On the Margin Newsletter: Crypto super PAC notches another win in the primaries

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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:

• Big crypto donors appear to be impacting Congressional races — at least so far.
• We remain on ETH ETF launch watch. An update on the latest there.
• A Congressman wants you to pay your taxes in bitcoin, but your accountant probably disagrees. We break down why.

Crypto’s deep pockets

As election season ramps up, crypto advocates and industry big shots are continuing to break out their checkbooks. So far at least, it seems to be working.

Crypto-focused super PAC Fairshake on Tuesday notched another victory when Rep. Jamaal Bowman (D-NY) lost in the primary race to Westchester County Executive George Latimer.

Fairshake spent just over $2 million this year campaigning against Bowman, Federal Election Commission filings show.

“Jamaal Bowman fought against setting clear rules of the road for the crypto and blockchain industry, and tonight he’s looking for a new job,” a Fairshake representative told Blockworks. “The crypto and blockchain community will continue to support candidates who believe in innovation and job creation, and reach across the aisle to get things done.”

In total, Fairshake — alongside associated PACs Protect Progress and Defend American Jobs — have deployed $93.6 million of capital between January 2023 and May 2024. The three groups have collectively raised $202.7 million during the same period.

Top donors include Ripple Labs ($45 million), Coinbase ($56 million) and a16z co-founders Marc Andreessen and Ben Horowitz ($44 million).

Though not all of the crypto-PAC endorsed candidates were successful during the primary season, many were.

Fairshake spent more than $10 million alone advocating against Katie Porter, the US Rep. from California who was vying for a vacant Senate seat in 2025. Porter lost in the March primaries to Rep. Adam Schiff, collecting just 14% of the votes.

The Republican-focused Defend American Jobs spent $3 million supporting West Virginia Gov. Jim Justice, who remains in the running for a US Senate seat in 2025. The PAC dolled out another $3 million to Rep. Jim Banks, currently representing Indiana’s 3rd district. Banks won the Republican primary and will also be vying for a US Senate seat in November.

Protect Progress, the Democratic arm of the trio, has so far spent the most capital ($2.7 million) backing newcomer Shomari Figures, who is running for a US House seat from Alabama.

It’s still early though, and winning a primary is only half the battle. Still, I’ll be the first to admit that I did not foresee crypto playing such a big role this election season, especially in the presidential race.

Fairshake and co. have said they will not be supporting any presidential campaign. But that has not stopped the crypto industry from broadly hopping on the Trump train.

Cameron and Tyler Winklevoss endorsed Trump last week and each pledged $1 million worth of BTC to his campaign. Because this exceeds individual contribution limits, the campaign refunded them, they later said. Trump earlier this month met with bitcoin mining execs, a gathering that participants called “monumental.”

The first Biden-Trump debate is scheduled for Thursday evening. We are curious to see if crypto comes up.

— Casey Wagner

34%

The percentage of surveyed UK adults (in both the 18-24 and 25-34 age ranges) that say crypto industry growth should be top of mind for the country’s politicians.

The results, published by crypto firm Zumo, come ahead of the UK’s July 4 general election. Roughly a third of the voters noted their concern about political advocacy for crypto after the election.

Coinbase has called on the country’s next government “to position the UK as a global hub of digital assets, tokenization and fintech.” Crypto ETPs began trading on the London Stock Exchange last month, and the Financial Conduct Authority is expected to draft a crypto licensing framework by year-end, Fortune reported.

The US election is set for a few months after the UK’s. A Grayscale Investments survey found last month that 41% of surveyed American voters are paying attention to crypto.

Ether ETF ball is in the SEC’s court

Fund issuers expect very few additional comments from the SEC on their US spot ether ETF registration statements — if any at all.

Though the SEC last month formally approved 19b-4 proposals from the exchanges on which the ETH funds would list, it has been working with fund issuers to finalize their so-called S-1 documents.

Once the agency allows these disclosure forms to go effective, the ether ETFs will have a clear path to start trading.

Because the SEC’s last round of suggested S-1 revisions were so “light,” the Commission could contact issuers “at any point” with a date for when the funds can launch, a source close to the filings told Blockworks Wednesday.

“The ball is in their court,” the person noted.

“We really don’t have an expectation because it is completely up to them now, but we are on the edge of our seats waiting,” the source added. “They can move as quickly or as slowly as they like.”

A second source familiar with the ETH fund filings noted that while issuers had not yet received additional comments from the SEC after the latest S-1 adjustments, at least one more round could be coming.

“The timeline to launch is not clear, but we reasonably expect it would be in the next two to three weeks,” that person added.

Among the small items some issuers have not yet added to their S-1s are the planned fees. Only Franklin Templeton and VanEck have revealed those, at 0.19% and 0.20%, respectively.

— Ben Strack

The endless tax cycle

Republican Rep. Matt Gaetz from Florida introduced a bill Tuesday that would require the IRS to accept bitcoin as payment for federal income taxes.

In a press release, Gaetz said he was inspired by El Salvador, where he met with President Nayib Bukele last month.

El Salvador, which became the first country to adopt bitcoin as legal tender in 2021, “has helped promote financial stability and job creation in Central America” by embracing BTC, Gaetz said.

(We will add that local reports suggest adoption there is not yet widespread. A January poll by Central American University found that 85% of residents had not used bitcoin at all during 2023.)

While bitcoin maxis rejoiced upon learning of the new bill, my first thought was that this all sounds complicated. Using appreciated (or depreciated, for that matter) bitcoin to pay taxes creates (you guessed it) another taxable event. It’s a never-ending cycle.

Colorado has already been giving crypto tax payments a try. It became the first US state to accept crypto assets (bitcoin, bitcoin cash, ether and litecoin) for tax payments in 2022, citing smaller fees associated with crypto payments. The option has not yet gained traction, with only 11 citizens choosing to use crypto last tax season.

“It could potentially be easier to make large payments over crypto versus sending a check; maybe for someone that lives mostly onchain it would make sense,” Taxing Cryptocurrency owner Jordan Bass told Blockworks when Colorado introduced the policy. “It sounds cool, making Colorado more blockchain-friendly, but I see this as maybe only benefiting a select few.”

There’s not much reason to give the federal proposal too much thought now, though. With the election looming and a divided Congress, the odds of Gaetz’s bill passing are very slim.

— Casey Wagner

Bulletin Board

• BTC price action settled down Wednesday, with the asset trading at roughly $61,050 at 2 pm ET — down about 1% on the day. ETH saw a similar mild dip, hovering around $3,360 at that time.
• The US Department of State said Wednesday it is offering a $5 million reward for Ruja Ignatova — the so-called “Crypto Queen” indicted in 2017. Accused of defrauding investors by promoting OneCoin as an investment, Ignatova has reportedly been on the run ever since.
• Pine Brook Capital Management founder David Cervantes joined Blockworks’ Felix Jauvin to discuss the recession outlook and whether stocks will continue to grind higher.

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