For many sex workers, keeping money at a traditional bank is risky. According to data from the Free Speech Coalition, as many as 40 percent of people who earn money in the adult industry have lost access to a bank account in the past year.
Enter crypto. It’s become popular with sex workers as an alternative to the traditional banking systems that shut them out. But now, they’re facing a familiar problem: As the U.S. government starts to crack down on the crypto industry, what was once a lifeline for sex workers is becoming more and more difficult to use.
On Friday’s episode of What Next: TBD, I spoke with Joel Khalili, a reporter at Wired, about why sex workers turned to crypto—and how crypto turned on them. Our conversation has been edited and condensed for clarity.
Emily Peck: To understand how sex workers came to rely on crypto, we have to go back roughly a decade. In 2013, under the Obama administration, the Department of Justice launched a program meant to fight fraud that it said was prevalent in certain industries. The initiative was known as Operation Choke Point. How did it work?
Joel Khalili: It firmly reminded banks of their duty to screen businesses from industries that are said to pose an elevated risk of fraud. Among those industries were payday lending, firearms, and pornography.
As for Operation Choke Point 2.0, that’s the crypto industry calling back to the original Operation Choke Point. It’s saying that it’s now facing the same problems that the payday lenders, the firearm industry, and the pornography industry faced under the original Operation Choke Point.
It’s basically a way to get these industries out of the mainstream by cutting off their access to banks. If you don’t have access to a bank in 2023, it’s pretty hard to stay in business, whether you’re a crypto company or a sex worker—right?
That’s it. From the crypto company’s perspective, you effectively cannot operate. You can’t pay your staff. You can’t pay partners. You can’t handle the conversion of dollars into cryptocurrency. You cannot operate without access to banking.
What happened as a result of the first Operation Choke Point? Did people go out of business? Is that when sex workers really started to get cut off from the financial sector, from banks?
Sex workers—irrespective of whether they engage in legal or illegal sex work—have found it difficult to secure banking services for decades, at least since the 1960s, around which time the pornography industry was beginning to grow at a serious clip in the U.S. It’s more the case that Operation Choke Point is suspected to be among a number of events that contributed to making that problem more acute. It’s largely anecdotal evidence—the industry suspects that its problems were aggravated by this initiative.
In the U.S., full-service sex work, also known as prostitution, is illegal in every state except Nevada, but other forms of sex work—like selling nude images or broadcasting from a live cam—are legal. For banks, the difference doesn’t seem to matter. How do banks find out when a sex worker is a sex worker?
Because of the lack of transparency surrounding the reasons for account closures, we’re reliant on speculation here. Sex workers believe that there could be a few different ways that a bank might catch on: a tip from an individual or an anti-pornography lobby that disapproves of what they’re doing, or perhaps it’s the origin of the inbound payment or the payment reference. The other possibility is that because of the nature of the work and because sex workers are perpetually concerned about losing access to their bank accounts, they tend to receive a high volume of transactions and then withdraw those funds immediately. The thinking in some corners of the adult industry is that this pattern might be looked upon by the banks, or at least the automated systems that the banks use, as a red flag perhaps indicative of criminal activity.
But the reality is that it’s never really clear how the banks find out that a client works in the adult industry, and the reasons for the policy against serving people who operate in that industry.
What are the effects of being shut out of banking systems?
This is a bit of a sliding scale. Not having access to banking and payment services can create small issues, small frictions in your life. It means that you can’t split a bill with your friends after dinner. It raises questions: Why don’t you have access to Cash App? Why don’t you have access to Venmo? Perhaps the people that you’re socializing with aren’t aware of your line of business, and that’s not something that you’re planning on disclosing.
And then on the complete other end of the spectrum, it can create really dangerous situations whereby you become dependent on other people for access to financial services. Whether that’s a partner, a friend, or whoever else, if you need to rely on them to custody your wealth, that creates opportunity for abuse. It creates dangerous situations.
One source that I spoke to was pointing to the irony of all of this, which is that the policy of the banks, at least at face value, is that they refuse to bank members of the sex work community in order to limit the risk of sex trafficking. Without access to banking services, you leave sex workers in a position where they’re much more likely to be sex trafficked, because control over someone’s finances is one of the chief mechanisms by which someone is able to exert control over someone that’s being trafficked.
In the years after Operation Choke Point, crypto offered sex workers a way around the traditional finance sector. Data from Sex Work CEO, a site that provides resources to sex workers, suggests that as many as a third of all sex workers in the U.S. now accept crypto payments. Why is crypto an attractive alternative?
It handles the first leg of the journey really well, the payment by a client to a sex worker. It’s great for the client because they don’t have to supply personal information. They don’t end up with an incriminating transaction reference on their bank statement. It’s great for sex workers because they can receive payment directly to a cryptocurrency wallet without incurring the fees levied by the platforms, but also without interacting with the banking system that refuses to serve them. If you don’t have a bank account, this is a way for a client to continue to pay you.
Additionally, because crypto transactions by nature cannot be reversed in the same way as credit card payment, it also liberates sex workers from that risk of chargebacks, this process whereby a payment is taken back after a client raises a dispute with their card provider. Often at the point the dispute is raised, they’ve already received the content provided by the sex worker.
What happens when sex workers need to convert their crypto into cash?
The trouble kind of begins when it comes time to move from crypto into a currency that you can use to pay for rent, for groceries, for whatever else. One way of doing that would be to go via crypto exchange. You’re paid directly in cryptocurrency by your client. You take that cryptocurrency to an exchange, and then you convert your crypto into dollars and cash out. The problem is that there are scenarios in which exchanges are closing the accounts of sex workers.
There are also cases when it’s actually impossible to cash out by exchange precisely because their bank account has been closed. In both of those scenarios, you have a situation in which someone is stranded with a form of currency that can’t be used to pay for things. Meanwhile, the banks are increasingly unwilling to work with crypto businesses in the wake of the fall of FTX last November. And that means that the crypto businesses that popped up to make this whole process easier for sex workers aren’t able to operate because they can’t maintain the banking relationships of their own.
In the case of crypto, the regulatory future is pretty murky. But there’s legal and illegal sex work. If the work is legal, shouldn’t people have access to the financial system?
This is the argument of the advocacy groups. Frequently, the line among advocacy groups is that all sex work should be decriminalized. By criminalizing a portion of sex work and not criminalizing the other, the argument goes that you create opportunity for a broad-brush approach. It doesn’t matter if part of it is legal and part of it not, because the whole industry will be treated as if it’s illegal.
Future Tense is a partnership of Slate, New America, and Arizona State University that examines emerging technologies, public policy, and society.
