Mary Altaffer/AP Photo
Sen. Kirsten Gillibrand (D-NY) speaks to reporters during the election night party for New York Gov. Kathy Hochul, November 8, 2022, in New York.
On Tuesday, Politico reported that the Commodity Futures Trading Commission’s (CFTC) former director of the division of market oversight, Dorothy DeWitt, had just joined Sen. Kirsten Gillibrand’s (D-NY) office as chief counsel for finance. Before DeWitt’s two-year stint at the CFTC, for about a year, she worked as the vice president and general counsel for the cryptocurrency company Coinbase’s business and lines division.
During the peak of abortion politics in the summer, the Prospect reported how Gillibrand, a recently anointed “crypto hero,” unveiled the industry-friendly Responsible Financial Innovation Act with Sen. Cynthia Lummis (R-WY). The bill included a study of whether to allow people to purchase crypto assets for their retirement accounts. Eventually, Gillibrand would co-sponsor Sens. Debbie Stabenow (D-MI) and John Boozman’s (R-AR) Digital Commodities Consumer Protection Act (DCCPA), the most likely crypto bill to pass, which would designate oversight powers for “digital commodities” to the CFTC, as opposed to the Securities and Exchange Commission. Throughout the development of a crypto regulatory framework, the New York senator has consistently functioned as a moderating force.
But what was supposed to be an exciting year for crypto insiders to demonstrate that their technology could scale up and bring millions of everyday consumers into the fold has instead been a disaster. The hype surrounding NFTs collapsed almost as quickly as they entered the public’s consciousness. Prices crashed over the spring and companies had to be rescued by one of the industry’s giants, the exchange platform FTX. Then last month, FTX fell amid allegations of widespread fraud and illegal use of customer funds to make risky bets. That could be just the beginning, as other crypto firms like BlockFi announce bankruptcies.
It’s maybe the least likely possible time for anyone on Capitol Hill to hire a crypto lawyer, given the taint of the industry and its bipartisan influence-peddling campaign. But that’s what Gillibrand has done.
While most watchdogs have paid attention to government officials moving into the crypto sphere, Timi Iwayemi, a senior researcher at the Revolving Door Project, explained to me that Gillibrand hiring DeWitt is a pioneering move, where a crypto insider is entering government, rather than vice versa.
Coinbase has been a particular revolving-door hub. The crypto exchange’s chief legal officer from September 2018 to March 2020, Brian Brooks, then moved to take over the highest position at the Office of the Comptroller of the Currency, the national bank regulator. In this capacity, Brooks proposed regulatory changes that “would give cryptocurrency businesses more access to banking services,” citing Dodd-Frank’s mandate over fair access to financial services. Brooks is now CEO for the Netherlands Bitcoin mining company Bitfury Group.
“[Gillibrand] hiring a lawyer with industry and government experience allows her to profess a real interest in regulating the [crypto] space,” Iwayemi said. “At the same time, it is also an indicator of how much crypto interests and concerns will shape her office’s legislative goals going forward.”
That’s especially true given DeWitt’s last stop at the CFTC, the agency that stands to benefit the most from the DCCPA legislation. While this legislation was on the fast track prior to FTX’s collapse, it has now stalled out, primarily because FTX and its leader Sam Bankman-Fried supported and helped craft it.
Gillibrand hiring DeWitt is a pioneering move, where a crypto insider is entering government, rather than vice versa.
Proponents for CFTC jurisdiction over crypto structure their analyses around an imprecise definition that crypto is a “digital commodity,” akin to the sorts of complex trades sophisticated investors make. That framework limits the reach of the SEC, the only government agency explicitly tasked with protecting retail investors.
Gillibrand has committed to donating campaign funds that she received from Bankman-Fried to a New York nonprofit.
In a statement to the Prospect, Gillibrand spokesperson Evan Lukaske said, “Dorothy Dewitt is a tough regulator with deep experience in legal, regulatory and compliance issues. At the CFTC, Dorothy educated staff on crypto market structure, emerging trends and risks so they could better license, regulate, and examine digital asset registrants. Dorothy will be an asset to Senator Gillibrand’s efforts to pass a bipartisan and comprehensive framework that protects consumers, bolsters market integrity and supports responsible innovation.”
ASIDE FROM DEWITT’S CRYPTO BACKGROUND, her career encapsulates some of the worst excesses of financialization, all rolled into a single person. According to LinkedIn, in the late 1990s, she began her legal career at the white-shoe law firm Davis Polk & Wardwell. During this period, DP&W advised Exxon on its $81 billion acquisition of Mobil, creating the largest company in the world at the time.
Gillibrand also began her career out of law school with DP&W, where she stayed until 2000. In 1996, she defended the tobacco giant the Philip Morris Company (now Altria Group), as it faced a federal perjury investigation when the company lied to the public about the adverse health effects posed by smoking. By 2005, as Gillibrand entered politics, she branded herself as a conservative Democrat, though she has grown rather progressive during her time representing New York in the Senate.
In that same stretch, DeWitt climbed the ladder in the alternative investments sphere. First, she worked as an event-driven hedge fund research analyst for ING Furman Selz, now Selz Capital; then as an arbitrage portfolio manager for the asset management firm GAM Investments; and lastly, spent the late 2000s at another hedge fund, Cadogan Management, as a partner, research director, and general counsel.
DeWitt’s LinkedIn page has no employment history from October 2009 to October 2014. However, she landed on her feet just fine, hopping from J.P. Morgan to S&P Global, back to Davis Polk & Wardwell, and finally returning to the hedge fund space as counsel and chief operating officer for Citadel Securities.
The year at Coinbase is most relevant now, however, especially because it has been specifically cited as one of her core areas of expertise.
When DeWitt was appointed to the CFTC, former CFTC chairman Heath Tarbert celebrated her 20 years of dedication to enriching Wall Street. “Her strong investment, risk, legal, and compliance background and familiarity with distributed ledger technology, including crypto assets, will be invaluable as the agency looks to develop a holistic approach to regulating 21st-century commodities,” Tarbert said (emphasis added). After leaving the CFTC, Tarbert joined Citadel Securities, a market-making firm, as chief legal officer.
While the technology that crypto operates on might be mystifying, how it’s marketed to everyday investors is clearly not. The most glaring example being how crypto firms dominated ad slots for this year’s Super Bowl. Earlier this year, the Federal Trade Commission called the combination of crypto and social media a “combustible combination for fraud.”
While a crypto lawyer is new, it’s hardly different from any other finance type landing a job on Capitol Hill. But Gillibrand’s recruitment of DeWitt is emblematic of how, at a time when the crypto industry’s influence in official Washington should be at a low ebb, it’s instead gaining legitimacy and power, during its most embarrassing and destructive year yet.
