The crypto industry might need to boost its lobbying efforts. Concerns about current political spending are understandable. For those who believe in its mission, these expenses are crucial for survival.
The cryptocurrency political action committee, Fairshake, is already gearing up for the 2026 elections. This comes even as the dust settles from the 2024 elections. Last time around, this financial backing stirred up controversy. Some called it a “flood” or a “loaded gun” aimed at lawmakers. The U.S. Securities and Exchange Commission, or SEC, even labeled it as “influence peddling.” But is the industry really overspending?
The answer is no, and here's why.
There are two main critiques regarding political spending. First, many see it as unfair. Most people lack the funds to impact election outcomes, giving the wealthy an outsized influence. This concern is valid. However, the Supreme Court ruled in 2010 that domestic entities have the constitutional right to spend unlimited amounts on independent political speech. This precedent isn’t likely to change anytime soon.
The second critique is about efficiency. Gordon Tullock's “rent-seeking” theory suggests that political spending often yields less benefit than the cost of gaining political favor. Critics argue this leads to wasteful expenditures that simply redistribute wealth without creating new value.
But here’s the twist: the spending in the crypto industry isn’t wasteful. Unlike traditional rent-seeking, money spent by groups like Fairshake protects an industry that brings societal benefits. This creates additional value. Interestingly, even Sam Bankman-Fried, the former FTX founder, pointed out that there seems to be a lack of financial investment in politics compared to the stakes involved.
In recent years, the Biden administration, especially through agencies like the SEC and the Federal Deposit Insurance Corporation, has been seen as actively working to undermine the cryptocurrency industry. This has left many legitimate crypto businesses struggling to operate legally in the U.S., despite their efforts to innovate and improve the global financial system.
Some might argue that if certain products are illegal, then regulators should enforce the law. However, this view overlooks the complexities of administrative law. Regulators have broad authority and often operate without transparency. They can determine which projects thrive or fail without clear guidelines. The SEC has repeatedly suggested that companies should “come in and register” but hasn’t provided a clear path for compliance.
Given this situation, many industry leaders viewed the 2024 election as critical for the future of cryptocurrency. If one election could determine the survival of the industry, how much should it invest to influence that outcome? The answer lies in calculating the potential future value of the industry, multiplied by the likelihood that spending will yield positive results.
While some might argue that the current value of the cryptocurrency sector is uncertain, those within the industry believe its success will ultimately benefit society. Therefore, the crypto industry could justify significant contributions to political activism in 2024, considering the immense future value at stake.
Political spending may seem unfair, but that’s a matter for the courts. In reality, industries must navigate the legal landscape they encounter. It was both reasonable and consistent for the cryptocurrency sector to engage politically in 2024, and this approach will likely continue into 2026.
Regulatory opponents within the crypto space may believe their actions are justified, just as industry advocates hold firm to their convictions. The industry’s role isn’t to worry about the broader implications of its political engagement; it’s to succeed in its objectives.