If anything could kickstart the stalled effort to reform the role of money in politics, one might think it would be an epic scandal involving an overnight billionaire who suddenly became one of the biggest political donors in the world. nation.
But while the collapse of Sam Bankman-Fried’s crypto empire is already sparking change in the crypto industry and beyond, it is unlikely to change the loophole-ridden campaign finance rules that allowed the 30-year-old executive of a controversial new industry buy friends and influencers in Washington, despite widespread public frustration with perceived corruption, any time soon.
“I don’t think it’s going to change anything in Washington,” said Lawrence Lessig, a Harvard law professor and activist who ran for president in 2016 as a protest candidate to push for campaign finance reform. “The reality is that Congress likes to have access to big money. It’s an insider’s game that everyone is happy to play.”
Even critics of money in politics accepted the Bankman-Fried checks, including a major campaign finance watchdog group and progressive lawmakers allied with Sen. Bernie Sanders, I-Vt.
For example, the Campaign Legal Center, a leading Washington group that has pushed for reform for two decades after being founded by a former Federal Election Commission chairman, took $2.5 million from Bankman-Fried, which it now says it will return because “alleged Bankman-Fried’s actions…betray CLC’s mission.”
The group told NBC News that it took the money from Bankman-Fried after a “careful investigation” that included “checking with other nonprofit organizations that vouched for its apparent legitimacy at the time.”
“We cannot change the past, but we can change the future,” the group said in a statement. “CLC will now move forward, continuing the work of decades to ensure that all eligible voters can participate in and influence the democratic process.”
A sense of pessimism has set in after repeated attempts at change have died in Congress in the 13 years since the Supreme Court opened the floodgates to unlimited and undisclosed donations of “dark money.” Meanwhile, the Democratic Party, which has long championed campaign finance reform, has gotten so good at the game that it used more dark money than the Republicans during the 2020 presidential campaign. overhauling elections and campaign finance, HR 1, never had a real chance of getting out of Congress and stalled like many bills before it.
“We all wish we could fly like Superman, but we don’t jump off tall buildings,” Lessig said, summing up why so few have pushed for change since Bankman-Fried’s arrest.
Bankman-Fried, now awaiting trial on fraud and money laundering charges related to the collapse of the cryptocurrency exchange he ran, FTX, distributed his money widely when he became a Democrat. second largest donor in 2022 and pondered spending $1 billion in 2024, which would have easily made him the largest political donor in American history.
He was also charged with campaign finance violations, allegedly using “fake donors” to circumvent contribution limits by giving money to allies who would then donate to politicians in their own name.
Lawmakers and regulators have moved quickly to impose new rules on the cryptocurrency industry, but there has been little discussion, let alone action, in Washington to prevent the next Bankman-Frieds from using their wealth to skew politics toward their interests. personal.
No campaign finance bills have been introduced in the new Congress, there are no new policies from regulators and there has been little discussion of reform.
Lawmakers who received campaign cash from Bankman-Fried and other FTX executives have collectively shrugged about the system in general, even as some donate the equivalent of their contributions to charities or wait for the legal case to play out. reimburse FTX customers.
Speaking to NBC News on condition of anonymity, a member of Congress to whom Bankman-Fried made a donation said he never spoke to Bankman-Fried and instead believes he was a beneficiary of his funding because of a working relationship he had. with Bankman-Fried’s brother. , Gabe, and his organization Guarding Against Pandemics. (Some critics insisted on NBC News that Bankman-Fried’s pandemic-preparedness efforts were nothing more than a way to generate good publicity that, in the end, was helpful in advancing her crypto agenda.)
“I’m not sure what we could have done differently,” the lawmaker said. “I probably have tens of thousands of contributors… I don’t have intimate knowledge of every person who contributes.”
“So if someone had known it was a fraud, no one would have accepted their contribution,” the legislator continued. “I feel like any time you accept a contribution from a person, there’s a risk that the person isn’t who they say they are. And I’m not clear on how to escape that risk.” While he can stop fundraising, the lawmaker said, that wouldn’t be practical.
The pervasive influence of big money in politics has contributed to a negative view of the political system for many Americans.
Surveys, including some commissioned by Campaign Legal CenterA: It shows that the overwhelming majority of Americans believe that there is too much money in politics. Large portions of voters in both parties view the system as corrupt and unresponsive to ordinary Americans.
“I’m disheartened that this hasn’t been a topic of conversation more. It should be. But I’m not that surprised,” Sheila Krumholz, executive director of OpenSecrets, which tracks political donations, said of the use of Bankman-Fried. of the campaign finance system. “This is yet another example of how lax campaign finance rules allow someone with money to express weight and build influence and maybe it’s not gaining traction because it’s just one of many stories like this.”
“I fear and I believe that the political class, and really the American public, to the extent that they are concerned about this, are getting used to these stories,” Krumholz added. “I’m not saying that all hope is lost. But as time goes by, any rule or status takes hold and the norm, we run the risk of it just being accepted.”
Still, some activists believe Bankman-Fried’s demise could create a once-in-a-lifetime opportunity for normally skeptical Republicans to rally behind reform, as Bankman-Fried primarily supported Democrats.
Bill Cortese, a Republican campaign veteran who is now executive director of American Promise, a multipartisan nonprofit group advocating for a constitutional amendment that would allow states to individually regulate federal campaigns within their borders, said the latest scandal may be just what’s going on. necessary for the ball to roll.
“I think Republicans are waking up to say, ‘Listen, this is something the dynamic here has changed,’” he said. “It’s something we need to be aware of. And something we need to be concerned about and potentially address now that they’re in control of at least one body in DC.”
Jeff Hauser, founder and director of the Revolving Door Project, said he believes the Bankman-Fried scandal could lead to more targeted reforms around front donor donors, a major piece of the Bankman-Fried prosecution, and how think tanks and others influence groups groups raise money.
“I don’t think they will become law in 2023,” he said. “But I think there will be a response that will lead to reforms that will become law the next time an even bigger scandal occurs.
“I feel like we’re on the cusp,” he continued. “There are a lot of reforms that have quite a bit of momentum. But it takes so much momentum to pass something that, in the short term, the cynicism is not unwarranted.”