(Bloomberg) -- The crypto lobby is putting US political candidates on notice: Side with us or risk defeat at the ballot box.

As evidence, it’s pointing to the defeat of Democratic Representative Katie Porter in California’s Senate primary last week. Deep-pocketed industry participants pumped $10 million into an advertising and get-out-the-vote effort that they’ve said helped eliminate Porter in the open primary. That set a clearer path for her fellow Democrat Adam Schiff – seen as being more friendly to crypto – to take the spot in November.

Sympathetic billionaires are offering plenty of support, and money, for the cause. A pro-crypto super PAC, Fairshake, has amassed a war chest that now totals around $75 million to spend on US elections. Backers include Coinbase Chief Executive Officer Brian Armstrong, Cameron and Tyler Winklevoss — founders of the digital-asset exchange Gemini — and Marc Andreessen of Andreessen Horowitz.

Crypto proponents acknowledge that the odds are slim that they will be able to unseat one of the industry’s toughest critics, Massachusetts Senator Elizabeth Warren, who is running for reelection this year in a relatively safe seat. But they plan to use the example of Porter’s loss to pressure the Democratic senator’s more vulnerable allies.

Teaming with Warren “is going to make your election much more difficult,” Kristin Smith, chief executive officer of crypto trade group Blockchain Association, said in an interview. 

One of the candidates Smith’s group says it’s watching is Senator Sherrod Brown. The Ohio Democrat and chair of the Senate Banking Committee has been at the forefront of a group of lawmakers pushing for stricter limits on crypto. 

“It’s sort of an open question as to what, if any, moves he’s going to make on crypto through the rest of the year,” Smith said of Brown. 

A spokesperson for Senator Brown’s campaign declined to comment.

New Legislation 

The industry has its eyes on legislative proposals aimed at combating illicit finance. Two bills, one backed by Warren and Republican Senator Roger Marshall, and another introduced by Senators Mark Warner, Jack Reed, Mitt Romney and Mike Rounds, would aim to apply anti-money laundering rules that currently exist for banks and other financial institutions to crypto firms.

Criminal networks have used cryptocurrency to move illicit funds around and taken advantage of tools to make transactions more anonymous.    

Groups like the Blockchain Association and the Chamber of Digital Commerce have said the current bills would impose unworkable requirements and effectively kill the industry in the US. 

The political tough talk represents a remarkable evolution from a year ago, when it seemed the crypto industry would never recover from a barrage of scandals and business failures that saw one of its most formidable figures, Sam Bankman-Fried, convicted on criminal charges. 

Other moments of optimism around crypto have fizzled after scrutiny from regulators and a struggle to establish a practical use for the technology. Regulators continue to examine many aspects of the business.

Representative Brad Sherman, a Democrat on the House Financial Services Committee who regularly questions the usefulness of crypto, said the effect the industry is having on elections is probably overstated. But its ability to throw millions of dollars at races won’t escape lawmakers’ notice. 

“Whether they actually are decisive may be less significant than a shot across the bow of the 430-some members of Congress whose races they’re not involved in,” he said in an interview.

Super Tuesday was the first big test for the Fairshake super PAC. Key races it could jump into next, according to spokesman Josh Vlasto, are the Democratic Senate primaries in Michigan and Maryland — for the seats currently occupied by Debbie Stabenow and Ben Cardin, who are both retiring – and Senate Banking Committee member Jon Tester’s race in Montana. 

ETF Turning Point

The crypto market is rebounding thanks in large part to the approval by US regulators in January of spot Bitcoin exchange-traded funds. That decision lent a new aura of respectability to the most widely held cryptocurrency.

Getting to that point wasn’t easy after a string of business failures in 2022 culminated in the implosion of one of the sector’s most high-profile ventures, FTX. The company’s co-founder Bankman-Fried is awaiting sentencing after being convicted last year for defrauding customers. 

Others in the industry have been left to rebuild relationships on Capitol Hill as lawmakers consider a number of bills to regulate the marketplace, including measures to combat illicit finance and to rein in stablecoins, crypto tokens pegged to assets like the dollar. If adopted, the new rules could change how the businesses operate. 

Meanwhile, the industry is waiting to see whether the Securities and Exchange Commission will approve ETFs tracking Ether, the world’s second-biggest cryptocurrency.

Critics say that they remain skeptical of the industry’s ability to sway elections. They note that some television advertisements that crypto-linked PACs paid for ahead of Super Tuesday avoided mentioning crypto, instead focusing on hot-button issues like reproductive rights and gun safety in the messages supporting Democrats, and lower taxes and inflation for Republicans. 

“They know the public views crypto like kryptonite – it turns off more voters than it turns on,” said Dennis Kelleher, president and chief executive officer of Better Markets, a group that pushes for greater market oversight. But “you can bet that wherever crypto spends a penny, they will claim they have influenced the outcome and expect the winners to pay them back.”

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