Photo credit: www.cbsnews.com
In the wake of significant gains in the cryptocurrency market following the 2024 elections, Brad Garlinghouse, the CEO of Ripple, has revealed that his company has pledged $25 million to support an industry super PAC ahead of the 2026 midterm elections. The surge in cryptocurrency values, including Bitcoin and XRP, has heightened Ripple’s commitment to influence electoral outcomes.
Data indicates that cryptocurrency companies were responsible for a substantial one-third of all direct corporate donations to super PACs during the 2024 electoral cycle. Among the 62 candidates—29 Republicans and 33 Democrats—supported by the crypto sector, an impressive 85% were victorious, a trend Garlinghouse views as a pivotal success for the industry.
“People are questioning why these companies decided to collaborate and assert that this is important. It’s a direct response to what many perceive as a systematic attack on the crypto sector,” Garlinghouse remarked.
The Perceived Attack on Crypto
The founding of Fairshake, an industry super PAC, in 2023 by Ripple and two other firms was largely motivated by the stance of the Securities and Exchange Commission (SEC) regarding the crypto industry. SEC Chair Gary Gensler, who is set to leave his position next month, has been a leading figure in the federal crackdown on cryptocurrency companies, having initiated over 120 lawsuits against them.
The SEC first sued Ripple in December 2020 during the closing days of the Trump administration, alleging that the sale of XRP amounted to an unregistered security offering. Garlinghouse asserted that Ripple has incurred over $150 million in legal expenses contesting the SEC’s claims, insisting that XRP should not be classified under the same regulatory umbrella as traditional securities.
“Having attended Harvard Business School, I consider myself fairly knowledgeable regarding the definition of a security. It never occurred to me that XRP could be viewed as one,” said Garlinghouse.
He added that the formation of Fairshake was highly unlikely without the significant challenges posed by Gensler’s regulatory approach.
In response, an SEC spokesperson stated, “The legal defenses undertaken by the crypto industry, as well as their lobbying efforts, are dwarfed by the financial losses suffered by investors due to frauds and failures in the crypto market.”
Underlying Issues with the SEC’s Stance
John Reed Stark, a former SEC enforcement chief, opined that while he does not own cryptocurrencies nor has he been involved with the industry, he anticipates a less adversarial stance from the SEC under the upcoming Republican administration. However, he maintains that the SEC’s actions during the Biden administration were justified.
“Cryptocurrency poses significant risks and lacks societal value; it is regressive,” Stark contended. “Its nature facilitates criminal activities such as ransomware attacks, human trafficking, and money laundering.”
He pointed to the infamous collapse of the FTX exchange and the subsequent conviction of its founder, Sam Bankman-Fried, as a stark reminder of operational failures due to inadequate regulatory frameworks. The FTX debacle resulted in the loss of $8 billion in customer funds, many of which were beyond the jurisdiction of U.S. regulators.
Garlinghouse, however, views the crypto industry in a different light, stating, “While Bankman-Fried’s actions were criminal, they do not reflect on the integrity of all market participants. Numerous legitimate enterprises exist within the cryptocurrency space.”
Ripple employs around 900 individuals and is developing means to streamline cross-border money transfers using XRP. The company has also sold XRP to investors, who now trade it on various exchanges.
Political Engagement of the Crypto Industry
The scale of financial commitment by the cryptocurrency sector during the recent election cycle is unprecedented. Ripple alone contributed $48 million to political action committees that supported pro-crypto candidates from both parties.
A notable instance during the Ohio Senate race saw Republican Bernie Moreno benefiting from $40 million in favorable advertising funded by a crypto super PAC, which ultimately helped him secure victory over incumbent Democratic Senator Sherrod Brown, a known critic of cryptocurrencies.
“It’s clear to me that the substantial financial input into the Ohio campaign influenced its outcome,” Garlinghouse remarked.
According to him, these contributions served to educate voters regarding cryptocurrency and emphasize the importance of technology that benefits society. “Citizens should advocate for lawmakers who are receptive to innovations that can enhance public welfare,” he added.
Future Regulatory Environment
With President-elect Donald Trump announcing intentions to nominate Paul Atkins, a former SEC commissioner with a consulting history in crypto, to lead the SEC, the regulatory landscape may be poised for change. Atkins is anticipated to adopt a more lenient stance compared to Gensler.
Stark, despite his reservations regarding cryptocurrencies, acknowledges that the election results depict a public mandate for regulatory leniency in the sector. He stated, “The feedback from voters indicates a clear message: it’s time for the SEC to ease its enforcement against crypto.”
Trump’s Cabinet selections, which include those who have expressed favorable views of cryptocurrency, further support this shift. Recently, Trump announced his involvement in a new cryptocurrency venture, World Liberty Financial, raising questions about potential conflicts of interest.
When confronted with this concern, Garlinghouse noted, “Regardless of any potential conflicts, voters made their preference clear through the election results. Their voice carries more weight than any single opinion, including mine.”
Advocating for Clear Regulations
Garlinghouse emphasized that his strategy for investing in the political arena is aimed at establishing concrete regulations for the cryptocurrency market. He insists that clarity in regulatory frameworks is essential for the industry’s growth.
“Our goal is not to evade regulation but to receive a structured legal framework,” he explained, calling on Congress to create comprehensive guidelines for the management of digital assets.
Recently, the FIT21 bill, which gained bipartisan support, passed in the House, aiming to redefine the regulatory landscape for digital currencies. This legislation would delegate greater regulatory authority over cryptocurrencies to the Commodity Futures Trading Commission (CFTC) while still allowing the SEC a role in oversight.
Stark pointed out the differences between the two agencies, describing the SEC as focused on investor protection, whereas the CFTC is geared towards ensuring market integrity. “Given the implications, it’s understandable why the crypto industry would prefer regulation under the CFTC, which presents a more accommodating framework,” he stated.
The bipartisan passage of FIT21 reflects a growing acknowledgment among lawmakers of the need for clear regulations to address existing uncertainties within the cryptocurrency market. While future moves regarding FIT21 remain uncertain as the new Congress convenes, both sides recognize the necessity of regulatory measures to fill current gaps and prevent further complications in an already complex marketplace.
Source
www.cbsnews.com