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Public Citizen and Molly White File Updated Campaign Finance Complaint Against Coinbase

Highlights:

  • Crypto critics accuse Coinbase of violating campaign finance laws.
  • The updated complaint claims Coinbase’s $25 million donation to Fairshake violated federal contractor rules.
  • Coinbase denies FEC violations; Paul Grewal clarifies no Congressional funds were used.

Consumer advocacy group Public Citizen and writer Molly White, who has been critical of crypto, filed an updated complaint to the Federal Election Commission (FEC) alleging that Coinbase violated US campaign finance laws. 

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Allegations Over Campaign Finance Violations

The initial complaint, submitted on August 1, alleged that Coinbase violated campaign finance laws when negotiating the Marshals Service contract. The US Marshals Service, a part of the Department of Justice (DOJ), announced in early March that it was paying $32.5 million for a contract with Coinbase Prime to provide custody and “advanced trading services” for large-cap digital assets.

The complaint states that Coinbase donated $25 million to the pro-crypto group Fairshake Super PAC in May. This donation allegedly violated campaign finance laws because Coinbase was considered a “federal contractor” at the time. The Federal Election Campaign Act prohibits a federal contractor from contributing, directly or indirectly, to any political committee, party, or candidate.

The updated complaint, filed on August 5, reads:

“Since the Assets Forfeiture Fund is a Congressional appropriation, Coinbase was paid for the performance of a contract from funds appropriated by the Congress, and is thus a federal contractor.”

Cryptocurrency has rapidly entered the election arena, with millions of dollars pouring into super political action committees like Fairshake. Recently, most of Fairshake’s funding seems to have originated from Coinbase, which disclosed a $25 million donation on June 3. Additionally, other companies, including a16z crypto and Ripple, have also contributed millions.

Last week, Coinbase Chief Legal Officer Paul Grewal responded on X after the complaint was filed, stating that the exchange was not a federal contractor. 

Previously, Grewal stated:

“Whether intentional or not, this is misinformation. Coinbase is not a federal contractor under the plain language of 11 CFR 115.1.  USMS [U.S. Marshals Service]  isn’t paying us with appropriated funds.”

Coinbase Responds Again to Allegations of Campaign Finance Breach

In a post on X later on Monday, Grewal criticized the White and Public Citizen’s most recent updated complaint. Seized cryptocurrencies are not “Congressionally appropriated funds,” he stressed. The seized assets were from the defunct cryptocurrency exchange FTX and the Silk Road platform. Grewal said the company works closely with federal law enforcement and is dedicated to fulfilling the US Marshals Service’s cryptocurrency service needs. 

Additionally, the company has donated $500,000 each to Democratic and Republican super PACs, covering both House and Senate funds for this year. While White and Public Citizen suggest there is political bias, he insists that there is none. The Chief Legal Officer said the researchers’ views in the document don’t match current legal standards.

Rick Claypool, Research Director at Public Citizen, criticized Coinbase for “aggressively” exploiting the laws established in the 2010 Citizens United case.

Further, Claypool added:

“The crypto corporation’s eye-popping contributions — made in apparent violation of longstanding pay-to-play prohibitions — demonstrate how lax enforcement emboldens corporate lawbreaking. The FEC must step up.”  

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