners who represent competitive districts — a sign that the super PACs are already having an impact.
The sweeping proposal, known as the CLARITY Act, is the top priority for most crypto firms — including Fairshake's leading donors: the venture capital giant Andreessen Horowitz and the digital asset firms Coinbase and Ripple.
The rising influence of crypto companies is a major concern for industry skeptics and consumer watchdogs who warn that the industry's super PAC spending and lobbying have warped the policy debate. After the House votes last week, Bartlett Naylor, a financial policy advocate at the watchdog group Public Citizen, accused lawmakers of piling 'venality onto perversion onto corruption' and surrendering to an 'onslaught of crypto political spending.'
A spokesperson for Fairshake, Josh Vlasto, said the 'progress we are seeing reflects a growing understanding of the need for clear rules to protect consumers and unlock American enterprise.' Crypto executives have attributed recent successes to grassroots support from their users.
Rep. Warren Davidson, an Ohio Republican who was one of the crypto industry's earliest allies in Congress, said the sector was 'slow to recognize the role that that plays in shaping policy and what members of the House and Senate pay attention to.'
'To get something across the finish line, I think they realized, hey, you're going to have to spend money because the people that have been blocking them have spent a lot of money for a long time,' he said.
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Driving the day
Federal Reserve Chair Jerome Powell and Fed Vice Chair for Supervision Michelle Bowman speak at the Integrated Review of the Capital Framework for Large Banks Conference, which kicks off at 8:30 a.m. … World Bank President Ajay Banga speaks at the Center for Global Development's conference on development economies at 9:10 a.m. … Senate Finance Committee meets at 9:45 a.m. to mark up the nominations of Joseph Barloon to be a deputy U.S. Trade Representative in the Geneva Office and Brian Morrissey Jr. to be general counsel at Treasury … The Securities and Exchange Commission holds a meeting of the Small Business Capital Formation Advisory Committee at 10 a.m. … Senate Finance holds a hearing on the nominations of Jonathan McKernan to be Treasury undersecretary and Alex Adams to be assistant Health and Human Services secretary for family support …
Powell latest — The White House continued to signal Monday that President Donald Trump won't seek to fire Federal Reserve Chair Jerome Powell. But that doesn't mean the central bank chief's problems are going away.
—Treasury Secretary Scott Bessent on Monday called on the Federal Reserve to do an institution-wide review of whether it is achieving its mission, Victoria Guida reports. 'What we need to do is examine the entire Federal Reserve institution and whether they have been successful,' Bessent said on CNBC.
—On Capitol Hill, Victoria and Jordain Carney write that Senate Majority Leader John Thune said the Fed should remain politically independent but called for oversight of the central bank's expensive headquarter renovations.
Thune told reporters he didn't know whether Powell could be fired over his management of the building upgrades, where costs have ballooned to $2.5 billion, but said when it comes to interest rates, the Fed is historically shielded from politics.
—Meanwhile, the Fed 'took additional steps to defend the renovations underway at its headquarters in Washington,' Colby Smith writes in the NYT: 'The central bank published a virtual tour of the active construction site on Monday, including footage of asbestos caulking being removed and blast resistant windows being installed. The Fed, which has said it has scaled back its initial plans, highlighted changes made to a 2021 proposal submitted to a little-known planning board.'
On Wall Street
'Not innovation' — GOP megadonor Ken Griffin's trading powerhouse, Citadel Securities, is firing a shot across the bow at cryptocurrency firms that want Wall Street regulators to let them trade blockchain-based versions of U.S. stocks without fretting about all the rules that govern stock trading today, Declan Harty reports.
In a letter, Citadel Securities pressed the SEC on Monday to treat tokenized U.S. stocks 'in the same manner' as traditional stocks — the latest warning from a traditional financial giant about the crypto-led push.
'Simply put, while we strongly support technological innovations designed to address market inefficiencies, seeking to exploit regulatory arbitrage for 'look-a-like' securities is not innovation,' wrote Stephen Berger, global head of government and regulatory policy for Citadel Securities.
At the regulators
New PCAOB chief — The SEC on Monday named Public Company Accounting Oversight Board member George Botic to lead the audit watchdog on an acting basis, Declan reports.
Botic, a certified public accountant, will succeed PCAOB Chair Erica Williams after she officially steps down Tuesday. Williams said last week that she would leave after SEC Chair Paul Atkins asked for her resignation, citing a desire to go in a new direction.
On the Hill
House passes financial services bills — The House passed a slew of bipartisan bills on Monday that are aimed at expanding investor access to private markets, increasing monitoring of foreign countries regarding U.S. financial services and tailoring SEC rules, Katherine Hapgood writes.
Financial services funding plan advances — House Republican appropriators voted Monday evening to advance their fiscal 2026 funding bill for the Treasury Department, the Judiciary and the IRS, as well as federal support for Washington, D.C. The Financial Services subcommittee approved the measure in a 9-6 vote, sending it to the full committee for action, Katherine Tully-McManus and Jennifer Scholtes report. The bill proposes $23.3 billion, an 8 percent decrease to current funding, with the Treasury Department facing a steep cut of 20 percent.
Not today — The Senate Agriculture Committee canceled a Monday vote to advance Brian Quintenz's nomination to be President Donald Trump's Commodity Futures Trading Commission chair, Declan reports.
GOP megabill's final score — Over the next decade, the GOP megabill Trump signed on July 4 would increase the federal deficit by $3.4 trillion and cause 10 million people to lose health insurance, the Congressional Budget Office forecasted Monday, per Jennifer Scholtes, Robert King and Benjamin Guggenheim. While the newly enacted legislation would save more than $1 trillion by cutting federal spending on health care — with the majority coming from Medicaid — CBO predicts that the package's costs will far outweigh its savings.
Jobs report
The Bank Policy Institute has hired Evan Sekeris and Daniel Grodzicki as senior vice president and senior economists for their research team. The bank group has also hired Laurence (Laurie) Bristow as a vice president and research associate.
Loughlin Cleary has rejoined the Independent Community Bankers of America as EVP for member relations. He most recently was president and national sales director for Lenders Cooperative.