What David Sacks brings to the table

The Sacks pick was the latest in a series of pro-cryptocurrency selections made by Trump, including Paul Atkins for Securities and Exchange Commission Chair, Howard Lutnick for Secretary of Commerce, and Scott Bessent for Treasury Secretary.

Sacks will lead a council of advisors tasked with crafting a legal framework for the crypto industry. This will include, but is not limited to, how different coins are classified, how they will be taxed, and what regulations will be put in place.

Securities or commodities?

One important matter that will need to be sorted out with a more permanent framework is whether certain cryptocurrencies will be classified as commodities, like gold or silver, or securities, like stocks. It would be more favorable to crypto advocates for tokens to be classified as commodities, as securities are subject to disclosure and registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934.

To be considered a commodity instead of a security, an asset must pass the Howey test, which is four criteria used to determine whether an asset should be classified as an “investment contract.” Not every cryptocurrency has the same properties, which means some might be more likely than others to be classified as a security instead of a commodity.

Coins like Bitcoin, Ethereum Classic, and Litecoin are much easier to assess because they are mined using a proof-of-work consensus mechanism which requires significant energy and resources, similar to gold, though a decentralized structure that does not tie the assets to centralized entities, and lack central issuers. These coins are likely the most safe from being classified as securities.

Coins that use a proof-of-stake consensus mechanism like Ethereum, Solana, and Cardano, however, could be classified as commodities, but are more at risk of being labeled securities than their counterparts. This is because instead of a decentralized mining process, transactions are validated by stakers and the more stake one has in a PoS asset, the more power they wield. This is similar to how publicly-traded corporations work. 

Sacks is a huge proponent of Solana, which uses PoS, prompting some to question whether he would be impartial in his advice. His firm Craft Ventures has also been a big supporter of the Lightning Network, a payment protocol built for Bitcoin. 

The incoming crypto czar has speculated that Solana can overtake Ethereum as the second most valuable token, next to Bitcoin. He disclosed that he held a large amount of the coin in 2021, and that he did not sell after the FTX-related crash in 2023. Sacks is also heavily tied to Elon Musk, as they were both part of the “PayPal mafia.” Musk is a top proponent of Dogecoin, which uses proof-of-work.

Trump has also used Solana, which has experienced at least 10 network disruptions since its inception, to launch his own collectable NFTs.

Sacks was named to the 0x crypto platform’s advisory board in 2020, which is relevant because the 0x developers legal guide states that “it is possible that virtually every crypto asset,” regardless of which centralizing properties it holds, “can be legally defined as a commodity.”

Ripple CEO Brad Garlinghouse praised Sacks as the crypto czar pick, which could signal that the incoming administration may be more friendly to the most centralized cryptocurrencies such as Ripple’s XRP. The company has been in a years-long legal battle with the SEC over whether it should be considered a security.

The SEC argues that Ripple marketed XRP as an investment and allegedly pooled funds from XRP sales to fund its operations, while Ripple Labs being the central issuer of XRP gives it disproportionate influence over the coin’s development. Critics argue that this makes XRP more similar to a stock than a commodity, but Ripple’s counterargument is that the coin is used as a currency, whereas stocks are not.

An early adopter of Bitcoin

Sacks was bullish on Bitcoin as far back as 2013, when he declared “I’m buying” and said it has “potential to be the next internet.”

With debanking becoming a major issue raised by figures such as Melania Trump, Nigel Farage, and Kanye West, Sacks has argued that Bitcoin represents a “separation of money and state” which protects citizens from debanking through government overreach.

Former COO of PayPal, Sacks said that “Bitcoin is fulfilling PayPal’s original vision to create the new world currency.”

His selection was lauded by many of the most influential people in the crypto community, including Tyler Winklevoss of the Gemini exchange and David Bailey of the Bitcoin Magazine. The latter said that he and others in the space contributed to the discussions surrounding who Trump should pick for crypto czar and added that Sacks “was by far the best candidate for the job.”

While Sacks is bullish on other coins besides Bitcoin, he argues that Bitcoin has the highest chance at long-term success.

In line with Sacks’s public statements on Bitcoin being digital money, Trump has proposed eliminating capital gains tax on cryptocurrency.

“They have them paying tax on crypto and I don’t think that’s right,” Trump said. “Bitcoin is money and you have to pay capital gains tax if you use it to buy a coffee? I was talking with a friend he said ‘it really shouldn’t be taxed’ and I agree. Maybe we get rid of taxes on crypto and replace it with tariffs.”

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Sacks has not publicly specified whether he supports eliminating capital gains tax on crypto.

The Washington Examiner reached out to Sacks for comment.