As everyone from giant corporations to celebrities embrace the cryptocurrency phenomenon known as NFT, political candidates are now getting in on the act – but some experts say transparency issues could affect their use in as a political fundraising tool.
Non-fungible tokens – digital assets that cannot be replicated and can be used to represent real-world objects – are slowly creeping into the political world, with a few candidates already using them to raise thousands of dollars.
“NFTs are bringing more people into our fold, into our movement,” said Max Rymer, digital consultant for Minnesota Republican gubernatorial candidate Dr. Scott Jensen.
Jensen’s campaign saw an opportunity for NFTs to be an inexpensive way for people to engage with their candidate and receive something of value in return for their donations, Rymer told ABC News.
Through the sale of NFT, “we’ve added 2,500 new people who are going to support our campaign going forward,” Rymer said.
Blake Masters, Republican candidate for the US Senate in Arizona, also embraces NFTs.
“I was thinking of creative ways to raise funds and I thought of NFTs because [they] can give people a sense of belonging,” said Masters, who also co-authored “Zero to One,” a best-selling business book published in 2014.
So Masters sold his followers limited-edition NFTs depicting his book cover — and raised nearly $575,000.
Like collectible artwork and rare baseball cards, the value of an NFT derives from its uniqueness – in this case, a unique digital token in a distributed database known as a blockchain. Digital tokens are stored on the blockchain via a digital wallet and can be held as an asset – as digital memories – or sold and traded for investment purposes.
Many NFTs also offer real perks and exclusive access to events, making them attractive as campaign offers.
For example, for those who purchased Masters’ digital tokens, benefits included receiving a signed copy of his book and the opportunity to meet him and his co-author, tech billionaire Peter Thiel, who helped to develop the NFT collection.
“We will at least have a party for the token holders,” Masters told ABC News. “It’s like Willy Wonka’s golden ticket.”
This kind of involvement makes NFTs a good way to help contestants build a community of supporters, said Joseph Argiro, CEO of Iron Key Capital, a digital asset hedge fund.
“[NFTs] are probably a better way than just accepting donations because they are more of a symbolic representation of your beliefs,” Argiro said.
For those who purchased from her initial NFT collection, former first lady Melania Trump offered an audio recording with a “message of hope.” Some of the proceeds from her collection, which was released last month, supported her Be Best initiative, a campaign focused on children’s issues and the fight against cyberbullying.
“What you’re trying to tap into with NFTs is a sense of partisanship around a common cause,” said Joshua White, an assistant professor of finance at Vanderbilt University. “And so NFTs can create a community where there’s this positive feedback loop.”
In the case of the Senate Masters campaign, White said, NFTs could attract younger voters who have never voted Republican but want a younger, more tech-savvy candidate to represent them.
NFTs have also been a breath of fresh air for political campaigns and fundraisers looking for a new way to appeal to grassroots supporters, said Brian Forde, co-founder of the fundraising platform in Numero line, which is working to launch a new NFT fundraising platform. for Democratic campaigns called electables.com.
“We have launched surveys with over 14,000 local donors and a few things stand out: one, they are tired of hyperbolic emails, two, they want to be recognized and connect with other local supporters of this campaign “, said Forde. . “So with NFTs, elected officials allow them to connect with other grassroots supporters and be recognized for their contribution.”
Forde said supporting an NFT is similar to supporting a sports team – which is why NFTs have been adopted by many leagues.
“What surprised me most about NFTs is how quickly and powerfully you connect and build a strong community of followers,” Forde said. “Professional sports leagues were some of the first to figure this out, and in many ways campaigns are a lot like sports teams. If you own [an NFT], you feel a sense of belonging to this community in a stronger way than ever before. Sports teams were the pioneers and campaigns will follow in their footsteps.
And while the number of political campaigns that have launched NFTs remains low, interest has increased. Forde said electables.com, which will make money by providing an NFT fundraising platform for campaign clients, currently has more than 300 campaigns on its waiting list ahead of its scheduled March launch.
Currently, there is little to no official guidance on NFT fundraising from the Federal Election Commission, said FEC Commissioner Ellen Weintraub. Nor has there been a campaign or committee requesting a formal advisory opinion from the agency.
“It’s not something the agency has received a lot of questions about, and there certainly hasn’t been a formal request from the Commission as a whole to rule on it,” he said. Weintraub at ABC News. “My feeling is that it’s just not that mainstream yet.”
As a result, the Masters campaign and the Jensen campaign both sought legal advice before launching their NFT collections.
“We went through it through all the legal analysis,” Masters said. “I was very diligent legally and we were careful with our language…we made sure all the benefits were allowed.”
“It’s also brand new territory for a lot of these regulators,” Rymer said. “So we partnered, in essence, with the Campaign Finance Board and treated it the same way supporters would get a hat for a donation.”
NFTs can usually be purchased using either regular currency – like a credit card – or with cryptocurrency, virtual tokens that allow buyers to remain anonymous. But most political campaigns that fall under the Federal Election Commission or state-level election agencies are required to declare the identity of their donors — and officials say that could raise transparency issues.
“I think we probably need to look at the transparency aspect, if we can figure out where the NFT came from, the ‘thing of value,'” Weintraub told ABC News.
White said that if a cryptocurrency user has linked their virtual wallet to their personal information, transparency is not an issue. But he said using cryptocurrency for general political fundraising makes it “not clear where that money is coming from.”
To comply with fundraising regulations that govern contribution limits and other restrictions, some campaigns offering NFTs have turned to platforms like electables.com and the recently launched Front Row, which launched in the fall of as another NFT market for Democrats.
“We built this platform because we saw that was what needed to happen to progressive organizations, campaigns and movements that have some of these compliance regulations to participate in this ecosystem,” said Parker Butterworth, co-founder of Front Row, to ABC News. Butterworth said the platform allows political organizations to collect all necessary information from NFT buyers, including their name, address, age and US citizenship status.
The platform offered its first Texas Democratic Party NFT collection, and it’s now talking to several new customers, Butterworth said. He said the world of NFT fundraising is a “very rapidly changing space” that is expected to expand the world of digital campaigns.
“NFTs aren’t going anywhere,” Argiro said. “I think we’re just beginning to see how communities are using these NFTs to drive community formation and capital formation.”