At DKP, our affiliate 501c3, we do a lot of investigating corruption, propose policy fixes for it, and build transparency initiatives. At Dekleptocracy Alliance, our 501c4, we have a mission to put anticorruption atop the national political agenda. A key part of that is explaining why some of these extremely complex issues matter to you personally.
Today’s post tries to do that by explaining the regulatory capture agenda. It’ll take us to a very dark place if we don’t stop it. Leave us your comments, subscribe, share and help spread the word.
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During the first Donald Trump administration, the Trump Hotel, just down the street from the White House, became a symbol of influence peddling Trump's Washington. But the breathtaking scope of the Trump 2.0 grift makes the Trump Hotel look quaint.
The alarm bells are ringing. The crypto industry is ransacking our rule of law. And Trump is collecting tolls for the privilege.
I’m just fitting pieces together that are in plain sight, and you almost have to marvel at Trump’s moxie. He’s daring people to do anything about it. The business community has spent ten years mollifying him, and he has learned from it.
The Crypto Industry Has Co-opted Trump
At the start of Trump’s first term, Atiku Abubakar, a prominent Nigerian politician, was having “visa issues.” He faced accusations of corruption back at home and was blocked from traveling to the US. Few remember his alleged transgressions, but after hiring Trump’s friend, Brian Ballard, to lobby on his behalf, Trump resolved those visa issues (we’re sure the timing was merely coincidental). Abybakar traveled to the US and conspicuously stayed at Trump International Hotel as a thank-you.
But using hotels for tribute is for pikers. By simultaneously having an enormous stake in the crypto sector and selling seats at the table to write the rules for the industry – the very definition of regulatory capture – Trump has created a lucrative tollbooth for himself and created danger for us all.
Trump’s crypto empire deserves investigation, but the regulatory capture he’s facilitating deserves our attention because it risks everything.
Regulatory Capture
Regulatory capture is when a government regulatory agency – say the Security and Exchange Commission (SEC) – starts answering to industry. Regulatory agencies are why Americans have nice things. Foreign investors invest here because we do (or did) have a stable rule of law.
A captured agency prioritizes industry profits and growth over broader public protection. It can only lead to bad places.
In American history, one of the more ominous cases of regulatory capture involved the Interstate Commerce Commission (ICC) and interstate travel. The ICC came to represent the transportation industry’s interests more than the voters, and one of those interests was segregation in interstate travel. It took a brave Rosa Parks to end that nonsense.
A more recent example is the example of the Boeing 737 Max. The FAA delegated responsibility for large portions of the safety certification to Boeing itself, with the inevitable results. Or the 2008 financial crisis, where US banks had responsibility for policing their actions. The world paid the price.
TL;DR: Regulatory capture impacts you. Because it’s Trump, he gave us the Atlantic City all-you-can-eat variant.
Unfortunately, resisting and reversing state capture is an arduous process. It requires that whistleblowers, journalists, and activists continuously speak up, with no immediate reward and at significant personal risk. Such persistence can pay off in the long run: civil society groups in Bangladesh, South Africa, and Sri Lanka eventually chased out corrupt politicians. But success often comes only after captors have crashed the economy by milking it for everything it’s worth. And by then, rebuilding is extremely difficult.
You’ve been warned. I lived in Russia when Putin asserted similar control over regulatory bodies. The weakening of the rule of law and investment frameworks has been disastrous for investment in Russia since I lived there over 20 years ago. Still, the world’s recognition then of what Putin was doing to Russia was sudden and violent. Lemme tell ya, living through capital flight wasn’t fun.
The path we’re on is not good for America, your 401k or your children. A lot of damage has already been done, but more is looming on the horizon, and we can stop it.
On those happy notes, let’s take a journey.
The “War on Crypto”
Did you know there was a war on crypto? I sure as hell didn’t. If anything, the crypto industry was both out of control and an Enron waiting to happen. I mean, have we forgotten Sam Bankman-Fried and the risks that he created for the entire financial system with FTX?
Nevertheless, the then soon-to-be Acting Commissioner of the Securities and Exchange Commission (SEC) said he was going to help Trump end it while campaigning for a job promotion speaking out on the subject
Its oppression and suffering notwithstanding, the war-weary crypto industry managed to find more than $200 million of couch cushion change for the 2024 election. Sure, Elon Musk gave $291 million to the election, but the crypto industry should be looked at as a single entity.
Crypto Buys Trump
If Elon Musk bought the election, the crypto industry bought Trump. Public Citizen assembled some astonishing figures.
$119 million of that $200 million went to Trump – and no, the other $81 million didn’t go to Kamela.
Nearly half (44%) of all corporate money during this year’s elections (at least $274 million) came from crypto backers.
Coinbase, for example, reportedly donated $1 million to Trump's inaugural fund and spent over $50 million backing a pro-crypto super PAC that supported Trump allies in Congress. Gemini's founders contributed $2.65 million to groups backing Trump, and Kraken's co-founder donated $1 million in cryptocurrency to support Trump's presidential campaign, with the company also reportedly donating $1 million to his inaugural fund. Ripple pledged $5 million in its own cryptocurrency to Trump's inaugural, making it one of the largest donors.
They individually made relatively small donations, but collectively, the industry went into business with the Trump family.
There’s the broader philosophical point: How can we consider ourselves a democracy when we allow this? But consider it within the context of regulatory capture.
Trump’s Crypto Empire
Let’s look at Trump’s crypto footprint. It’s big, and the country should care more than it seems to.
If Trump 2.0 came to town prepared, his 2016 hotel was the slap-happy result of unexpectedly winning then. This time, he had four years to plan. This is best conveyed visually, though his crypto empire is a bit like Heisenburg’s Uncertainty Principle. Since Fortune has created the below graphic, Trump has announced yet another crypto venture.
Trump’s massive and constantly increasing stake in the crypto industry dwarfs his former hotel in ambition and, unlike with a hotel, he controls the regulatory agencies of the entire industry.
The Weakening Rule of Law is Why Foreigners Should Think Twice About Investing Here
America in the Trump era can’t have nice things, and Trump’s decapitation of the commanding heights of our financial regulatory infrastructure lies at the heart of why.
The GOP Senators who have cheered this on will no doubt refer to the fact that the SEC and CFTC chairs traditionally step down at the end of an administration, even if they have time left on their appointments. And that is true. That the Trump administration appointed new heads for both shouldn’t cause alarm. However, what has followed should. With Trump as a coinvestor and in very rapid succession, the crypto industry has started regulating itself. What could go wrong?
A Turkish friend told one of our colleagues that we Americans are hotfooting it down the path that Turkish President Erdogan followed to autocracy and in his 20-year quest to destroy the Turkish economy for his benefit. This timeline bears that out.
January 21, 2025: Acting SEC Chairman Mark T. Uyeda announced a new “Crypto 2.0” task force to create a new crypto regulatory framework. To lead it, he chose Commissioner Hester Peirce, a proud crypto booster.
January 23, 2025: President Trump signed an executive order to establish the President’s Working Group on Digital Asset Markets. Among other things, it repealed a Biden administration crypto executive order. The Biden Executive Order focused on consumer financial stability and national security and called for the development of an international framework to regulate it. This also repealed Staff Accounting Bulletin (SAB) No. 121. SAB 121 required public companies and regulated banks holding crypto assets on behalf of customers to record those assets as liabilities on their balance sheets.
January 28, 2025: Scott Bessent becomes Secretary of the Treasury. He’s a known crypto booster.
January 29k 2025: Trump co-campaign manager Chris LaCivita joins Coinbase’s Global Advisory Council.
February 11, 2025: President Trump nominated Brian Quintenz to serve as the Chair of the CFTC. Quintenz previously worked for Andreessen Horowitz, a crypto industry investor and major Trump backer. Marc Andreesen and Ben Horowitz each gave Trump $2.5 million for Right for America PAC, Andreesen gave the legal maximum (over $800,000) to Trump and, for good measure, Andreessen Horowitz gave $44 million to Fairshake PAC, a PAC supporting crypto-friendly candidates. You’ll never guess which ones.
February 27, 2025, the SEC announced that it had filed a joint stipulation with Coinbase Inc. and Coinbase Global Inc. to dismiss the ongoing civil enforcement action against the two entities. The lawsuit, filed in 2023, accused Coinbase of operating as an unregistered securities exchange, broker, and clearing agency.
Also February 27th, the SEC announced that it would not regulate meme coins. Without going into this, meme coins are scams. Trump and Melania each launched one on the eve of Inauguration. State attorneys general could kill them. We talk about how they could do that a lot. Follow us and comment below for details.
March 3, 2025: The Trump administration’s SEC dismisses the case against Kraken. The SEC had sued them for commingling billions in customer investor and company funds and running an unlicensed exchange. Commingling funds like this had been a central element of the legal cases against Sam Bankman-Fried and FTX.
March 3, 2025: Trump's SEC and Binance filed a joint request to pause litigation for 60 days. The SEC had sued Coinbase for acting as an unregistered national securities exchange, broker, and clearing agency, among other things. Oh, they donated $1 million to Trump’s Inaugural fund, donated $50 million to Fairshake PAC, and listed Trump’s $TRUMP on their platform, creating a multimillion-dollar surge in income for Trump.
March 3, 2025: Trump's SEC dropped the case against OpenSea. They are an NFT marketplace that had been facing a number of charges. Trump’s NFTs are sold on their marketplace.
March 3, 2025: The Trump administration moved to dismiss the case against Robinhood Markets for allegedly violating securities law. They also donated $2 million to Trump’s Inaugural Fund.
March 3, 2025: Trump’s SEC and Justin Sun (Tron Foundation Limited, BitTorrent Foundation, Rainberry) filed a joint request to pause litigation for 60 days. Sun was born in China and founded TRON, a favorite blockchain platform of Hamas. He had been investigated for market manipulation. He was also Grenada’s Ambassador to the WTO. Because, of course. He’s been personallyinvolved in Trump’s crypto business ventures.
March 6, 2025: President Trump created the "Strategic Bitcoin Reserve" and a "Digital Asset Stockpile." I won’t force the tedium of explaining this boondoggle. I will just leave it with a chart of Bitcoin when Trump announced this – and I’ll remind you, the point of a reserve is to be a store of value. I’ll leave it to you to guess the exact moment Trump made his announcement.
Pause here and recall the FTX freakout caused by its collapse. When FTX collapsed, it caused Bitcoin to fall below $16,000, and markets freaked out. As you can see above, Trump’s shady behavior merely caused Bitcoin to fall to about $85,000. Yet, his SEC let off the hook multiple funds for doing exactly what landed Bankman-Fried in prison. Multiple FTXs. What could go wrong? Only this time, Trump has tied this asset to the US Government’s creditworthiness.
March 7, 2025: President Trump hosted a White House Crypto Summit. More on that below.
March 7, 2025: The Office of the Comptroller of the Currency (OCC) issued guidance allowing banks to hold cryptocurrency, asking them to do their own risk diligence.
There’s more, but honestly, it’s exhausting. Surely, you get the idea.
Driving Home the Point
Trump’s World Crypto Summit industry attendees
Note: Bakkt is a SaaS company and API platform for owning and trading cryptocurrency and redeeming loyalty points. Loeffler’s husband runs the company that had a 68% economic interest in Bakkt at the time Loeffler ran it.
Trump’s World Crypto Summit official government attendees
David Sacks: White House AI & Crypto Czar
Crypto Assets: Sold over $200 million (including BTC, ETH, SOL) 205; Minor holdings through Craft Ventures.205
Past Crypto Industry Work: Venture capitalist (Craft Ventures) 205; Former PayPal executive.233
Significant past Crypto Investments.205
Administration's point person on crypto policy.1
Howard Lutnick: Secretary of Commerce
Led Cantor Fitzgerald, which invested $1.58 billion in Strategy (MicroStrategy) 206; Cantor provides custody for Tether (USDT) 207; He and Cantor personally own Bitcoin.207
His sons took over Cantor Fitzgerald.206
Scott Bessent: Secretary of the Treasury
Supports Trump’s goal of making the US a crypto leader218 and was a big supporter of the Strategic Bitcoin Reserve.1
Hester Peirce: SEC Commissioner
Leads SEC's Crypto Task Force
Strong advocate for crypto innovation and “clearer regulations.”209
Kelly Loeffler: Head of Small Business Administration
Founding CEO of Bakkt.3
"We will cut red tape while restoring the accountability and transparency that taxpayers deserve... shifting SBA's focus... back to Main Street."212
Tom Emmer: House Majority Whip
Formed Congressional Crypto Caucus.220
Pro-Crypto Quote: "Until we have a clear definition of what is a commodity and what is a security, American innovation will continue to suffer... Our legislation will help provide these answers..."221
One of the top recipients of crypto industry contributions in Congress.
Bo Hines: White House Representative/Executive Director of Presidential Working Group on Digital Assets
Past Crypto Industry Work: No professional background before this role.215
Hines is obsessed with the idea that the banking industry and government have been colluding to “debank” crypto companies. They have nicknamed it "Operation Choke Point 2.0". 215
"We're well on our way in delivering on the President's promise to welcome in the golden age for digital assets... make the United States the crypto capital of the planet."215
The GOP Knows its Vulnerability
We bang the drum often and loudly that the path to action against Trump’s corruption agenda is leveraging the rule of law and the states’ powers to regulate their economies. The vast and interconnected nature of the US economy means blue states like California, New York and Massachusetts have significant leverage over extremely complicated ecosystems like cryptocurrency because states control critical nodes of these systems — and state governments regulate the companies that operate those nodes. When corruption schemes run through their jurisdictions, states can disrupt them.
We used to use this methodology against Putin. It’ll work here, too. State action won’t be able to block entire schemes or stop regulatory capture – only political action will do that – but it will significantly disrupt these schemes. And that will buy time for the political counter-narrative to develop.
My erstwhile allies in the GOP understand that cryptocurrencies have this vulnerability to disruption. To eliminate this vulnerability, they submitted the STABLE and GENIUS acts (yeah, I know) in the Senate and House, respectively. Here’s Grant Thornton:
Currently, stablecoins fall under state regulations, as payment processing is regulated at the state level. This increases barriers to entry and compliance costs for companies. Industry advocates hope that stablecoin legislation will streamline oversight and regulation, though many state regulators and financial regulatory hawks may need to be convinced.
…Nonbanks could receive streamlined regulation through the Office of the Comptroller of the Currency (OCC), a federal bank regulator, though that could be a friction point in negotiations. State regulators previously went to court over an OCC effort to create a special charter for nonbank fintech companies that would’ve allowed a similar bypass of state-by-state registration.
The emphasis is mine, and the translation is that these acts will remove the power of states to disrupt this industry and place it in the hands of federal regulators….which Trump’s insiders control. In case you’re wondering, Trump’s appointment to run the OCC is Jason Gould. Before his appointment, Gould served as the chief legal officer at Bitfury, a blockchain infrastructure company.
Call to Action
I don’t care if this is the correct thing to do for the more fluid functioning of the cryptocurrency industry. It may be. I don’t know. But the crypto industry needs a brake applied to it.
The states’ ability to disrupt Trump’s regulatory capture derives from their constitutional authorities, and the Constitution goes to great pains to ensure states have the authority to regulate their economies. This authority is a critical tool for the states to bring Trump’s lawlessness to heel. And Blue States are out of their minds crazy if they give this up.
Members of Congress are going to want to use this as leverage for which they can get something. Nope. There is no deal here worth taking.
This is bigger than crypto.
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We need to consider the SEC and CFTC gone when it comes to crypto, and so states’ authorities are the defensive line. Federal agencies are no longer constraining this industry. They exist to expedite windfalls for Trump and his inner circle.
These agencies regulate many industries.
Predictability and the rule of law are why you have a 401K. Trump’s crypto ambitions could wreck everything. Think the tariffs are bad for the stock market? Just wait until the world concludes that American markets aren’t governed by a stable rule of law. You millennials still upset about the financial crisis might want to pay attention here because the tab will come due about the time you want to retire.
Seeing Trump’s crypto ecosystem falling into place, Kraken (Payward Inc.) and Blockchain.com (Blockchain US) both hired that old Trump friend Brian Ballard. Ripple Labs and Robinhood Markets, too. Coinbase, Paradigm Operations, Galaxy Digital Holdings and Crypto.com donated to Trump’s Inauguration. They all know.
If you want state governments to retain their leverage to slow this corruption, call your Member of Congress.
