Washington Weekly: Crypto Wins

The Senate approved various Biden administration nominees, including the 200th judicial nominee during this administration. It also passed a resolution to repeal an Energy Department rule to create stronger energy efficiency standards for gas furnaces and failed to advance a border security and immigration legislation (see below). The House passed bills to provide tax relief to victims of federally declared disasters (see below), repeal Washington, DC’s non-citizen voting law (see below), split oversight duties between the SEC and CFTC (see below) and prohibit the use of central bank digital currency for monetary policy.

The Senate and House will be on recess to celebrate Memorial Day. Both chambers will return on June 3.

Southwest Border Vote.

The Senate voted again to reject a bipartisan immigration deal that was struck three months ago, but that was subsequently dismissed by Senate Republicans as insufficient. Senate Democrats wanted to sequence the vote prior to executive action that the Biden administration is expected to take next week to limit entry into the US via the asylum process, which has been used by many undocumented immigrants to cross the border and stay in the US in unprecedented numbers. There are political implications to all of this action. According to polls, problems at the southwest border remain a top concern for voters. The Senate vote and Biden administration action are meant to show a response to that sentiment. Whether the administration’s executive action will be enough to both address voters’ concerns and improve the situation at the border remains to be seen, but we believe this vote and the impending executive action will be the last taken on this issue this year by either the administration or lawmakers.

Crypto Wins.

The crypto industry this month has scored a couple of big legislative victories. Both the House and Senate recently passed a resolution to reject an SEC rule on the accounting treatment of digital assets held in custody. While financial assets held in custody are typically considered off balance sheet, the SEC rule requires digital assts held in custody to be recorded on the balance sheet of the custodian. The crypto industry has raised serious concerns about how the rule would raise costs for holding digital assets. This week, the House passed a bill on the market structure of digital assets that would delineate jurisdiction over digital assets between the CFTC (commodities) and the SEC (securities). While these votes demonstrated bipartisan support for crypto assets less than two years after the collapse of crypto exchange FTX, these wins are likely a highwater mark this year. The resolution against the SEC rule is subject to a presidential veto, while the digital asset market structure bill is unlikely to go anywhere in the Senate. Supporters of that bill will try to attach it to broader legislative vehicles like the farm bill, but those efforts are likely to fall short in the Senate.

Big Tech's Liability Protection.

The top Republican (Chairwoman Cathy McMorris Rodgers) and Democrat (Ranking Member Frank Pallone) on the House Energy and Commerce Committee unveiled a new bill that would remove the legal immunity that big tech firms currently have through the Communications Decency Act of 1996 unless they make their platforms safer and follow certain standards. If enacted, the bill would have a significant impact on the content posted by these platforms. However, the bill is unlikely to advance further in the House or in the Senate. It is opposed by the technology industry and a significant group of lawmakers who fear that removal of the immunity will open the floodgates to frivolous lawsuits. However, the bill signals a greater willingness by lawmakers to demand changes at tech companies and could influence those companies’ business practices and decisions about posting content.

Gas Prices.

This weekend is the unofficial start to summer travel season, and you may be one of millions of Americans who will fill up the gas tank and drive to the beach or mountains. The average price per gallon nationally is currently $3.58, which is slightly lower than last month’s level, but also slightly higher than that of a year ago. The Biden administration announced earlier this week that it would release one million barrels of reserve gas in the Northeast as part of an effort to bring down gas prices. To put this in perspective, the Biden administration released 180 million barrels in 2022 in the wake of a spike in energy prices following Russia’s invasion of Ukraine. The current release will be administered 100,000 barrels at a time before the end of June. Gas prices are used by many voters as a way to gauge the economy (and inflation), and the price of gas is often most visible in the summer when people drive more. The Biden administration could release more gas later in the year, but it is running out of viable ways to impact the price of gas at the pump in the near term.

Disasters and Taxes.

The House passed a bipartisan tax package earlier this year that has since stalled in the Senate. That bill includes a provision to provide tax relief to those impacted by certain disasters, like hurricanes and wildfires and the train derailment in East Palestine, Ohio. In response to inaction in the Senate, Congressman Greg Steube (R-FL) used a rare parliamentarian procedure to force a vote in the House for this tax relief. His bill passed this week with strong bipartisan support. The bill arrives at the beginning of what is projected to be a difficult hurricane season this year. While action on this bill is not enough to prompt the Senate to pass the more comprehensive tax bill, it does increase the chances that it will pass the smaller bill for disaster victims later this year.

Coming in June.

After the Memorial Day recess next week, the House will focus on passing government funding bills for fiscal year 2025 as well as an annual defense authorization bill. The bills’ spending levels will be broadly consistent with this year’s government spending. They will provide a very small increase in defense spending and flat levels of spending in non-defense activities. Many lawmakers are already grumbling about that frugality and will try to raise spending in certain areas. Congress has passed the defense authorization bill for a remarkable 63 consecutive years. Beyond these legislative efforts, the House will hold what will be a widely watched and contentious hearing on June 3 with testimony from former White House chief medical advisor Anthony Fauci.

On Deck at the Supreme Court.

Also in June, the Supreme Court will begin its process of announcing various decisions from cases it heard this term (October-April). The court’s caseload consists of a wide array of politically delicate issues, including former President Trump’s claim of immunity from prosecution and the question of whether a state can disqualify him from the ballot. Other cases involve abortion medication, gun rights, social media regulation, the power of federal agencies and racial gerrymandering. The Court will hand down decisions on a rolling basis throughout June on all of these cases, though the most contentious decisions will be announced late in the month. With the timing of some of these decisions occurring just months before the elections, some decisions could have significant political impacts (just as the Dobbs v. Jackson decision relating to abortion did in 2022).

Noncitizens and Voting.

For the second time in two years, the House voted this week to repeal a Washington, DC law that allows for noncitizens to vote in DC local elections. DC is one of 17 cities in the US (a list that includes San Francisco and Oakland) that allow noncitizens to vote in local elections. An effort in New York City to extend the vote to certain noncitizens was passed in 2022 but later was ruled unconstitutional by the courts. A federal law from 1996 denies noncitizens the right to vote in federal elections in any state, but this does not apply to state and local elections. Seven states currently prohibit their municipalities from extending the vote to noncitizens (AL, AZ, CO, FL, LA, ND, OH), while five states will have the issue on their ballots this year (IA, KY, MO, SC, WI). The House bill passed this week will not be acted on in the Senate, and most of the focus on these issues going forward will continue to be in the states or on the campaign trail.