Led by exchanges, crypto industry lobbying grew 17% in Q2 despite bear market

Quick Take

  • Crypto lobbying continued to grow even as the overall market faltered in the second quarter of the year. 
  • The Block analyzes the overall trend and breaks down the crypto exchanges that drove the expansion. 

Despite market chaos and broad layoffs, the crypto industry has continued pouring money into lobbying programs.

According to an analysis by The Block, cumulative lobbying expenditures by crypto firms in the second quarter of 2022 reached $6,751,500. For comparison, the previous quarter saw a total of $5,772,408. 

That figure represents an increase of just under 17%. The rise is particularly notable given that crypto’s market cap dropped from just over $2 trillion to under $900 billion during the same timeframe. 

The market collapse has resulted in several notable firms falling into default or bankruptcy. Many other industry participants are enacting layoffs and belt-tightening measures. 

Political influence spending is seemingly an exception.

Companies or entities that reported more than $100,000 in lobbying this quarter included Chainalysis, Celo Foundation, Dapper Labs, the DeFi Education Fund, BAM Trading Services dba Binance US, West Realm Shires Services Inc. dba FTX US, Foris DAX inc. dba Crypto.com, Meta Platforms via four contracts with outside lobbying firms (this analysis does not include Meta’s entire lobbying spending, which hit $5.39 million), Coin Center, Atlas Power Holdings and its portfolio company Greenidge Generation, Block Inc, Electronic Transactions Association, the Chamber of Digital Commerce, the Blockchain Association and Robinhood Markets.

The role of exchanges

Crypto exchanges in particular drove the quarter's lobbying surge as they continued to expand their lobbying. Spending from crypto exchanges or organizations that expressly represent them grew from $1,190,030 to $2,210,000 between the two quarters. 

The largest individual spender remains Coinbase, which reported $1 million. FTX, which has been conspicuously active on Capitol Hill, reported $270,000, including the launch of its first in-house lobbying. Crypto.com declared $430,000, which as recently as the fourth quarter of last year reported none. 

Binance US reported an increase in lobbying spending from $100,000 to $310,000 through contracts with Ice Miller Strategies and Hogan Lovells US. Gemini and Kraken reported smaller contracts as well. 

The Association of Digital Asset Marketplaces, or ADAM, which aims to become a self-regulatory organization for crypto exchanges, expanded a lobbying contract with Conaway Graves that it had first reported in March. Conaway Graves has become a go-to for the crypto industry since founders Mike Conaway and Scott Graves ended their cooling-off period following their respective tenures as a Congressman and staffer on the House Agriculture Committee. 

Even Uniswap Labs, which codes the largest decentralized exchange, Uniswap, got into lobbying for the first time, reporting a new $10,000 contract with Diroma Eck & Co. 

Exchanges face a critical juncture before Congress. A huge ongoing political push aims to set up a federal registration regime for exchanges with the Commodity Futures Trading Commission. At the moment, the default practice is to register with state regulators as a money transmitter or money services business. 

However, the Securities and Exchange Commission under Chairman Gary Gensler has long signaled that it views many of these exchanges as securities exchanges. The industry, however, has argued that the SEC has made a path to register opaque. 

Editor’s note:  For this analysis, The Block included crypto-native firms like Coinbase, as well as firms and entities whose political activities have focused on crypto issues, including Robinhood Markets, Block (formerly Square) and the Electronic Transactions Association. Though we did not include the full expenses from Meta (formerly Facebook), we did include contracts that Meta has with lobbying firms that indicate strong ties to crypto issues. This analysis did not include a number of banking and finance firms and associations that have been active in crypto-relevant issues. 

These numbers for Q1 differ from earlier analysis by The Block based on subsequent conversations with parties involved in lobbying activities and expanded searching.

Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.