(NEW YORK) — With everyone from giant companies to celebrities embracing the cryptocurrency phenomenon known as NFTs, political candidates are now getting into the act — but some experts say that transparency concerns could affect their use as a political fundraising tool.
Non-fungible tokens — digital assets that cannot be replicated and can be used to represent real-world items — 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, a digital consultant for Minnesota Republican gubernatorial candidate Dr. Scott Jensen.
Jensen’s campaign saw an opportunity for NFTs to be a low-dollar way for people to become engaged with their candidate and receive something of value in return for their donations, Rymer told ABC News.
Through the sale of NFTs, “we’ve added 2,500 new people that are going to support our campaign going forward,” Rymer said.
Blake Masters, a Republican U.S. Senate candidate in Arizona, is also embracing NFTs.
“I was thinking of creative ways to raise money and I thought of NFTs because [they] can give people a sense of ownership,” said Masters, who is also the co-author of “Zero to One,” a bestselling business book published in 2014.
So Masters sold his supporters limited edition NFTs depicting the cover of his book — and raised nearly $575,000.
Like collectible artwork and rare baseball cards, the value of an NFT derives from it being unique — in this case, a unique digital token in a distributed database known as a blockchain. The digital tokens are stored in the blockchain through a digital wallet and can be held as an asset — as digital memorabilia — or sold and traded for investment purposes.
Many NFTs also come with real-life perks and exclusive access to events, which makes them attractive as campaign offerings.
For example, for those who purchased Masters’ digital tokens, the perks included receiving a signed copy of his book and the opportunity to meet him and his co-author, tech billionaire Peter Thiel, who helped develop the NFT collection.
“We’ll have at least one token-holders party,” Masters told ABC News. “It’s like the Willy Wonka golden ticket.”
That kind of involvement makes NFTs a good way to help candidates 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 to accept donations, because they are more of a symbolic representation of your beliefs,” said Argiro.
For those who purchased from her initial NFT collection, former first lady Melania Trump offered an audio recording with a “message of hope.” A portion of the proceeds from her collection, which was released last month, supported her Be Best initiative, a campaign focused on children’s issues and advocating against cyberbullying.
“What you’re trying to tap into with NFTs is a sense of supporters around a common cause,” said Joshua White, an assistant professor of finance at Vanderbilt University. “And so NFTs can build a community where there’s this positive feedback loop.”
In the case of Masters’ Senate campaign, said White, NFTs could attract young voters that have never voted Republican but want a younger and more tech savvy candidate to represent them.
NFTs have also been a breath of fresh air for political campaigns and fundraisers that are seeking a new way to appeal to grassroots supporters, said Brian Forde, co-founder of the online fundraising platform Numero, which is working to launch a new NFT fundraising platform for Democratic campaigns called electables.com.
“We’ve put out surveys to more than 14,000 grassroots donors and a couple things stand out: One, they’re tired of hyperbolic emails, two, they want to be recognized and connect with other grassroots supporters of that campaign,” Forde said. “So with NFTs, electables allow them to connect with other grassroots supporters and be recognized for their contribution.”
Forde said that supporting an NFT is similar to supporting a sports team — which is why NFTs have been embraced by numerous leagues.
“What surprised me the most about NFTs is how quickly and powerfully one connects and builds a community of strong supporters,” Forde said. “Pro 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 belonging to that community in a stronger way than you ever did before. Sports teams have been the pioneers, and campaigns are going to follow in their footsteps.
And while the number of political campaigns that have launched NFTs remains low, interest has been growing. 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 waitlist ahead of its planned launch in March.
As of now, there’s little to no official guidance on NFT fundraising from the Federal Election Commission, FEC Commissioner Ellen Weintraub said. Nor has there been any campaign or committee seeking an official advisory opinion from the agency.
“It’s not something that the agency has gotten a lot of questions on, and certainly there have been no formal request of the Commission as a whole to weigh in on this,” Weintraub told ABC News. “My sense is that it’s just not that common yet.”
As a result, the Masters campaign and the Jensen campaign both sought legal advice before they launched their NFT collections.
“We ran it through all the legal analyses,” Masters said. “I was heavily legally diligent, and we were careful with our language … we made sure that all the benefits were allowed.”
“It’s brand new territory for a lot of these regulatory bodies too,” said Rymer. “So we partnered, in essence, with the Campaign Finance Board and we treated this the same way that supporters would get a hat for a donation.”
NFTs can typically be purchased using either regular currency — like through a credit card — or with cryptocurrency, virtual tokens that allow purchasers to remain anonymous. But most political campaigns that report to the Federal Election Commission or state-level election agencies are required to report the identity of their donors — and officials say that could raise transparency concerns.
“I think we probably have to look into the transparency aspect, whether one could determine where the NFT, the ‘thing of value,’ is coming from,” Weintraub told ABC News.
White said that if a cryptocurrency user has linked their virtual wallet to their personal information, then transparency isn’t an issue. But he said that the use of cryptocurrency for political fundraising in general makes it easier to “not know 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 over the fall as another NFT marketplace for Democrats.
“We built this platform because we saw that that’s what needed to happen for progressive organizations, campaigns and movements that have some of these compliance regulations to participate in this ecosystem,” Front Row co-founder Parker Butterworth told ABC News. Butterworth said the platform allows political organizations to collect all the necessary information from NFT buyers, including their name, addresses, age, and U.S citizenship status.
The platform offered its first NFT collection from the Texas Democratic Party, and it’s now talking with several new clients, said Butterworth. He said the world of NFT fundraising is a “very fast moving space” that’s expected to expand the world of digital campaigning.
“NFTs are not going anywhere,” said Argiro. “I think we’re just seeing the beginning of how communities use these NFTs to drive community formation and capital formation.”
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