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Jeremy Owens: Hello and welcome to On Watch by MarketWatch. I’m Jeremy Owens. As we near the November election, there is a growing power in politics from an industry that many had written off just a couple of years ago. Today we’ll take you inside a discussion that has been bouncing around the power centers of Washington, DC and Silicon Valley. Then, we will discuss a big change arriving in the real estate market with new rules being introduced nationwide this month, your experience of buying a home is about to change. We’ll tell you how and what you should do about it. Plus, we’ll take a quick look at the news stories we are watching right now and how they will affect your wallet. First, let’s talk about the biggest pool of money sloshing around the upcoming election and what it’s for. Last week, liberal member of the House of Representatives Cori Bush lost her primary in Missouri after being attacked with ads like this one.
Speaker 2: Cori Bush can’t keep her word. Out for herself. Fairshake is responsible for the content of this ad.
Jeremy Owens: If you were forced to guess what entity was behind that ad? I imagine it would take a while before you got to cryptocurrency, but that’s the answer. Fair Shake is a political action committee or PAC that is funded by large crypto concerns, including Coinbase, Ripple, and the venture capital firm founded by Mark Andreessen and Ben Horowitz. And the funding they have provided is massive. In fact, Fairshake is the most well-funded PAC going in the current election cycle, raising more than $200 million as of the latest round of disclosures. So what is the crypto industry doing with all that money? Well, we brought Washington D.C. correspondent, Victor Reklaitis, on the program this week to explain what the crypto industry is doing so that you know what all those ads are really for.
Well, Victor, there’s a new power in this election that we’ve probably never really seen at this level before, and it comes from the crypto industry. Could you describe this super PAC they have formed and in relation to everything else going on in this election, how big it looks?
Victor Reklatis: Sure. The Super PAC is called Fairshake and it has raised 203 million for the 2024 election cycle so far. And as of this week, according to analysis from Open Secrets, which is a watchdog group, that’s the most money that any super PAC has raised so far this cycle. It’s just slightly ahead of what MAGA Incorporated, which is a super PAC that supports Republican presidential nominee Donald Trump has raised. And then third place goes to Senate majority PAC that supports Democrats in US Senate races. These numbers could change, but right now it’s raised more money than anybody else, and that’s really notable because this is still a growing industry. It’s still a relatively new industry, and it’s just a sign of the industry’s power in Washington and in elections.
Jeremy Owens: And Vic, we’ve said the crypto industry in general so far, but where’s the bulk of the money actually coming from?
Victor Reklatis: So Coinbase has donated the most, it’s 45.5 million to Fairshake, but other donors are not that far off. Ripple Labs is at 45 million. Andreessen-Horowitz, which is also called A16Z has donated 44 million. There’s some other donors like Jump Crypto at 15 million. The Winklevoss twins at 5 million. So those are the donors so far for Fair Shake according to the latest disclosures that we’ve looked at.
Jeremy Owens: And some of the biggest names there, like Coinbase and Ripple, what’s the goal here for them?
Victor Reklatis: So when Fair Shake put out a news release back in December, it was pretty clear about its goals. It says, “A clear regulatory and legal framework for success is needed.” And that seems to be a reference to one of the industry’s goals that was included in a bill that passed the Republican Controlled house in May. And that bill, it would give primary responsibility for regulating the industry to the Commodity Futures Trading Commission rather than the Securities and Exchange Commission. And the SEC is just widely disliked by the crypto community.
Jeremy Owens: And so they really want that bill that went through the house in the last session, but never got the Senate, to pass and become law. And so far, the Senate has been the stumbling block?
Victor Reklatis: That’s correct. I mean, back in March they spoke with several media outlets and they said that they were looking at targeting the Ohio Senate race and the Montana Senate race.
Jeremy Owens: And also, if you were to flip just one or two Senate seats in this upcoming election, that could flip it from Democrat majority controlled to Republican, majority controlled. And it just seems in general that crypto is backing Republicans and going against Democrats in a lot of cases. Does that seem to be a general truth or is it a little more nuanced than that?
Victor Reklatis: No, it’s more nuanced than that. I think that Fairshake can point to a bunch of Democrats that they’ve supported, but certainly for these battleground Senate races that are going to be really important in determining control of the Senate, the signals seem to be that they’ll go against the Democratic incumbent in Montana, John Tester and against the Democratic incumbent in Ohio, Sherrod Brown. They’re key players on the Senate Banking Committee, and Brown in particular is the chairman for that committee.
Jeremy Owens: But the commercials they’re putting out, Vic, say nothing about crypto, they go after specific figures. They’ve done this with Katie Porter, Corey Bush, Jamal Bowman so far. They produce commercials that go after them in a way that has nothing to do with crypto and would not signal to any viewer that this is a crypto concern making this ad.
Victor Reklatis: Yeah, I mean, I think a lot of political strategists would say that’s smart. Crypto is not a major issue for the average voter. So if you want to go after somebody, you just want to go after in general terms. And to your point for Katie Porter, one of the ads attacked her as a fake for Jamal Bowman in New York. An ad said that decency is gone in Jamal Bowman’s in New York. So no, exactly as you said, you wouldn’t realize that it’s an ad funded by the crypto industry.
Jeremy Owens: Right, Vic. And that’s a big reason I wanted to talk about this is just to let everybody know that when they see those ads from Fair Shake, that this is what they’re for. The crypto industry is attempting to change control the Senate and especially the Senate Banking Committee, and their goal is to improve the odds of Congress passing crypto regulation that’s friendlier to the industry and gets them out from under the thumb of the SEC. As this ever continues, we’ll have you on to talk more about it. Thanks so much for joining us, Vic.
Victor Reklatis: Thanks for having me.
Jeremy Owens: We did reach out to the major funders of Fairshake as well as the PAC itself to ask for comment, but they did not respond. We’re going to take a quick break. Coming up, a major change in the real estate industry. Stay with us. Welcome back to On Watch by MarketWatch. Before the break, we talked with MarketWatch Victor Reklaitis about the growing political power of crypto. Now we’re going to discuss why the process of buying a house is going to change drastically.
A recent settlement in a lawsuit against the National Association of Realtors or NAR is going to upend the real estate industry. To put it as simply as I can, home sellers used to pay the real estate agents involved on both sides of the transaction, but now that bill will be split between the seller and the buyer. While I made that sound simple, market Watch housing reporter Aarthi Swaminathan says the actual change is causing massive amounts of confusion. So I invited Aarthi on the program to try to walk us through how the process of buying selling homes is about to change and what you need to watch out for.
So Aarthi, when I bought my house, it was about 600 grand and the seller was required to pay 6% of that, about $36,000 to split between my real estate agent and theirs. That was how the real estate agents got paid. But if I were buying this month, the process would likely be really different. Instead of the seller paying that full 6% fee, they’d pay their agent, I’d pay mine, we’d each negotiate the fee, which is probably around 3% each, but you can negotiate it up or down and the process is very different. Can you walk me through that?
Aarthi Swaminathan: Yeah. You pay your own agent. You pay your own agent the fee that you want to pay. And so, it becomes a model where the buyer doesn’t have to depend on the seller to pay it, which is completely different from the model that we’ve been used to.
Jeremy Owens: And there’s a lot of stuff that could get really bad or really good here. So let’s take it from both angles. Let’s start with the seller. The seller now has to pay less. It’s actually a better deal if you’re selling a home than it would’ve been before this settlement.
Aarthi Swaminathan: And for the home seller, I think it is net-net a win because now you have the ability to negotiate what you want, and so it gives you a slew of options. But this is just one more way that you can take more of those earnings, I guess, the home value. Right? You really put a lot of effort into it. Some home sellers I’ve spoken to have said, I’ve spent so much money renovating this house. Why should I pay an agent, especially the buyer’s agent, this money?
Jeremy Owens: Let’s talk about the buyer’s side of this. It’s gone from the onus is on the seller to now the onus is partly on the buyer, and that’s where we’re going to see a lot of changes in the basic structure of how these deals work. Right?
Aarthi Swaminathan: The buyer side has seen the biggest change. As a buyer, you now have to pay tens of thousands of dollars in fees that you didn’t need to pay. And that alone is big stumbling block. Right? People find it hard to save for the down payment. How are they going to save for this commission? And so, just another block that erodes housing affordability, so to speak. And so, that’s a big change. On a sort of day to day basis, if you’re going to buy a house, you go on Zillow, you see a house you like, there’s an open house. What changes there is you just don’t book the open house and then attend it. You have to sign a form to tour the house. You have to sign a form if you like the house and you want to hire that agent. There is a little bit more paperwork in every single part of the process. There’s more negotiation.
If you have a good, honest real estate agent, they will ask you how much you want to pay and then you can negotiate with them. It’s also like do you want to be exclusive with this agent like a relationship? You have to develop maybe a 30-day relationship with them, a six-month relationship with them. So just from a buyer’s perspective, you have to do a lot of work, and especially repeat buyers will feel this difference a lot more than a first time buyer,
Jeremy Owens: Right. That’s the thing is the new buyers are going to experience this for the first time, but repeat buyers are experiencing something completely different. And these exclusive contracts that a buyer’s agent is going to try to get you to sign is the biggest change and the biggest potential stumbling block. You really need to know what you’re signing and exactly what you’re talking about with the exclusivity. You might be signing up and saying you won’t contract with another buyer’s agent for 30 days or six months or something like that. And the fee could be delineated in that. And there’s a lot of things you need to know there, and it’s hard for somebody, whether new or repeat, to know exactly to look for in there.
Aarthi Swaminathan: Yeah. So the process in which we understand the new rules is going to be painful. It’s going to be disruptive. Some people might make mistakes. I talked to a lawyer who said that one buyer he was working with violated the terms of an agreement and didn’t even know. Right? So you cannot sign multiple contracts with multiple people. You can’t be exclusive with three different agents, but at the same time, you can sign an exclusivity for one property or maybe just one day or one neighborhood. You can sign just an agreement to tour the house, but not really go with that agent.
You can also, and this is what I found interesting in my reporting over the last day, you can sign an agreement just to do the paperwork. So you can do the legwork as a repeat buyer. You can go and talk to all agents and do all your research and look at all the houses, and then you can sign just the paperwork, get a realtor to handle the legal side of things and pay a lower fee. And so, from a buyer side, it seems to me that if you’re very sophisticated, you know how to put in the legwork, you can still get a lower fee, but then again, you still have to pay a fee.
Jeremy Owens: And just to make this even more confusing, there is no real set date. You mentioned the August 17th date that this is supposed to go into effect, but state by state, some of it is already in effect in some states, some states are still quibbling about the language and depending on what state you are in, the rules could be different because of this. What a real estate agent is allowed to say and do can change state to state based on how they’re implementing this on a state level.
Aarthi Swaminathan: Yeah, you got that right. So New Jersey, the rules went into effect on August 1st. In Indiana, it went into effect on July 1st. And so state by state, it’s rolling out very differently. Each state has a different form, each state has a different rules. And by the way, New York has not decided if it is following these rules. And New York is always a little bit different in terms of a real estate market.
Jeremy Owens: So again, to try to simplify this, if you’re getting into the housing market right now, you should really know it’s a super awkward time, especially from the buyer’s perspective. You’ll need to really do a lot more research into how these new rules work in your specific state. Look into realtors before you sign anything with them and make sure you’re looking hard at that contract. When you do, if you do all of that and you still have questions, you can reach out to Aarthi, she has a column called The Big Move and is here to help. Thank you for helping us at this moment, Aarthi.
Aarthi Swaminathan: Thank you for having me.
Jeremy Owens: Before we go, it’s time for what we are watching, a look at the news you need to know for the rest of the week and beyond. Starbucks made a major change this week and it affected another well-known restaurant chain. The struggling coffee company ousted its chief executive who had been on the job for less than two years and replaced him with the CEO of Chipotle. Brian Nickel, Nickel oversaw a massive surge in Chipotle’s valuation with shares growing more than 770% since he took over in March, 2018. Starbucks investors, including activists starboard value, are hoping he can have a similar effect on the coffee chain, which has seen customers start to cut visits after large price increases. And apparently Wall Street likes Nickel. Starbucks stock had its largest one day gain on record after the move, while Chipotle stock suffered a large dip. New inflation reasons this week for the consumer price index and producer price index didn’t cause many ripples on the market.
Economists said that it is more evident that any movement from the Federal Reserve will be focused on the sagging labor market at this point instead of inflation. All eyes are now on next week’s Jackson Hole economic symposium. For any signals that the Fed is ready to cut interest rates. Fears of a recession will be a major theme in Jackson Hole next week. Recession indicators have been flashing all over the place in recent weeks, and there are even new ones popping up. This week, economists in California said a new rule they developed suggests there’s a 40% chance the US is already in a recession, but are we? And are all of these recession signs actually useful in the current strange economy? We’ll discuss that, along with Jackson Hole next week.
And that’s it for this episode. Thanks to Victor and Aarthi. To keep following the latest on the election, crypto and the housing market, head to marketwatch.com. You can subscribe to the show wherever you get your podcasts, and please do. If you like what you heard, please leave us a rating or review. It really helps others discover the show and let us know what you want to hear from us. You can reach us at On watch@marketwatch.com. The show is hosted by me, Jeremy Owens, and produced by Alexis Moore and Jackson Cantrell. Isaac Gaines mixed this episode. Melissa Haggerty is the executive producer. We’ll be back next week with a new episode, and until then we’ll be watching.
