Developments in Cryptocurrency Contributions in Federal and State Elections

As cryptocurrency makes waves in the financial services industry and rumors of increased oversight circulate, campaign finance regulators have also been forced to contend with these emerging currencies. Individuals, corporations and political action committees (PACs) considering making contributions in cryptocurrency should be mindful of the various federal, state and local rules governing such contributions.

The Federal Election Commission (FEC) first permitted the use of cryptocurrency, specifically bitcoin, for federal political contributions in a 2014 advisory opinion. More recently, states have begun to issue their own guidance on the use of digital currencies. In the past few months alone, campaign finance authorities in Ohio and Iowa released their own advisory opinions allowing cryptocurrency contributions, potentially spurring other jurisdictions to consider the issue.

Though limited, the FEC’s guidance on cryptocurrency contributions offers several key takeaways:

• Cryptocurrencies may be accepted as in-kind contributions provided that the recipient takes certain steps to verify the identity of the contributor.
• Although a recipient committee is not required to immediately liquidate the cryptocurrency, it must sell/exchange the cryptocurrency for dollars before depositing its value into the committee’s campaign depository.
• Similarly, cryptocurrency cannot be used by a committee to directly purchase goods or services—it must be liquidated first.
• A cryptocurrency contribution’s value is based on the market value of the cryptocurrency at the time the contribution is received.

States have taken different approaches to cryptocurrency under their own campaign finance laws. Oregon’s legislature, for example, prohibited the use of cryptocurrency for political contributions in 2019. Regulatory authorities in a handful of other states, including California, have interpreted their existing laws to bar cryptocurrency contributions. Other states are less skeptical. Most recently, in February, the Iowa Ethics & Campaign Disclosure Board opined that cryptocurrency contributions are permissible under state law. Like the FEC, Iowa considers these in-kind contributions, and the recipient committee is required to report the fair market value of the contribution. The board did, however, conclude that Iowa political committees could not use cryptocurrency to purchase goods or services—again following the FEC’s lead.

Texas and four other states have also proposed laws or regulations permitting cryptocurrency as political contributions. Adopting a middle of the road approach, Georgia allows committees to accept cryptocurrency but requires that it be immediately converted to U.S. dollars to ensure contribution limits are not exceeded. Although several states explicitly permit such contributions currently, most have yet to take a position.

Those who are interested in contributing using cryptocurrency should still consider contribution limits at both the federal and state level, as well as applicable pay-to-play laws. Committees that accept cryptocurrency contributions are obligated to determine the eligibility of the contributors and ensure that they do not accept excessive contributions. The ambiguities surrounding the legality of such contributions, as well as the complex nature of the recordkeeping and reporting requirements associated with accepting cryptocurrency contributions, have likely discouraged wide-spread use, and the online political contribution platforms Actblue and WinRed do not accept them.

The Akin Gump political law team will continue to monitor developments to keep clients informed. If we can be of assistance in other ways, please let us know.