Coinbase’s big election bet is about to be tested

WASHINGTON — In the first few years after founding Coinbase, CEO Brian Armstrong shied away from Washington, D.C. But as his ambitions for his crypto exchange scaled, so too did his need to curry favor on Capitol Hill.

“About five or six years ago, we realized that crypto was getting big enough that we needed to go really engage actively in a policy effort, so I started coming out to D.C.,” Armstrong, who started Coinbase in 2012, told CNBC in September, following a day of meetings with political leaders.

Now, it’s practically Armstrong’s full-time job, and Coinbase’s money is all over the nation’s capital. The company was one of the top corporate donors this election cycle, giving more than $75 million to a group called Fairshake and its affiliate PACs, including a fresh pledge of $25 million to support the pro-crypto super PAC in the 2026 midterms. Armstrong personally contributed more than $1.3 million to a mix of candidates up and down the ballot.

The tech industry’s biggest names have dotted Washington for years to try and push their agendas as their market caps have expanded, but for Coinbase, the matter is potentially existential.

Securities and Exchange Commission Chair Gary Gensler sued the firm last year over claims that it sells unregistered securities. A judge has since ruled that the case should be heard by a jury. Coinbase has fought back vociferously, and has also said that it wants to work with regulators to come up with a proper set of laws governing the nascent industry.

Meanwhile, Coinbase faces a growing list of competitors.

In the company’s latest quarterly earnings report last week, Coinbase missed on the top and bottom lines due to lower transaction revenues and a drop in subscription and services revenues. The shares plummeted 15%.

Data from CCData shows the exchange is losing spot market share to industry rivals like Crypto.com. And investors have many new options for accessing bitcoin and ethereum since the SEC greenlit spot funds this year. BlackRock’s ETF chief, Samara Cohen, told CNBC that 75% of its bitcoin buyers are crypto investors who are new to Wall Street.

Washington can’t save Coinbase from the competition, but the company is betting that, with favorable lawmakers in place, it can be the leader in a thriving industry rather than under the constant threat of lawsuits and Wells Notices.

Armstrong said his D.C. visits normally took place once or twice a year. Then it got to be at least a quarterly occasion. And the pace has only increased.

“In the beginning, a lot of people didn’t know what crypto was,” Armstrong said of his earlier trips. Now, “the discussion has advanced, really, to, how do we pass clear rules, create legislation in the United States?”

Paul Grewal, Coinbase’s chief legal officer, attended a fundraiser in San Francisco in June that raised $12 million for former President Donald Trump. It was hosted by venture capitalist David Sacks, a former Trump critic who became an outspoken supporter when he became the Republican nominee.

Grewal later joined a fundraiser in Nashville, Tennessee, in July for the former president.

Trump has never shown much of an aptitude for the nuances of crypto, but he’s welcomed the industry’s financial support. He was applauded in the summer, when he vowed to fire Gensler as head of the SEC if he wins.

Grewal told CNBC that he’s had “many conversations” behind closed doors with both the Trump camp as well as Democratic Vice President Kamala Harris‘ campaign. Heading into Election Day on Tuesday, the candidates were in a virtual dead heat.

“What I think we’re hearing from both campaigns is they get it,” Grewal said. “They understand that in swing state after swing state, there are enough voters who care about crypto that the candidate and their campaigns need to give voice to the concerns of those voters in supporting sensible rules for crypto, sensible legislation coming out of Congress, and that’s very encouraging.”

Grewal said that Trump “came earlier to this pro-crypto view,” but said that Harris recognizes the need for “an agenda focused on promoting sensible rules for crypto as much as any other technology.”

But Coinbase has stayed out of the presidential contest and focused its finances exclusively on congressional races, as the company looks to help assemble a group of lawmakers with favorable views of the industry.

The Stand With Crypto Alliance, launched by Coinbase last year, has developed a grading system for House and Senate candidates across the country.

In the Ohio Senate race, for example, the organization gives Democratic incumbent Sen. Sherrod Brown, who chairs the Banking Committee, an “F” grade, versus an “A” grade for his Republican rival Bernie Moreno, a blockchain entrepreneur. Some $40 million of crypto money has been directed at defeating Brown, and one PAC has paid for five ads designed to boost awareness of Moreno. The race is very close and is crucial in determining which party will control the Senate.

Stand with Crypto, which has enrolled 1.8 million advocates across the country, is also working to mobilize digital asset owners living in swing states. This effort involved a cross-country bus tour through battlegrounds focused on getting these residents registered to vote.

“It’s really extraordinary, given how razor-thin the margin of victory was in the 2020 election, to see crypto not only be an issue, but potentially a determinative issue in terms of the presidential cycle,” Faryar Shirzad, Coinbase’s chief policy officer, said in an interview.

Shirzad said that last year, he and his team concluded that the only way to get politics out of crypto was “to build our own political operation.” He said the goal is “neutralization the politicization of the crypto issue and talk about it on the merits.”

Coinbase is far from alone. Nearly half of all corporate money raised this election comes from crypto firms.

Fairshake, one of the top-spending PACs this cycle, told CNBC it’s raised around $170 million this election and disbursed approximately $135 million.

Ripple Labs is another one of Fairshake’s top political donors.

The company, which has spent more than $100 million battling Gensler, has given around $50 million to Fairshake. Several executives have also contributed to a mix of Democratic and Republican candidates in races across the country.

Ripple’s head of U.S. public policy, Lauren Belive, told CNBC at a fintech conference in Las Vegas that the company was motivated by the SEC’s overreach.

“We really wanted to put people into office that could learn about this technology and understand this technology, because we need Congress to act and to create federal statutes and not have this enforcement regime,” said Belive. She added the regulator has issued more than 100 enforcement actions against crypto-aligned companies.