As crypto companies see a surge in funding for this election cycle, a large number of crypto-friendly candidates are likely to be elected on Tuesday.
The Senate races in Ohio and Montana could impact the progress of crypto legislation next year.
Whether the Democrats or Republicans control the House and Senate will also determine who will lead the key committees that will play a leading role in crypto and stablecoin legislation.
The crypto industry has poured a significant amount of money into the US congressional elections, which could have a major impact on legislation in 2025.
For example, according to Open Secrets, Fairshake raised over $200 million this election cycle to support key campaigns, with funding from major crypto companies like Ripple and Coinbase. Some of the biggest races to watch on Tuesday include the Senate battles in Ohio and Montana.
Alison Mangiero, the executive director of the Proof of Stake Alliance, said there will be more seats in Congress held by crypto-supportive individuals, which is a first in this election.
"Regardless of the outcome of each race, we will have the most crypto-friendly Congress in history," Mangiero told The Block in an interview. "There is still a lot of work to be done on education and the industry, because we have invested so much in these campaigns, and the real work is just beginning."
The presidential candidates themselves have also weighed in on the crypto industry, which is a unique phenomenon in this election year. Vice President Kamala Harris stated that, according to her 80-page economic plan, her administration would encourage innovative technologies like artificial intelligence and digital assets, while protecting consumers and investors.
Former President Donald Trump promised to end the "illegal and un-American attack" on the US crypto industry and support a crypto project called "Freedom Coin."
Meanwhile, prediction markets have also played a significant role in this year's elections. The courts ruled that the prediction market Kalshi can continue to offer election betting, and its markets have also gone live. As of November 1st, bets on who will win the US presidential election on the decentralized prediction platform Polymarket have surged to nearly $3 million. It's worth noting that Polymarket does not operate in the US.
Analysts say that prediction markets, like any market, are not always accurate, but can effectively aggregate real-time public sentiment. The Block cited Kalshi's data to understand how the congressional elections might unfold. For reference, the latest polling from 538 shows that the Republicans have a 91% chance of winning the Senate, while control of the House is closer. According to 538's data, the Republicans have a 51% chance, while the Democrats have a 49% chance. All data was collected on Monday morning.
The Republicans have an 80% chance of winning the Senate, while the Democrats have a 20% chance.
One of the most influential committees in the Senate is the Senate Banking Committee, which has jurisdiction over the SEC and CFTC, both of which regulate cryptocurrencies. Currently, the committee is led by Ohio Democratic Senator Sherrod Brown, who has been critical of the crypto industry, and is facing a fierce challenge from the crypto-friendly Republican candidate Bernie Moreno in the state.
If the Senate flips to the Republicans, then Tim Scott, the Republican Senator from South Carolina, is likely to take over the Senate Banking Committee, regardless of whether Brown wins his race.
Scott is currently the top Republican on the Senate committee, and he has recently expressed support for the crypto industry. In August, he proposed that if he became the chairman, he would establish a subcommittee focused on the digital assets industry. Scott's spokesperson said that if this happens, the senator plans to develop a framework for regulating digital assets.
"Senator Scott will work to establish a regulatory framework that provides a reliable path for the trading and custody of digital assets, to promote consumer choice, education and protection, and ensure compliance with appropriate Bank Secrecy Act requirements," the spokesperson said in an email to The Block.
Ron Hammond, the Director of Government Relations at the Blockchain Association, said that if Scott creates a subcommittee focused on digital assets, it could be a "trailblazer" for future crypto legislation. For example, the House Financial Services Committee has a subcommittee focused on digital assets, which has played a key role in launching crypto bills.
"We can assume that with this subcommittee, the Senate not only can consider House bills, but may even initiate its own bills, whether it's on stablecoins, market structure, or other anti-money laundering bills," Hammond told The Block.
If the Democrats control the Senate, Brown is likely to continue as the chair of the Senate Banking Committee. However, if he loses his race, and the Democrats still hold the majority, Elizabeth Warren, the Democratic Senator from Massachusetts, could become the chair. But this scenario is unlikely, as Ohio is a swing state, so the Democrats would need to win other states to control the Senate.
"For Warren to become the chair, there would have to be a lot of very unlikely scenarios," Hammond said.
Warren has been critical of cryptocurrencies, and she is pushing for the crypto industry to comply with anti-money laundering rules, and supports a bill that would expand the Bank Secrecy Act's requirements, including know-your-customer rules, to cover miners, validators, and wallet providers.
Mangiero of POSA said she expects lawmakers in a Republican-led Senate to be more willing to advance the bills that have already been introduced. Two notable bills have gained support in the House - one focused on what's called the FIT21 crypto market structure, and another focused on stablecoin regulation.
As for stablecoins, both Democrats and Republicans are eager to pass a bill. On the Senate side, Republican Senator Bill Hagerty of Tennessee introduced a draft bill in October that is very similar to the work being done in the House.
"If the Senate is Republican-led, the chances of achieving that goal are higher," Mangiero told The Block. "But I do think the Democrats are willing to engage on the stablecoin issue."
As for the likelihood of a Democratic-led Senate passing a market structure-focused bill to regulate cryptocurrencies, Mangiero said, "Anything is possible."
The Democrats have a 53% chance of taking the House, with the Republicans close behind.
The House Financial Services Committee has been key for crypto-related bills, and over the past few years, some bills have passed under the leadership of its chair, North Carolina Republican Congressman Patrick McHenry, who will retire in January 2025, leaving an opening for new leadership.
McHenry played a crucial role in the efforts to advance the stablecoin bill and the FIT21 bill. McHenry said in September that he believes his bills could gain momentum during the lame-duck session, the period between the election and the new Congress taking office in January.
Hammond said that regardless of which party wins the White House, they could win the House. He added that the chair of the House Financial Services Committee could also be selected as early as November or December. If the Republicans control the committee, the potential leaders include Arkansas Congressman French Hill, Kentucky Congressman Andy Barr, Michigan Congressman Bill Huizenga, and Oklahoma Congressman Frank Lucas - all of whom are crypto-friendly.
"Regardless of who the Republican chair is, if it's not done by the end of this year, their focus will be on stablecoins and market structure, and then likely DeFi, Non-Fungible Tokens, until their term ends in 2026," Hammond said.
If the Democrats take the House, California Congresswoman Maxine Waters could once again lead the House Financial Services Committee. Waters has sometimes criticized cryptocurrencies, but has also been very willing to let the stablecoin bill pass. At a congressional hearing in September, Waters called for a "major stablecoin deal" to be reached by the end of the year.
"I've publicly declared to you all bipartisan cooperation - let's see what you're going to do," Waters told McHenry at that hearing.
"So if they don't get it done this year, she'll probably go back to her old ways," Hammond said. Waters did not respond to The Block's request for comment on what her crypto priorities would be if she chaired the committee.
However, Hammond said Waters opposed FIT21, so the path forward for that specific bill is unclear, but he added that it depends on whether Waters believes digital assets need a regulatory framework.
The White House has opposed FIT21, but in a statement released in May said it was "eager to work with Congress to ensure a comprehensive and balanced regulatory framework for digital assets." At the same time, U.S. Securities and Exchange Commission Chairman Gary Gensler said cryptocurrencies do not need new rules and called for crypto entities to register and comply with its rules.
Hammond said taxes will also be on the table in 2025, as lawmakers face a looming deadline for the expiration of the Trump tax cut and jobs act at the end of next year.
"When there's a major tax bill on Capitol Hill, the whole tax space opens up," Hammond said, adding that crypto tax proposals will be part of the discussion. For example, part of the discussion could include a bill proposed by North Carolina Democratic Congressman Wil Hurd and Georgia Republican Congressman Drew Ferguson that would clarify that staking rewards should only be taxed upon sale.
Key Races to Watch
Hammond said the Ohio Senate race could be the most important. Another contentious race could be the Montana Senate race. There, Democratic Senator Jon Tester will face off against Republican Tim Sheehy. Stand With Crypto gave Sheehy an A grade for his crypto-friendly stance, while Tester received a C.
Notably, Tester is one of the few Democrats who has pushed back against a Securities and Exchange Commission announcement that set certain accounting standards for companies that custody crypto assets, including Senate Majority Leader Chuck Schumer, a New York Democrat.
Overall, Hammond said that in conversations with candidates across the country, many seem crypto-friendly.
"The good news is there are a lot of crypto-friendly Democrats and crypto-friendly Republicans running for office," Hammond added. For example, in the Arizona Senate race, Republican candidate Kari Lake and Democrat Ruben Gallego both received A grades from Stand With Crypto. Reports indicate Fairshake provided millions in funding for Gallego's campaign.
POSA's Mangiero laid out in detail how next year will be "the most crypto-friendly Congress ever." She said this will include those who already identify as crypto-friendly, but also means future lawmakers may be more open-minded.
"I also think you'll see at least a little bit more open-mindedness, because they have to educate themselves on these topics in order to effectively govern the country," she said.
