Bitcoin For America: Cryptocurrencies In Campaign Finance
In the wake of the 2018 election cycle, candidates turn to crypto donations to fill their coffers.
Last week, Secretary of State of Colorado Wayne Williams proposed a new set of rules for financing political campaigns, which now includes a section on cryptocurrencies. The original edition of the draft introduces the same caps for crypto donations as for fiat ones, while limiting anonymous contributions to $20. The move renders the overall picture of individual states’ handling political crypto contributions spottier than ever, as the last few months saw states adopting divergent approaches to the issue.
Although a 2014 advisory opinion by the Federal Election Commission (FEC) remains a major reference point for anyone who seeks to boost their chances for election with digital money, this non-regulatory document is barely fit to serve as a definitive guide into the world of crypto campaign finance.
The FEC came up with a set of guidelines in May 2014, responding to an inquiry from a Super PAC named Make Your Laws. This entity, which advocates for replacing representative democracy with a more inclusive form of ‘liquid democracy,’ requested clarification on whether it could accept BTC donations to fund political action. At that time, Bitcoin was worth some $400, and altcoins were not even considered as a vehicle for campaign finance. The FEC ruled that Bitcoin could be received by campaigns as ‘in-kind donations’ – a form of contribution that provides goods and services needed for organizations’ operations rather than the money to purchase those goods and services.
Effectively, this means that campaigns cannot spend received Bitcoin directly, but rather have to ‘liquidate’ it and then deposit the money to their accounts. As far as donation caps are concerned, the commission was split across party lines, with Democrats advocating for a $100 limit, and Republicans standing for the standard federal $2,700 cap. Since the advisory opinion outlines recommendations rather than rules, GOP support for a larger cap had later inspired some politicians to allow themselves to go with the $2,700 limit.
Given somewhat inconclusive federal guidelines, many state authorities have been facing similar inquiries ever since the FEC ruling was issued. Building up to the 2018 wave of primaries and elections, these requests have intensified. Oftentimes it is state governments’ ethics bodies that are tasked with deciding whether crypto donations are appropriate and how they should be governed. So far this year, several state commissions have either ruled against cryptocurrency donations or wavered on the issue, so the Colorado initiative, if successful, might become a precedent for other undecided states to consider.
In October 2017, a Kansas candidate for office sought guidance on potential use of crypto contributions from the state’s Governmental Ethics Commission. Shortly after, the office had announced that Bitcoin is ‘too secretive and untraceable,’ and could be used by ‘totally unidentifiable lobbyists’ to influence local elections.
Wisconsin Libertarian Party asked the State Ethics Commission in April to clarify whether it deems the use of cryptocurrency political contributions acceptable. The commission held public hearings and concluded that the issue should be decided by the state legislature. The time frame for the state House to rule on the issue is yet to be announced.
Emmanuel Wilder, a Republican candidate for North Carolina State House, has approached State Board of Elections and Ethics Enforcement with a similar request in April. In his letter, Wilder acknowledged that traceability concerns exist, but still advocated for giving voters a choice between fiat and crypto donation formats, as well as supporting the ‘new upcoming financial service.’ The request is still under review.
In South Carolina, the issue has been decided in a speedier manner, and not in favor of crypto enthusiasts. Britton Wolf, a 23-year-old Republican candidate for District 71 of the South Carolina House of Representatives in June primaries, asked the state House’s ethics committee whether he could use digital currency donations to support his campaign. The officials responded that he could not, since the definition of a campaign contribution, as provided by the state law, does not include cryptocurrency.
Heroes of Crypto-Funded Campaigns
Institutional politics is a field permeated by inertia and adherence to the status quo, so there is little wonder that cryptocurrency as a vehicle of political finance is still far from mainstream adoption. Politicians who use it are still vastly outnumbered, and for the majority of those who do, crypto donations constitute a minor share of overall funds.
However, certain brands of politicians, such as firebrand libertarians and technology advocates, are already naturally predisposed to be relying on digital currency donations – accepting digital currency contributions has become an integral part of manifesting their ideology. Increasing mass adoption and surging prices are also factors that nudge more establishment actors to be looking towards crypto. Here are some of the most high-profile U.S. politicians on both federal and state levels who are vocal about their embrace of crypto funding.
A Republican candidate for New Hampshire governor in 2014, Hemingway has been the first ever contender to the office to use cryptocurrency contributions in his campaign. Bitcoin donations amounted to about 20 percent of his overall funds. Hemingway never advanced to the general election, having lost to Walter Havenstein in the Republican primary.
U.S. Representative Jared Polis, who is arguably the most outspoken supporter of cryptocurrencies and distributed ledger technology on the Capitol Hill, claims the credit of being the first acting Congressman to accept Bitcoin from his supporters. During his successful 2014 re-election campaign, he collected a modest $2,000 worth of crypto donations. In his 2018 bid for Colorado governor, Polis will surely exceed this figure by a significant margin.
The libertarian’s 2016 bid for Missouri House of Representatives has the distinction of being the first campaign ever to be funded entirely in Bitcoin. The result of the experiment turned out to be somewhat lackluster, with Elder carrying just over 10 percent of the vote. In 2018, Elder is running for District 79 of the Missouri House of Representatives again.
A feature of every list of Bitcoin-friendly politicians, Paul became the first presidential candidate to embrace cryptocurrency donations when he announced his bid for the 2016 election. Back in 2015, this caused quite a stir.
In an apparent move to attract younger and tech-savvy voters, then-Texas Attorney General Greg Abbott announced in April 2014 that he will accept Bitcoin contributions for his gubernatorial campaign. The strategy seems to have worked, as in January 2015 Abbott was sworn in as Governor of the state.
A Republican seeking election to the U.S. Senate from Missouri this year, Petersen’s embrace of cryptocurrency is grounded in his pro-market ideology. His campaign manager called the use of bitcoin a ‘no-brainer.’ Petersen’s campaign amassed just south of $10,000 and became renowned for having received the largest ever single cryptocurrency contribution of 0.284 Bitcoin ($4,500 at the time) in December 2017. This figure doesn’t quite add up with the FEC guidelines even for fiat contributions, but the donation page on Petersen’s website gives a hint to how this could be legitimized:
“The maximum amount an individual may contribute is $2,700 per election. Your contribution (up to $2,700) will be designated for the primary election. The next $2,700 will be designated for the general election.”
Democratic candidate for Congress from New York, Nelson proclaimed that his is a ‘21st century campaign,’ which readily embraces ‘technology like #bitcoin.’ He later faced crypto fundraising issues when BitPay, a service that his campaign used for processing crypto donations, ran into licensing trouble with the state of New York.
Forde is well situated to become a new political crypto star. A Democrat seeking election to the U.S. House to represent the 45th Congressional District of California this year, he had worked as both head of digital currency at MIT Media Lab and a tech adviser for the Obama administration. His embrace of the technology is explicit, and his electoral chances look solid. The crypto community has already acknowledged its unequivocal support of his candidacy by funneling a record-breaking $66,000 worth of crypto to his wallets in August and September of 2017 alone, while the biggest names in the industry pledged their support.
Even though the weight of cryptocurrency contributions in campaign funds remains modest, the overall upward trend is consistent with the increasing degree of mass adoption. There is little doubt that we will soon see more campaigns funded exclusively by crypto, as well as more successful bids relying at least partly on digital currency contributions. As these processes unfold, the FEC will be compelled to chart clearer rules and grapple with the problem of crypto donations’ limited traceability.