How cryptocurrency executives helped decide the California Senate primary

In the days before the California Senate primary, political ads calling Rep. Katie Porter (D-Irvine) a fake, an actor and a hypocrite inundated social media platforms and television programs.

The $10-million bill for the advertisements, which were designed to bump Porter out of the race for a rare open Senate seat, was footed by a super PAC called Fairshake that is funded by cryptocurrency companies and their executives.

As primary results rolled in that showed Porter a distant third behind Rep. Adam B. Schiff of Burbank and Republican Steve Garvey, Fairshake boasted that the Orange County lawmaker’s alliance with mentor Sen. Elizabeth Warren (D-Mass.), a vocal skeptic of cryptocurrency, had “ended her career in Congress.”

Porter later blamed her loss on “an onslaught of billionaires spending millions to rig this election,” a not-too-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 charges, the cryptocurrency industry is back in the political arena, flexing its significant cash reserves in the 2024 election cycle. The California Senate race is one of many in which the industry has signaled that it will boost candidates who support more favorable crypto laws in Washington, and oust those who don’t.

“That amount of money buys you a seat at the political table in Washington, D.C., and that’s their goal,” said Dennis Kelleher, chief executive 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 asserted in court that cryptocurrency should be regulated like stocks and bonds, which would require trading firms to follow a wide range of disclosure and investor protection laws. The industry has lobbied for more favorable regulations, including allowing the markets to be regulated by the smaller Commodity Futures Trading Commission.

Fairshake was the largest outside spender in the Senate primary, but to what extent it moved the needle is a matter of debate. Schiff and his allies spent prodigiously to boost Garvey among Republican voters, blanketing the state with ads that described the retired baseball star as a two-time Trump voter who was “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 gambled that in a deep-blue 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 ads. He cited Schiff’s campaign strategy of boosting Garvey and the major support from leaders in the Democratic Party, including Speaker Emerita Nancy Pelosi (D-San Francisco), as well as Schiff’s long resume and Porter’s status as a relative newcomer in Democratic politics.

Polling from the week before the election found Garvey and Schiff in a fight for first, although Porter received a lower share of votes than polls predicted. Who will fill the remainder of the late Dianne Feinstein’s term in the Senate, as well as a six-year term that starts in 2025, will be decided on the November ballot.

Sawyer Hackett, a spokesman for the Progressive Change Campaign Committee, which backed Porter, said the $10-million ad buy “probably contributed a significant amount” to Porter’s loss. In California’s costly media markets, he said, $10 million doesn’t win or lose a race, but “it’s certainly a major factor, especially when you’re talking about the final weeks of the election when Democratic voters are considering the options in front of them.”

He said he wasn’t surprised to see the crypto industry spending against Porter, who has a “somewhat minor” track record on crypto issues but has proved herself willing to take on major industries to defend consumers. The crypto industry, he said, is “targeting candidates with an overall brand that seems to be focused on antitrust and pro-consumer policy.”

Fairshake’s major donors include venture capital giants Marc Andreessen and Ben Horowitz, who have invested in dozens of crypto companies; crypto investors Cameron and Tyler Winklevoss; and Brian Armstrong, the chief executive of Coinbase, which is listed on the Nasdaq market.

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

Coinbase will be working to “educate” members of Congress through November, she said, so that “when they get asked about crypto at a town hall, or when they get asked about crypto by Fairshake, or by any of the rest of these organizations, that they know what they’re talking about.”

On the afternoon before election day, a group called Stand With Crypto hosted a get-out-the-vote rally for crypto owners in Los Angeles. A line stretched around the block on Hollywood’s Walk of Fame outside the Bourbon Room bar for an event headlined by the rapper Nas, who was an early investor in Coinbase.

Inside, as guests ate sliders and drank Sofia Coppola wine, Armstrong told the crowd that they needed to vote to send a “very clear message” for the November election that “you’ve got to understand innovation, you’ve got to be pro-tech, pro-innovation, pro-crypto, to get elected and be representing our values in California.”

Armstrong didn’t name any California Senate candidates, instead directing voters to a guide prepared by Stand With Crypto, which, as a political 501(c)4 nonprofit organization, is not required to disclose its donors. The guide described Schiff as “strongly supportive” of crypto 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” rating cited three references, including a post on X, formerly Twitter, in which she called Fairshake’s backers “shadowy crypto billionaires” because of their ad campaign against her, as well as her signature on a 2022 letter that Warren sent to the Texas power grid authority, questioning its practice of paying crypto mining businesses to shut off power during peak periods. Some companies reported earning more from the payments than from their mining operations, Warren wrote.

Stand With Crypto also said Porter voted “nay” last summer in the House finance committee markup of a cryptocurrency bill favored by the industry. But Porter isn’t a member of that committee and her name does not appear on the vote sheet. Porter did not vote on the legislation, her spokeswoman said.

Schiff’s “A” rating on crypto issues was attributed to a single statement on his campaign website that said the U.S. needs to “develop comprehensive regulatory frameworks” to ensure that cryptocurrency and blockchain companies “stay here and grow here, and that the United States remains the global 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 “sound regulation” for cryptocurrency companies that protect consumers but keep the firms in the U.S.

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