“Using NFTs to recognize donors or volunteers is a much more powerful way of identifying supporters than a shopping bag or t-shirt,” said Tomicah Tillemann, global policy director for venture capital giant Andreessen’s crypto investment arm Horowitz, a heavyweight supporter of blockchain startups.
The move of campaigns to lure donors with digital swag is just the latest example of crypto mania invading politics, with a growing list of candidates on both sides of the aisle promoting pro-crypto platforms around to remove incumbent incumbents. Like the broader explosion in digital currencies, NFTs raise a myriad of political and legal concerns, from their potential use in money laundering to how candidates can avoid breaking campaign funding and investor protection rules when selling.
As with anything crypto-related, proponents say the possibilities are endless.
“NFTs could emerge as a breakthrough technology in the political space for campaigning in Cycle ’22 simply because they are a much more powerful mechanism for demonstrating support for a candidate than most of the technologies 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 been around for less than a decade. They have experienced a surge in popularity during the Pandemic, with little-known artist Beeple selling an NFT of his work for $ 69 million in early 2021. By the end of last year, the sales volume had grown to more than $ 40 billion, according to crypto data company Chainalysis.
The political world is now on the rise. Roger Stone, a GOP agent and employee of former President Donald Trump, is selling a digital copy of a real estate magazine with Trump’s signature to pay for his legal fees. Melania Trump recently posted a series of NFTs on the Solana blockchain that show a “message of hope” over a watercolor of her eyes.
Masters, who wants to depose Senator Mark Kelly (D-Ariz.), Offered campaign supporters NFTs, which gave them access to a party co-organized by Thiel. (Masters is a senior executive at Thiel’s investment company.) The tokens also gave backers access to the candidate through a private channel on the Discord messaging platform.
“We’ve seen a lot of my political supporters actually being first-time donors, people who haven’t necessarily voted Republicans their entire lives but who want younger, more competent, and tech-savvy leadership,” Masters said in an email interview. “That overlaps quite a lot with people who are interested in crypto in one way or another.”
HODLpac, a non-partisan 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 amount of the donor, PAC founder Tyler Whirty said in an interview.
Policy advisors and campaign-driven tech startups are helping to drive the trend.
Democratic fundraising software company Numero recently launched electables.com, a campaign platform to offer NFTs and backers to showcase them. Numero co-founder and CEO Brian Forde, a former Obama administration official and former congressional candidate, said his service is allowing campaigns to offer basic donors a unique, hand-illustrated NFT that can be customized with purchase of shirts, hats, and other digital merchandise .
Front Row is an NFT marketplace that supports progressive causes and campaigns. Front Row co-founder Parker Butterworth, Democratic strategist, said NFTs could serve as passports for augmented reality campaign rallies or “digital living room” events.
“It’s really just beginning, and I think everyone will find out together,” Butterworth said in an interview. “I would have [to have] a lot of hubris to say exactly where it’s going. “
Selling NFTs will force the campaigns to address a number of legal and regulatory issues, some of which policymakers are still clearing up on their own as they attempt to oversee the crypto marketplace.
The Federal Election Commission, which regulates the financing of the election campaign, has Guidelines issued for accepting cryptocurrency contributions. However, some lawyers argue that there is a risk that the sale of NFTs could trigger regulations on investment products, especially as individuals start buying and selling fractions of individual NFTs.
The Securities and Exchange Commission has taken enforcement action against crypto market participants amid concerns that consumers may face increasing financial risk when flocking to digital assets. SEC Commissioner Hester Peirce warned last year that the The “fractionalization” of individual NFTs could lead the agency to take action.
“The FEC will not worry about aftermarket NFTs as long as there is no added value flowing back into the campaign,” said Brett Kappel, campaign finance attorney at Harmon Curran law firm. “However, the SEC may have some questions about whether NFTs are really just a new type of security – investments held in anticipation of appreciation and traded in a market.”
It remains to be seen to what extent the basic donors will adopt the new technology.
Kurani, who is fighting for a chance to stand up against Rep. Ken Calvert (R-Calif.), Said she plans to sell more NFTs after donors bought just 21 of their campaign’s 2,022 available tokens during a 72-hour auction in December had. Kurani is the vice president of financial technology company Republic, which provides investors with access to venture capital-backed startups, including virtual real estate deals in the Metaverse.
“To be honest, that was just the beginning,” she said in an interview. “It’s an opportunity to educate people and get involved in ways they may not be particularly familiar with.”
Hailey Fuchs and Zach Warmbrodt contributed to this report.