Congressional candidates and PACs are beginning to embrace the crypto boom ahead of this year’s midterm elections, auctioning off digital collectibles known as NFTs that have already drawn hundreds of thousands of dollars in donations.
The sale of non-fungible tokens by political campaigns comes after the technology exploded in popularity over the past year to become a $40 billion market, with everyone from the NBA to former first lady Melania Trump selling digital images and videos to fans via blockchain services like those that also power popular virtual currencies. NFTs are unique digital assets and give creators a way to pitch online wares that can’t be easily replicated.
They’re now poised to be big business in the world of politics, with consultants launching NFT platforms to help clients cash in on the boom and engage with voters. Arizona GOP Senate candidate Blake Masters last month raised $550,000 in 36 hours when he auctioned off digital tokens depicting the cover of a book he wrote with tech investor and GOP megadonor Peter Thiel. Tech executive Shrina Kurani, a Democrat who is looking to flip a Republican House district in California, raised $6,600 in 72 hours late last year by selling 21 NFTs containing her crypto policy agenda.
“If you use NFTs for donor or volunteer recognition, it’s a much more impactful way to recognize supporters than a tote bag or a T-shirt,” said Tomicah Tillemann, the global head of policy for the crypto investing arm of venture capital giant Andreessen Horowitz, a heavyweight backer of blockchain startups.
The move by campaigns to entice donors with digital swag is just the latest example of crypto mania spilling into politics, with a growing list of candidates on both sides of the aisle touting pro-crypto platforms as they look to unseat incumbents. Like the broader digital currency explosion, NFTs are beginning to raise a host of policy and legal concerns, from their potential use in money laundering to how candidates can avoid running afoul of campaign finance and investor protection rules as they sell them.
As with all things crypto, proponents say the possibilities are endless.
“NFTs could emerge as a breakout technology in the political space for campaigns in the ’22 cycle simply because they are a much more powerful mechanism for demonstrating support for a candidate than most of what’s available today,” said Tillemann, who was a State Department official during the Obama administration.
NFTs — unique digital tokens that can represent images, videos, virtual real estate and more on a decentralized blockchain ledger — have existed for less than a decade. They have experienced a surge in popularity during the pandemic, with the little-known artist Beeple selling an NFT of his work for $69 million in early 2021. By the end of last year, sales volumes had swelled to more than $40 billion, according to the crypto data firm Chainalysis.
The political world is now catching on. Roger Stone, a GOP operative and associate of former President Donald Trump, is selling a digital copy of a real estate magazine with Trump’s signature to help pay his legal bills. Melania Trump recently issued a series of NFTs on the Solana blockchain that feature a “message of hope” playing over a watercolor image of her eyes.
Masters, who is looking to unseat Sen. Mark Kelly (D-Ariz.), offered campaign backers NFTs that granted access to a party co-hosted by Thiel. (Masters is an executive at Thiel’s investment firm.) The tokens also gave supporters access to the candidate through a private channel on the messaging platform Discord.
“We’ve seen how a lot of my political supporters are actually first-time donors, people who haven’t necessarily voted Republican their whole lives, but who want younger, more competent, more technologically literate leadership,” Masters said in an email interview. “That overlaps quite a bit with people who are into crypto in one way or another.”
HODLpac, a nonpartisan political action committee focused on crypto interests, is planning a series of NFTs that would function like membership cards or campaign pins depending on the level of donor, PAC founder Tyler Whirty said in an interview.
Political consultants and campaign-focused tech startups are helping drive the trend.
Democratic fundraising software firm Numero recently launched electables.com, a platform for campaigns to offer NFTs and for supporters to show them off. Numero co-founder and CEO Brian Forde, a former Obama administration official and one-time congressional candidate, said his service allows campaigns to give grassroots donors a one-of-a-kind, hand-illustrated NFT that can be customized when they buy shirts, hats and other digital merchandise.
Front Row is an NFT marketplace that caters to progressive causes and campaigns. Democratic strategist Parker Butterworth, a Front Row co-founder, said NFTs could serve as passes for augmented reality campaign rallies or events in “digital living rooms.”
“It’s really early stages, and I think everyone’s figuring it out together,” Butterworth said in an interview. “I would have [to have] a lot of hubris to say exactly where it’s going.”
The sale of NFTs will force the campaigns to address a number of legal and regulatory issues, some of which policymakers are still sorting out themselves as they try to police the crypto marketplace.
The Federal Election Commission, which regulates campaign finance, has issued guidance for accepting cryptocurrency contributions. But some lawyers argue there’s a risk that the sale of NFTs could trigger regulations aimed at investment products, especially if individuals start buying and selling fractions of individual NFTs.
The Securities and Exchange Commission has ramped up enforcement actions against crypto market players amid concerns that consumers face mounting financial risks as they flock to digital assets. SEC Commissioner Hester Peirce warned last year that the “fractionalization” of individual NFTs could prompt the agency to crack down.
“The FEC won’t be concerned about an aftermarket in the NFTs as long as any increased value doesn’t find its way back to the campaign,” said Brett Kappel, a campaign finance lawyer with the law firm Harmon Curran. “The SEC, however, may have some questions about whether NFTs are really just a new type of security — investments that are held in the anticipation of an increase in value that are traded in a market.”
It remains to be seen to what extent grassroots donors will embrace the new technology.
Kurani, who is vying for a chance to run against Rep. Ken Calvert (R-Calif.), said she plans to sell more NFTs after donors purchased just 21 of her campaign’s 2,022 available tokens during a 72-hour auction in December. Kurani is vice president of the financial technology company Republic, which offers investors access to venture-capital-backed startups, including virtual real-estate deals in the metaverse.
“This was honestly just the beginning,” she said in an interview. “It’s an opportunity to educate folks and engage in a way they may not necessarily be familiar with.”
Hailey Fuchs and Zach Warmbrodt contributed to this report.