Brian Chilson
Sen. Bryan King (R-Green Forest)

All eight proposals regarding crypto mines passed out of the House Rules committee Tuesday and will head to the House floor on Wednesday.

Some colorful testimony served as a preview of the potential for political fireworks if lawmakers fail to take action to give local communities protection from crypto mines — or cave to lobbyists with a phony fig leaf.

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Speaking of which: In presenting his resolution today, Rep. Rick McClure, widely believed to be carrying water for the crypto industry, said his proposal would restore local control, even though the current language apparently still places some limits on local governments. The McClure proposal, co-sponsored by Sen. Joshua Bryant, does chip away at some of the most glaring issues with Act 851 of 2023, the crypto mining law McClure and Bryant teamed up to sponsor and pass last year. It will be worth monitoring closely to see just how these proposals evolve as the sausage gets made.

The flurry of resolutions comes in response to backlash to Act 851, which severely limits the ability of local communities to regulate bitcoin mining operations. Reportedly written by a crypto advocacy group, it was passed with little discussion during last year’s legislative session just eight days after it was introduced.

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The 2024 fiscal session, which began last week, is generally only for passing budget-related bills. For a bill to be filed on a non-budget matter during the fiscal session, both the Senate and the House must approve a resolution to consider it by a two-thirds majority. If that threshold is cleared, the bill itself can then be filed and go through the normal legislative process.

Sen. Bryan King, the most outspoken critic of Act 851, presented six resolutions alongside his House co-sponsor, Rep. Josh Miller, both Republicans

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“These crypto mines are not job creators,” King said, stating that an operation might at most employ a handful of people at the site. “They’re really job creators in China.” He cited investigations in The New York Times, the Wall Street Journal and elsewhere regarding Chinese ownership or involvement in crypto mining companies. He noted that given the web of shell companies involved, it’s difficult to trace who’s ultimately in control of these mining operations.

King noted one proposed crypto mine in the state that he said would use as much power as 6,000 to 8,000 homes, or a poultry plant or processing plant that employs thousands of people. All that for perhaps two or three local jobs, at most, he said. “It’s a China jobs-creating bill,” he said. 

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King also raised questions about the Satoshi Group, a dark money crypto advocacy group that reportedly had a part in crafting the language that wound up in Act 851 (King, apparently a fan of “Hee-Haw” — or alt-country — said it was a “501c3, BR-549, whatever,” a joke lost on the committee; google it).

King reiterated that he does not want to ban crypto mines but said that they should not get a special carve out from local government oversight and other regulation. Stripping local control, he said, had rigged the game in favor of powerful interests: “You have citizens in Bono having chili suppers trying to fight a billion-dollar company that is hiring the top, most expensive lawyers in the state.”

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“They knew what they were doing,” King said. “They had everything in place to set everything up. They knew that any community that tried to do anything … the Rose Law Firm and the people that did it knew everything. … Small towns and communities don’t have the resources to fight billion-dollar companies in federal court.”

(Note: As far as I know, the financial information on these operations is too opaque to say with confidence that any given firm doing crypto mining in Arkansas is a billion-dollar company, though that wouldn’t shock me if it was true (at least five of the biggest operations have market caps at or above a billion dollars). Just sorting out who ultimately controls the tangle of LLCs and shell companies involved can be murky. Certainly these are big players, and the point stands that preemptively getting a protective law passed and hiring the state’s top law firm seems to point to a strategy of using their spending power to overwhelm or intimidate local citizens who might complain.)

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Closing for the proposals, Miller said that some had told him he would lose all political capital he had if he helped to run the bills. Pausing to smirk, he said, “Hell, I’ve never had any.”

“There’s folks out here that are really hurting because of what’s going on here,” Miller said. He mentioned that he had been asked why he didn’t just trust the original sponsors, McClure and Bryant, to make necessary fixes. “I don’t let the same man take me snipe hunting twice,” he said.

McClure, presenting his proposal, objected, sort of, to the widespread reporting that the Satoshi Group played a heavy hand in drafting Act 851. He said he met the owner of Cryptic Farms, a bitcoin mining operation, in his role as chairman of the Hot Spring County Economic Development Corporation. That inspired him to write a bill that, he said, “included most of my language.”

“Yes, the Satoshi Group reached out,” he said. “They provided links to legislation in Missouri, Mississippi and Montana. I chose the Missouri bill to copy some wording. That was probably a mistake.”

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He said that to his surprise, “What was pitched as anti-discriminatory phraseology turned out to be limiting control.”

Oops!

He also tried to explain why the bill was rushed through at the very end of the session, a classic move by lobbyists trying to sneak something through that could be politically contentious but isn’t well understood by lawmakers. Supposedly there was some kind of miscommunication with a certain utility entity that wanted input. Just one of those things. Pay no attention to the smell …

“Obviously, there were unintended consequences on other portions of the bill,” McClure said. This is a strange claim, since the intended consequences in the plain language of Act 851 couldn’t be clearer. People aren’t complaining about some surprise that came out of nowhere. They are complaining precisely about the intentions spelled out nakedly in the original legislation — an effort by crypto mining operations to game the system to preemptively dodge local input or regulation.

“We’ve got problems and we need to fix it,” McClure said. He said the key elements were a return to local control for counties and cities, new noise mitigation and distance requirements, and efforts to stop ownership by designated nations such as China.

His claim that his bill would return local control sparked some questions. Rep. Carol Dalby (R-Texarkana) pointed out that the bill’s language regarding what a “local government shall not do” referenced a subsection that did not exist and that the new bill still mentions three prohibitions on local government. “You said it’s not limiting local control, but by the language it’s limiting local control,” she said.

That includes entirely new language stating that local governments are disallowed from prohibiting “home digital asset mining” or any requirements to “obtain approval from a local government before engaging in home digital asset mining.” While an individual could crypto mine from home, it wouldn’t really work — you need a very expensive network of high-powered computers in order to compete. I’m not sure why the protection for home bitcoin mining was included, but the paranoid among you might wonder if this is creating a new legal loophole that the crypto miners hope to exploit.

“We want to make sure we give the local control back to locals, so if we have a problem with language, we’ll get that taken care of,” McClure said. Hopefully there will be no unintended consequences. (To be fair, I suspect the issue with the missing subsection was just a typo that will be fixed.)

Asked why the proposal includes a new effort to explicitly block local governments from any form of regulation if the mining is done in a “home,” McClure said, “The intent there was to not get into homes, but that’s up for discussion, I’m open.”

Finally, Rep. Jeremiah Moore (R-Clarendon) presented a proposal, co-sponsored by Sen. Missy Irvin (R-Mountain View), that would establish state-level regulation and impose a state-level noise ordinance. He said that after a crypto mining operation opened near DeWitt, he spent no less than 60 hours speaking on the phone with concerned citizens. He said that given how powerful the crypto mining operations were, with potentially billion-dollar companies flexing their muscle, the issues demanded state-level authority to create and enforce rules and regulations. He also supported returning local control, he said, but without support from the state, the big corporations would “run roughshod” over smaller rural communities, he said.

Moore was among those subpoenaed by Jones Digital, which owns the crypto mining operation in DeWitt, after it sued the county on the basis of Act 851.

A couple of citizens testified, including the peppery Jackie Johnson, who owns a flower shop in DeWitt and emerged as the star of the day. She said she would tell the truth and try not to cuss. She said crypto represented “organized gambling facilities for billionaires.” It’s an industry riven with fraud, she said, and it will “ruin communities in Arkansas.”

“It opens up for bad actors to come in,” she said. “And I don’t want anybody to be fooled here. Sarah Sanders knew exactly what she was doing when she opened the door for the crypto mines to come in here. … It’s all fraud. I am a legitimate business.”

Speaking to a legislator who owned a sand and gravel business, she said, “That’s your business, you provide in the community. When you run your business, do you destroy other people that live miles from you? Do you hurt their business? No, you don’t.”

She said the facility in DeWitt uses up energy equivalent to thirty Walmart Supercenters.

She also offered an amazing anecdote about a city council meeting in Dumas. According to Johnson, Cameron Baker — a partner at Cryptic Farms, one of the key backers of Act 851 — was on the agenda and spouted off Satoshi Group talking points, dodged questions about job creation (“maybe five” he eventually said), and told the mostly elderly crowd that crypto was just a way to pay bills online. Heh.

According to Johnson, referring to the Bryant-McClure bill that would become Act 851, Baker said, “I wrote that bill.”

If I was a lawmaker in Arkansas, I would not want to get crossways with citizens like Jackie Johnson. The pressure is on to find a real solution to a problem legislators  themselves created.