SBF, Gensler, Warren and Crypto’s War for Washington

Key Concepts

• Crypto Policy/Lobbying: The practice of educating regulators and legislators on blockchain technology to shape market structure and regulatory frameworks.
• Clarity Act: A major bipartisan legislative effort aimed at establishing a comprehensive regulatory framework for crypto assets in the U.S.
• Staffer Power: The significant influence held by young, tech-savvy congressional staffers who often handle complex crypto issues for older, less tech-literate members of Congress.
• Proxy Lobbying: The practice of using third-party groups (e.g., housing organizations, gaming associations) to push specific agendas or attack competitors without direct attribution.
• The "SBF Effect": The negative impact of the FTX collapse on the crypto industry's reputation in D.C., leading to increased scrutiny and a "stain" on those who accepted campaign donations.
• DeFi (Decentralized Finance): A core area of focus for the crypto lobby, often misunderstood by regulators and frequently targeted by incumbents.
• Self-Custody: A critical pillar of crypto advocacy, currently being defended against legislative attempts to restrict individual control over assets.

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1. The Evolution of Crypto in D.C.

Ron Hammond, Head of Policy and Advocacy at Wintermute, describes the evolution of crypto in Washington from a "counterculture" niche in 2015 to a major political force in 2026.

• Early Days: In 2015–2017, crypto policy was handled by a handful of people. It was a "blank slate" with no established partisan lines.
• The "Captain Crypto" Era: Hammond notes that early lobbyists were often ignored or mocked. The turning point occurred around 2020–2021, when the industry began to be viewed as a serious, albeit misunderstood, sector.
• Current Vibe: The industry has matured. Unlike the "stuffy" bank lobby, the crypto lobby is viewed as younger, more tech-savvy, and more adaptable. It has successfully challenged entrenched incumbents by focusing on education and grassroots engagement rather than just financial contributions.

2. The FTX/SBF Impact

Sam Bankman-Fried (SBF) and FTX significantly altered the D.C. landscape.

• The Strategy: SBF utilized an "altruistic" narrative and massive capital to gain access to high-level officials.
• The Betrayal: FTX pushed for CFTC exemption authority that would have effectively crippled DeFi. This forced a split where major players like Coinbase chose to defend the broader industry (including DeFi) rather than taking a self-serving deal.
• The Cleanup: After the collapse, the industry faced a "corruption narrative." Many politicians had to scramble to return or donate FTX-linked funds to creditors, creating a "tail between the legs" moment for both parties.

3. Legislative Frameworks and Proxy Battles

Hammond explains that D.C. is a "game of chess" where information flow is often manipulated.

• Proxy Groups: Incumbents (like banks) often use third-party groups to lobby against crypto. For example, housing groups or gaming associations may be used to oppose crypto bills to protect the interests of traditional financial institutions.
• The Mark Coites/Silicon Valley Bank Letter: A prime example of how short-sellers can influence policy. A short-seller allegedly drafted a letter that Senator Elizabeth Warren read verbatim, which contributed to the narrative surrounding the collapse of Silvergate and SVB.
• The Clarity Act: Currently, the industry is focused on merging the agriculture and banking versions of this bill. Hammond estimates a 45% chance of passage, noting that the primary hurdle is the "yield" and "AML" (Anti-Money Laundering) narratives pushed by banking incumbents.

4. The Role of Regulators and "The Adults in the Room"

• Gary Gensler: Hammond characterizes Gensler’s tenure at the SEC as having a "personal vendetta" against crypto. He cites the timing of the Coinbase lawsuit—filed on the day of their congressional testimony—as a "nefarious" political move intended to insult the industry and Congress.
• Prometheium: Described as a "front" for SEC talking points. During hearings, it was observed that Prometheium’s witnesses were being fed notes by lawyers, repeating the same talking points as Gensler and Maxine Waters’ staff.

5. Future Outlook and Strategic Priorities

• Privacy: Privacy is becoming a "horseshoe" issue where progressives and conservatives find common ground against national security hawks. Hammond believes this is a critical area for the next generation of staffers to champion.
• DeFi Regulation: As the EU and UK move to regulate DeFi, the U.S. must decide how to approach it. Hammond warns that if the U.S. doesn't get it right, it risks losing innovation to other jurisdictions.
• Bipartisan Unity: Despite internal competition, the crypto lobby has unified. The "L1 group" (Layer 1 blockchain lobbyists) now coordinates to ensure that what is good for the industry as a whole takes precedence over individual company interests.

Synthesis/Conclusion

The crypto industry has successfully transitioned from an ignored subculture to a sophisticated political player. While the "SBF era" caused significant damage, the industry has responded by becoming more unified, transparent, and competent. The current focus is on passing the Clarity Act and defending core principles like self-custody and privacy. Success in D.C. is no longer just about money; it is about "cool factor," education, and the ability to navigate the complex, social, and often cutthroat nature of Capitol Hill.