ANALYSIS-Crypto donors navigate mid-term spending dilemma after Senate bill defeat

After suffering a major legislative defeat at the hands of Senate Democrats last month, the crypto industry is grappling with a dilemma three weeks out from ​the November election: punish Democrats, or preserve the bipartisan ties it has spent years building.

During the current and previous election cycles, ​the industry has spent more than $300 million backing crypto-friendly Democrats and Republicans in roughly equal measure, ‌hoping ​to pass legislation US crypto companies say will put them on a solid legal footing and allow them to thrive. That strategy paid off with last year's new law promoting dollar-backed cryptocurrencies, but suffered a major blow last month when all Senate Democrats and a handful of Republicans voted against advancing the Clarity Act, which the industry says would have provided the legal clarity it has long lobbied ‌for.

US President Donald Trump's personal crypto ventures became a flashpoint in the bill negotiations, prompting Democrats to push for tougher restrictions on officeholders' crypto dealings. Their decision to vote against the bill despite winning many concessions angered crypto executives, while the broader fight has made crypto more of a partisan issue, said analysts. Nine Democrats are up for reelection in the Senate, including some the industry had viewed as allies. With polls showing the party has a slight edge, the crypto industry is weighing whether to continue with its bipartisan strategy in the Senate, or to reward Republicans, ‌who overwhelmingly supported Clarity, said four executives involved in the discussions.

While it's unlikely a Democratic-led Senate will pass crypto legislation, turning the midterms into a referendum on Clarity could squander years of relationship-building and alienate lawmakers who may be in power next year, some ‌executives warn. “It's a pretty hard needle to thread," said Ron Hammond, head of policy and advocacy at crypto trading firm Wintermute, adding that the big crypto spenders have been "navigating this very carefully."

CRYPTO HAS PUNISHED ADVERSARIES BEFORE Fairshake, a crypto super PAC backed by Coinbase and Ripple among others, started the year with $193 million. On Monday, it said it would back 32 House candidates spanning both parties, but has not announced a Senate strategy. It has spent on 57 races this cycle, winning many.

“Fairshake has always been and always will be an issue-focused organization. We back pro-crypto candidates who support American innovation in both parties," said spokesperson Geoff Vetter. Crypto PACs have previously targeted vulnerable adversaries. In 2024, ⁠Fairshake spent about $40 ​million successfully unseating former incumbent Ohio Senate Democrat Sherrod Brown, who criticized the ⁠industry's Washington influence. In a sign of what may come, the PAC is spending $30 million opposing his bid to return to the Senate.

Digital Freedom Fund, a super PAC backed by crypto entrepreneurs Cameron and Tyler Winklevoss, is also spending $3 million opposing Brown and supporting current Ohio Republican Senator Jon Husted, who voted for Clarity, federal filings show. It's ⁠also spending $400,000 in the race for Iowa's open Senate seat, splitting the cash between backing pro-crypto Republican Ashley Hinson and opposing her Democratic rival.

Spokespeople for the Winklevoss twins and Hinson did not respond to requests for comment. Ripple declined to comment. A spokesperson for Brown's campaign accused Husted of being "for sale." ​A Husted campaign spokesperson said Brown was "terrified of having his abysmal record splashed across TV screens."

Until recently, the industry's aggressive spending made candidates think twice about crossing it, analysts say, but executives worry it's a risky strategy, especially against incumbents. Many believe ⁠crypto can still be a bipartisan issue and that the industry should find ways to settle scores without jeopardizing those ties. Among those up for reelection, for example, are New Jersey's Cory Booker and Virginia's Mark Warner, both senior Democratic lawmakers whom the industry sees as key allies. They broadly supported crypto legislation but ultimately opposed Clarity, citing insufficient curbs on ⁠officeholder ​crypto dealings.

Warner and Booker sit on the Senate Banking and Agriculture committees respectively, which jointly drafted the bill. With both senators in relatively safe races, attacking them could backfire, executives said. Spokespeople for the senators' campaigns did not respond to requests for comment. Senate control would also hand Democrats committee oversight powers which they plan to use to probe crypto companies with ties to Trump. In what analysts said was a potentially ironic twist, there is a chance that Brown, whom recent polls put slightly ahead of Husted, could reprise his leadership ⁠of the Banking Committee if he wins.

One of the crypto executives who wished to remain anonymous said attacking Democrats "didn't do us a lot of good," and others expect the industry will ultimately focus on rewarding friends in either party. "I do think you're going to ⁠see the industry lick its wounds and get back aggressively to supporting the ⁠pro-Clarity type folks," said Josh Riezman, chief legal and strategy officer at crypto firm GSR.

Stand With Crypto, a nonprofit backed by Coinbase, has endorsed dozens of candidates and is spending on advertising in some races. Its executive director Mason Lynaugh last month warned that the Clarity vote had exposed which officials were "against" the industry. But most of its latest endorsements are for House or Senate lawmakers who voted for ‌Clarity on both sides of the aisle.

“We ‌have the potential to move the outcomes or at least play a significant factor in helping reelect these crypto champions," said Lynaugh.