As the 2022 midterms approach, crypto-savvy politicians are learning to embrace NFTs
Politicians are adopting NFTs as a cornerstone of campaign finance with the start of the 2022 midterm elections.
They see this as an exciting way to raise funds and connect with voters.
Others see it as a path to financial crime due to the lack of NFT regulations.
Before everything.
With the 2022 midterm elections looming, the former Democratic candidate for California's 41st congressional district describes herself as an "engineer, entrepreneur, and problem solver based on facts, not politics."
This is exactly what prompted her to explore incorporating non-fungible tokens (NFTs) into her Congressional campaign.
“The political world has just woken up to how to engage the crypto community, and we're excited to be on top,” Kourani said.
This trend started with New York City Mayor Eric Adams and Miami Mayor Francis Suarez adopting cryptocurrency as a way to spur citywide economic growth.
But as Kourani explains, NFTs have proven to be a powerful fundraising tool.
Fundraising season is heating up as the 2022 midterm elections approaches.
In the high stakes race, financing is of paramount importance.
And for candidates like Kourani, who bring unique tech knowledge, this means implementing NFTs and cryptocurrencies as key aspects of their campaign financing plans.
The ranks of candidates using NFTs also include Colorado Governor Jared Polis, whom Axios described as the "most famous" politician for exploring NFT fundraising.
Matt West, a congressional Democrat, also recently launched a set of Ethereum-based crypto NFTs.
Blake Masters, the former CEO of Silicon Valley, has also made them part of his campaign in the Arizona Senate, which has Peter Thiel's support.
And Dr. Scott Jensen, the Republican nominee for the Minnesota seat, did the same.
More politicians have embraced cryptocurrency as it has gained prominence as a major investment tool.
But the use of NFTs to fundraise for campaigns is unique in this election cycle - and raises questions about their future.
Some experts point out that the precarious nature of NFTs as an investment vehicle can open the door to major problems beyond both campaigning and financing.
Digital platforms have proven essential, Whereas, people's banners, junk mail, and television advertisements are no longer enough to win elections.
This was especially good for candidates using the grassroots method of running without the support of corporations or super political action committees (PACs).
As Kourani notes, fundraising isn't just about maintaining strength, "You need to fundraise because that indicates you have the resources."
Political fundraisers face an ever-evolving need to connect with voters and raise money at the same time.
NFTs provide the opportunity to do just that.
New platforms take fundraising mid-term
One of the driving forces behind the rise of NFT as a campaign donation tool is Brian Forde, CEO and co-founder of campaign fundraising startup Numero.
This financial technology is launching electables.com, a fundraising platform from NFT.
As Ford sees it. "With NFTs, electrical materials allow them to connect with other grassroots supporters and recognize their contribution," he said.
One of the unique advantages of NFTs is that they can be made personal to the issuer.
Musicians have been drawn to NFTs because they allow fans to invest in the artists they believe in.
And as Forde discovered, primary donors want the opportunity to invest directly in the politicians they are eager to support.
"The technology behind NFTs is a timestamp, providing early donor support and impact that can be publicly displayed."
Kourani knows the importance of reaching out to the voter base for fundraising purposes.
"As a candidate, you are expected to spend more than 30 hours a week on the phone - not talking to voters, but calling potential donors without hesitation.
" Her entry into the NFTs has helped for this reason. As Kourani notes, “[my] NFT Drop has a similar benefit to campaign merchandise, with the added value of being able to engage more with our community.”
Fellow Democrat Matt West revealed another unique trait of NFTs.
“I really think it would be a great way to respond to dark money, the capital’s elite, and the Central Power in a very unique way,” he said.
Referring to the tendency of special interest groups to contribute to political campaigns.
In this statement, West highlights something important: the allure of decentralized finance.
Add the democratic character of democracy
The primary attraction of Decentralized Finance (DeFi) is that it can “eliminate the need for a central authority”.
Digital assets, such as cryptocurrencies and NFTs, provided investors with an opportunity to break away from central authority, helping to create a more democratic financial system.
For voters who believe in creating an accessible financial system for investors, decentralized contributions benefit both them and the candidates.
"With encryption, we can democratize access to financial services," Kourani noted.
Donors with an affinity for blockchain technology know that the NFTs purchased can gain even more value if the candidate's career advances.
Campaign merchandise can become very valuable, depending on the candidate's legacy. Kennedy's original 1960 President John F.
Kennedy campaign posters sold for $1,400 in 2022.
NFTs with the ability to generate return on investment (ROI) in the same scale, Kourani has joined a market built on the Algorand blockchain.
Her campaign released 230 NFTs, most of which showed photos of her and reflected her tech background. 21 of them have been sold so far.
Blake Masters, the Republican candidate for a Senate seat in Arizona, sold 99 NFTs before the end of 2021.
The Masters' NFTs were based on the cover of his book, which he co-authored with Thiel.
In short, NFTs provided a means for donors to effectively purchase digital goods.
So far, there is nothing to prevent these donors from making large-scale donations through the purchase of NFTs.
However, there are many organizational complexities.
"Under the current law, anonymous donors can give unlimited amounts of money to an organization in order to make independent expenditures, as long as that organization does not have any electoral activities as its main objective."
However, donors can spend as much as they like through NFT purchases, creating fraudulent ways to contribute to the election.
And while sites like OpenSecrets provide detailed lists of who contributed to the campaign and how much they gave, at least for now, there is less publicly available data regarding NFT buyers.
NFTs: pot of gold or pot of problems?
Recently, members of the European Union Parliament called for NFT trading platforms to be subject to Anti-Money Laundering (AML) laws.
Especially after NFTs attract people tired of the highly centralized financial system, these lawmakers may preside over an international market.
Justin Daniels, a lawyer who specializes in the legal intersections of business and technology, is concerned about the ability of NFTs to facilitate money manipulations.
Daniels noted that the use of NFTs is a convenient tool for money laundering operations.
Experts like crypto commentator Weil have tried to warn against the use of NFTs to secure illicit gains.
“I think the lack of regulation makes it very difficult for politicians to use NFTs to collect campaign contributions,” Daniels said.
Ryan Wilkinson, Head of Product at Blockasset, argued that KYCs “to set up a space for NFT to clean up their reputation in the West.”
It depends on the tables that you want to leave the European federations.
“You have to think carefully about including some sort of KYC or AML to buy a campaign membership,” Daniels said.
One example he cites are individuals listed by the Office of Foreign Assets Control (OFAC).
Anyone on that list can also purchase an NFT from a political candidate.
“Imagine if you were to introduce an NFT [to a market] and someone [from North Korea] was going to buy one, that would be an issue under campaign finance laws,”
Daniels said. According to the US Federal Election Commission (FEC) “Federal law prohibits donations, expenditures (including independent expenditures) and payments that are requested, directed, received, or made directly or indirectly by or from foreign nationals in connection with any state, federal, state, or local election.”
In early 2022, Joseph Weinberg called for the creation of NFT technology using an on-chain KYC rules engine.