Crypto could justifiably spend even more on lobbying

Opinion by: Aaron Brogan, founder of Brogan Law.

We are in a new age. The sound and fury of 2024 is behind us, but that only means the next election is approaching. Fittingly, the cryptocurrency political action committee (PAC) Fairshake is already raising for 2026. Last cycle, this money was controversial, being described variously as a “flood” and a “loaded gun” pointed at lawmakers. The US Securities and Exchange Commission itself called it “influence peddling.” This unspecific grousing belies a sharper concern. Is the cryptocurrency industry spending too much? Is this all wrong? 

It’s not. Here’s why. 

There are two main critiques of political spending. First, it is unfair because most people do not have enough money to affect outcomes in any election through expenditures, so the rich — individuals and entities — gain outsized political influence. That is valid, but the Supreme Court decided in 2010’s Citizens United v. Federal Election Commission that domestic entities have a constitutional right to spend unlimited sums on independent political speech, which is not changing soon. For better or worse, this is the world we live in.

The second critique is that it is inefficient — Gordon Tullock’s famous “rent-seeking” theory. In this view, political spending costs less than the corresponding gain in political favor. So, actors spend money to attract transfers that move money around society without producing anything new. This process, they say, is wasteful.

Safeguarding the industry

The cryptocurrency industry’s spending is not wasteful. Unlike traditional rent-seeking, money spent by groups like Fairshake isn’t merely redistributive — it safeguards an industry that benefits society and thereby creates marginal social value. Ironically, this view might have first been articulated by disgraced FTX founder Sam Bankman-Fried, who reportedly told the journalist Michael Lewis, “It just seems like there isn’t enough money in politics. People are undergoing it. The weird thing is that Warren Buffett isn’t giving two billion dollars a year.” Spending millions of dollars to unlock billions is simply a net positive. 

Recent: What role did crypto voters play in the 2024 US election?

Here’s the reality: It was repeatedly demonstrated that the Biden administration, particularly administrative agencies like the SEC and the Federal Deposit Insurance Corporation, made a coordinated effort to damage the cryptocurrency industry and succeeded. The past few years have been a wasteland of cryptocurrency businesses run by honest brokers who earnestly try to develop products to improve the global financial system but have no path to domestic legality. 

Cryptocurrency’s opponents in the administrative state continued to writhe until the bitter end — and it could happen again. 

Sure, a credulous observer might respond, “If these products are illegal, then these agencies should enforce the law,” but this view misunderstands administrative law. Financial regulation is so broad and agency operations are so opaque that regulators have effective plenary authority to decide what projects live and die. These aren’t the scales of justice; it’s the eye of Sauron.

These unelected bureaucrats didn’t make their case to the marketplace of ideas in the light of day — they hid behind third parties and refused to promulgate rules. The SEC repeatedly signaled that entities should “come in and register” without providing a path. There was no way to negotiate or persuade. Political speech was the only realistic lever available.

Supporting the industry

Knowing this, many industry leaders believed the 2024 election was existential for cryptocurrency. Consider the question as a utilitarian: If one election could determine whether an industry would live or die, how much should that industry be willing to spend to influence that election? The answer is not philosophical. It’s math; if spending linearly improves the industry’s political prospects, the industry should be willing to spend an amount equal to the net present value of the industry’s future multiplied by the probability that the spending will save it (minus $1 to keep the expected value positive). 

Is this too formulaic? After all, who knows what the net present value of the cryptocurrency industry is anyway? Contrarians and skeptics could argue that it is neutral, even negative. That may be a matter of debate, but not from within the industry. If one believes in the industry, one should also think its flourishing will be a net positive for the world.

Accepting this prior, the cryptocurrency industry in 2024 could have efficiently contributed almost anything to political activism. If this was a life-or-death inflection point with trillions of future value on the line, then the incremental dollar spent had an extraordinary marginal return. With its back to the wall, crypto had everything to gain. 

This is the point. Political spending may be unfair, but that is ultimately a question for the courts. In the real world, industries must make decisions in the legal environment they inherit. It was both intellectually honest and internally consistent for the cryptocurrency industry to do so in 2024, and given the fragile regulatory status of this industry, it will be in 2026, too. 

Many of the cryptocurrency industry’s regulatory opponents believe their actions are correct. But the industry believes it is right, too. It’s not the industry’s job to hand-wring over the systemic consequences of its approach to political advocacy. Its job is to win. 

Opinion by: Aaron Brogan, founder of Brogan Law.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.