Coinbase is pushing back against allegations it violated campaign financing laws by donating to political actions committees while serving as a federal contractor.
Coinbase, the largest U.S.-based centralized exchange, is facing allegations of violating campaign financing laws.
On Aug. 5, Public Citizen, a consumer advocacy group, and Molly White, a Wikipedia editor and outspoken web3 critic, filed an updated complaint to the Federal Election Commission alleging that Coinbase breached U.S. campaign financing laws.
The original Aug. 1 complaint claimed that Coinbase illegally donated $25 million to the crypto-focused super political action committee (super PAC) in May. White and Public Citizen argued that the donation violated campaign finance law as Coinbase was negotiating a contract with the U.S. Marshals Service. Coinbase also donated $500,000 to the hybrid PAC, Congressional Leadership Fund, on March 20, 2024.
“At the time of both contributions, Coinbase was negotiating a contract with the United States Marshals Service, a federal agency,” the complaint said. “In making these contributions of approximately $25.5 million, Coinbase violated federal campaign finance laws that expressly prohibit federal contractors from making contributions to political committees while negotiating or performing federal contracts.”
Paul Grewal, Coinbase’s chief legal officer, dismissed the allegations as “misinformation.”
Grewal asserted that to be considered a federal contractor, Coinbase must be paid using “appropriated funds” — treasury funds explicitly approved by Congress for a specific purpose. Instead, Coinbase’s contract was financed through the Assets Forfeiture Fund, which is capitalized through the sale of assets obtained through the Department of Justice Forfeiture Program.
The updated complaint from White and Public Citizen acknowledged and sought to rebut Grewal’s response, arguing that the Congressional enactment creating the Assets Forfeiture Fund qualifies the fund as an appropriation.
“Over the past five decades, both courts and the Department of Justice have considered the statutory creation of the fund to be an appropriation,” the updated complaint said. “The Congressional Research Service has similarly described the statute as a ‘permanent appropriation’.”
Grewal doubled down on his assertion that “seized crypto assets are not congressionally appropriated funds,” likening the complaint to a “press release by another name.”
Crypto infiltrates politics
The dispute comes as crypto has emerged as a major narrative amid the upcoming U.S. presidential election.
Donald Trump, the Republican Party nominee, abruptly reverted from likening Bitcoin to a scam in 2021 to promising to run on a pro-crypto platform in May. The former president has since met with Bitcoin mining executives and pledged to move all U.S.-government Bitcoin into a strategic reserve that would not be sold. The Republican Party’s policy platform also promised to champion web3 innovation and end the regulatory crackdown targeting crypto.
On July 31, Republican Senator Cynthis Lummis also introduced the Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act. The bill advocates for the U.S. Federal Reserve to accumulate one million BTC over five years as part of its strategic reserve policy alongside investing in gold and foreign currency.
While Kamala Harris is yet to issue public statements concerning crypto, the Democratic Party nominee is rumored to be preparing to break from the hostility towards web3 associated with Biden’s administration and the Gary Gensler-headed Securities and Exchange Commission.
Marc Cuban, the celebrity investor, said Harris’s campaign contacted him regarding crypto, adding that he is hearing rumors a Harris presidency would be “far more open to… crypto.” Anthony Scaramucci, the founder of SkyBridge Capital and the former White House director of communications, similarly tweeted that Harris has privately voiced she is “open-minded about crypto” and would fire Gensler if elected.
Grewal noted that Coinbase has equally donated $500,000 to Democratic and Republican super PACs supporting campaigns in both houses for 2024.
