The recent collapse of major crypto firms has had an outsized impact on advertising—no crypto ads for the 2023 Super Bowl. As Advertising Age notes, “crypto brands spent 96% less on social media .” This is a setback for media sellers—a sector of media buyers has evaporated overnight. This drastic collapse of ad spending could be blamed on the events of November 2022: “The FTX debacle took the wind out of a market that, until that point, had been a lucrative new source of easy money for ad agencies, media companies and social media sites.” According to one agency consulting executive, Ad Age reports that, “Until this year, top ad agencies were making fortunes off crypto largesse.” Unfortunately, these clients, rather than being actual money machines, were not; noted the consultant, “Crypto, it’s turning out, a lot of these companies are not being very well run obviously.” 

How might this turn of events illustrate some issues around fraud and the advertising industry?

Advertisements nearly always appeal to something we all want: comfort, love, pleasure, excitement, or satisfaction. Whether or not the goods and services advertised accomplish this is another story. However, it’s not “fraud” to imply that drinking Coke is fun or that eating McDonald’s food brings families together. These claims are never explicit, only implicit—the product is associated with experiences we desire. 

But was crypto advertising more explicit as to the benefits of investing in crypto: buyers would enjoy increased wealth, more excitement, and more success?  Or were these only implied? These appeals, along with the SEC’s assertion that crypto assets are securities, may bring legal trouble to those involved in advertising crypto.

Advertising has long been associated with fraud and deception. Patent medicines were the top advertisers in many magazines in the late nineteenth century. Advertising agents argued that they could not investigate the qualities of every product for which they designed advertisements. And patent medicine companies were often their biggest clients. But by the early twentieth century, it was clear that being in the business of making ads for patent medicines threatened to delegitimize the advertising industry overall—consumers had no reason to trust *any* ads. Eventually trade organizations and publications denounced fraudulent patent medicine ads and refused to take the worst of those companies as clients. The Federal Trade Commission (founded in 1914) began to crack down on deceptive and misleading advertising.

Today, the advertising industry again may be tainted by its association with companies that may prove to have been selling snake oil, this time of a computer code variety. Again, those ad creators may say they could have no idea that they were making ads for Ponzi schemes—how could they possibly know? Again, they could point to the amount of money those companies were spending—how could they pass up such lucrative clients? And look at some of those great ads—that Larry David one will be a classic. 

If the crypto industry is eventually viewed as no more than a set of Ponzi schemes or extralegal virtual casinos, we might also see the ad industry withdraw from such clients. Since the advertising industry strives to convince consumers of its legitimacy, and usually makes ads consisting of implications rather than explicit truth claims, there may be industry pressure to stop making ads explicitly Ponzi schemes. Such advertising might draw negative attention to the fuzziness of other ads. Keeping advertising viable will matter more over the long run.