If anything could jump-start the stalled effort to reform the role of money in politics, one might think it would be an epic scandal involving an overnight billionaire who suddenly became one of the nation’s biggest political donors.
But while the collapse of Sam Bankman-Fried’s crypto empire is already prompting changes in the crypto industry and beyond, it is unlikely to change the loophole-ridden campaign finance rules that allowed the 30-year-old executive from a controversial new industry to buy friends and influence people in Washington, despite widespread public frustration with perceived corruption, anytime soon.
“I don’t think it’s going to change anything in Washington,” said Lawrence Lessig, a Harvard Law professor and activist who ran for president in 2016 as a protest candidate to push for campaign finance reform. “The reality is Congress likes to have access to large amounts of money. It’s an insider’s game that they’re all happy to play.”
Even money-in-politics critics accepted Bankman-Fried’s checks, including a major campaign finance watchdog group and progressive lawmakers allied with Sen. Bernie Sanders, I-Vt.
For example, the Campaign Legal Center, a leading Washington group that has pushed for reform for two decades after its founding by a former chairman of the Federal Election Commission, took $2.5 million from Bankman-Fried, which it now says it will return because “Bankman-Fried’s alleged actions … betray CLC’s mission.”
The group told NBC News that it took Bankman-Fried’s money after “careful vetting” that included “conferring with other nonprofit organizations who vouched for his apparent legitimacy at the time.”
“We cannot change the past, but we can change the future,” the group said in a statement. “CLC will now move forward, continuing our decades’ long work to ensure every eligible voter can participate in and affect the democratic process.”
A sense of pessimism has set in after repeated attempts at change have died in Congress in the 13 years since the Supreme Court opened the floodgates to unlimited and undisclosed “dark money” donations. Meanwhile, the Democratic Party, which long championed campaign finance reform, got so good at the game that it used more dark money than Republicans during the 2020 presidential campaign. Democrats’ last legislative package aimed at overhauling elections and campaign financing, H.R. 1, never had a real shot at making it out of Congress and stalled out like many previous bills.
“We all wish we could fly like Superman, but we don’t leap off tall buildings,” Lessig said, summing up why so few have pushed for change since Bankman-Fried’s arrest.
Bankman-Fried, now awaiting trial on fraud and money laundering charges related to the collapse of the cryptocurrency exchange he ran, FTX, spread his money widely as he became Democrats’ second biggest donor in 2022 and mused about spending $1 billion in 2024, which would have easily made him the biggest political giver in American history.
He was also charged with campaign finance violations, allegedly using “straw donors” to circumvent contribution limits by giving money to allies who would then donate to politicians in their own names.
Lawmakers and regulators moved quickly to impose new rules on the crypto industry, but there has been hardly any discussion — let alone action — in Washington to prevent the next Bankman-Frieds from using their wealth to bend politics to their personal interests.
There have been no campaign finance bills introduced in the new Congress, no new policies from regulators and barely even any discussion about reform.
Lawmakers who received campaign cash from Bankman-Fried and other FTX executives have given a collective shoulder shrug about the system at large, even as some donate the equivalent of his contributions to charity or wait for the legal case to play out to reimburse FTX customers.
Speaking to NBC News on the condition of anonymity, one member of Congress who Bankman-Fried donated to said he never spoke with Bankman-Fried and instead believes he was a beneficiary of his funding because of a working relationship he had with Bankman-Fried’s brother, Gabe, and his organization Guarding Against Pandemics. (Some critics insisted to NBC News that Bankman-Fried’s pandemic preparedness efforts were nothing more than a way to generate good publicity that, in the end, was useful in advancing his crypto agenda.)
“I’m not sure what we could have done differently,” the lawmaker said. “I probably have tens of thousands of contributors. … I don’t have intimate knowledge of every person who contributes.”
“So if anyone had known that he was a fraud, no one would have accepted his contribution,” the lawmaker continued. “I feel like whenever you accept a contribution from an individual, there’s a risk that the individual might not be who he or she claims to be. And I’m not clear how you escape that risk.” While you can stop fundraising, the lawmaker said, that wouldn’t be practical.
The pervasiveness of big money’s influence in politics has contributed to many Americans’ dim view of the political system.
Polls — including some commissioned by the Campaign Legal Center — show the overwhelming majority of Americans believe there is too much money in politics. Large portions of voters in both parties see the system as corrupt and not responsive to ordinary Americans.
“I am disheartened that this hasn’t been more of a topic of conversation. It should be. But I’m not so surprised,” said Sheila Krumholz, the executive director of OpenSecrets, which tracks political donations, of Bankman-Fried’s use of the campaign finance system. “This is yet another example of how lax campaign finance rules allow someone with money to throw their weight around and build influence and maybe it is not gaining traction because it’s just one of many stories like this.”
“I fear and believe that the political class, and really the American public, to the degree that they’re concerned about this, is growing inured to these stories,” Krumholz added. “I’m not saying all hope is lost. But as time marches on, any rule or status becomes ingrained and the norm, we run the risk of it just becoming accepted.”
Still, some activists believe Bankman-Fried’s demise could create a unique opportunity to get normally skeptical Republicans on board for reform, since Bankman-Fried primarily supported Democrats.
Bill Cortese, a Republican campaign veteran who is now executive director of American Promise, a cross-partisan, nonprofit group advocating for a constitutional amendment that would allow for states to individually regulate federal campaigns within their borders, said the latest scandal may be just what’s needed to get the ball rolling.
“I think that Republicans are waking up to say, ‘Listen, this is something the dynamics here have changed,'” he said. “It’s something that we have to be aware of. And something we have to be concerned about and potentially address now that they have control of at least one body in D.C.”
Jeff Hauser, founder and director of the Revolving Door Project, said he does believe that the Bankman-Fried scandal could lead to more narrowly tailored reforms around straw donors — a major piece of the Bankman-Fried indictment — and how think tanks and other influence groups raise money.
“I don’t think that they will get written into law in 2023,” he said. “But I think that there will be a response that will lead to reforms that are written into law the next time an even bigger scandal happens.
“I feel like we’re on the cusp,” he continued. “There are a lot of reforms that have a fair amount of momentum. But you need so much momentum to pass something that in the short run, cynicism is not unwarranted.”