As Florida Gov. Ron DeSantis positions himself for a presidential bid, his state’s Republican-controlled legislature just sent him a bill that could enrich prospective Wall Street donors he may need to finance his campaign. That includes a GOP mega-donor who DeSantis recently met with as the bill advanced.

But if DeSantis does try to make a fundraising play off the new pension investment bill, it could put him on a collision course with federal regulators — if those regulators decide to enforce a longstanding anti-corruption rule that has previously hindered other governors considering a White House bid.

At issue is a new bill empowering the Florida State Board of Administration — which is run by DeSantis and two other Republican officials — to move an additional $18 billion of the state’s pension fund out of traditional stocks and bonds and into hedge funds, private equity, venture capital, and real estate firms. Such “alternative investment” firms often charge high fees and deliver weak returns — while many of their executives make big political campaign donations. The legislation passed even as other states’ pension funds are considering pulling back on such investments in the face of potential losses.

The GOP-controlled legislature sent the bill to the governor’s desk on Tuesday, shortly after DeSantis reportedly met with Republican financier Steve Schwarzman, whose private equity firm already manages — and reaps fees off — more than $800 million of Florida pension money.

That includes a new $150 million tranche that Florida officials delivered to a Blackstone green-energy fund one day before DeSantis signed a bill to block state pension money from going to companies that prioritize environmental considerations in their investments.

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“There Is No Way Around It And There Are No Loopholes”

Schwarzman’s meeting with DeSantis generated headlines because of the billionaire’s subsequent decision to not financially back the governor’s presidential bid, which was cast by the political press corps as a no-confidence vote in his prospective candidacy.

But that decision may have been due to something much more legalistic: Donating directly to DeSantis could violate the Securities and Exchange Commission’s (SEC) longstanding pay-to-play rule, which was designed to restrict campaign contributions from financial executives to state officials who control pension investment decisions.

As one of three Republican officials overseeing Florida’s $180 billion pension fund, DeSantis is explicitly covered by the rule.

Republican private equity donors have so far been able to get around the rule by donating to the Republican Governors Association (RGA), a group serving all GOP governors, which then siphoned some of the cash into a political committee that boosted DeSantis’ election bids. In doing so, they have relied on SEC regulators refusing to enforce the rule’s anti-circumvention provision prohibiting “acts done indirectly, which, if done directly, would violate the rule.”

On Tuesday, The Lever reported that $1 billion in Florida pension money had been directed to firms whose executives donated to the RGA, which spent more than $21 million supporting DeSantis’ reelection campaign in 2022.

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But in a presidential bid, circumvention might be more difficult. Wall Street donors seeking  Florida pension investments could give to a DeSantis-focused super PAC, but they would be daring regulators to ignore circumvention through a candidate-specific group — a far more brazen move than giving to a general party committee.

“It is not without risk that the SEC could consider a particular super PAC, whose sole purpose is to support a covered official, not truly independent and therefore an election committee for that official,” wrote Steptoe & Johnson attorney Jason Abel, a former U.S. Senate staffer, in 2015. “Therefore, a contribution to such an election committee would then run the risk of triggering the rule.”

This isn’t a theoretical problem — about a decade ago, New Jersey Gov. Chris Christie and Texas Gov. Rick Perry both faced the same fundraising obstacle in their own GOP presidential campaigns. At the time, Christie’s top adviser admitted that “there is no way around it and there are no loopholes.”

Indeed, the SEC rule proved so strict that it reportedly deterred Republican presidential nominee Mitt Romney from putting Christie on the ticket in 2012, because Romney knew it would complicate his Wall Street fundraising.

Soon after, state Republican parties tried to get the rule thrown out in court — but the GOP’s case was unsuccessful.

DeSantis And SEC Could Be Headed For Game Of Chicken

The X-factor for DeSantis and donors seeking Florida pension cash will be the SEC itself — and whether the agency will finally start enforcing the rule’s anti-circumvention provisions.

Of late, SEC Chairman Gary Gensler has been delivering speeches raising alarms about private equity firms’ relationships with institutional investors such as pension funds, and he is pushing new proposals to require more transparency. The commission has also recently charged a handful of firms for violating the pay-to-play rule.

A DeSantis presidential campaign could create a conundrum for major Wall Street firms.  Seeking influence in a future White House, they could funnel cash to his campaign — but then would run the risk of SEC sanctions. Will that deter them from donating?

If it doesn’t, then it could be a high-profile game of chicken. Who would blink first — the Florida governor and his Wall Street donors, or the nation’s top securities regulator?

And what happens to the Florida pensioners whose savings are at stake?