August 5, 2024

FEC Complaint Alleging Coinbase Violated Contractor Campaign Donation Ban

Supplementary Filing Highlights Coinbase's Incorrect Argument

By Molly White and Rick Claypool

Download the original complaint Download the supplement to the complaint

Original Complaint to the Federal Election Commission, Filed August 1, 2024

1. Coinbase, Inc. (“Coinbase”) is a cryptocurrency platform offering exchange, custody, and trading services. On March 20, 2024, Coinbase made a $500,000 contribution to the Congressional Leadership Fund (ID: C00504530), a hybrid PAC. On May 30, 2024, Coinbase made a $24,999,995 contribution to Fairshake (ID: C00835959), a super PAC. At the time of both contributions, Coinbase was negotiating a contract with the United States Marshals Service, a federal agency. 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.
2. This complaint is filed pursuant to 52 U.S.C. 30109(a)(1) and is based on information and belief that Coinbase violated the Federal Election Campaign Act of 1971 (“FECA”) prohibition on federal contractor contributions.
3. If the Federal Election Commission (“FEC” or “Commission”), “upon receiving a complaint . . . has reason to believe that a person has committed, or is about to commit, a violation of [the Federal Election Campaign Act] . . . . [t]he Commission shall make an investigation of such alleged violation . . . .” 52 U.S.C. 30109(a)(2) (emphasis added).

Background

4. FECA prohibits a federal contractor from making contributions, directly or indirectly, to “any political party, committee, or candidate for public office or to any person for any political purpose or use” at any time between the commencement of negotiations for a federal contract and the completion of performance or termination of negotiations for the contract. 52 U.S.C. 30101(8)(A)(i); 52 U.S.C. § 30119(a)(1).
5. The contractor contribution prohibition applies to any person “who enters into any contract with the United States or any department or agency thereof” for the “rendition of personal services” or for “furnishing any material, supplies, or equipment” or for “selling any land or building” if “payment for the performance of such contract or payment for such material, supplies, equipment, land, or building is to be made in whole or in part from funds appropriated by the Congress.” 52 U.S.C. 30119(a)(1).
6. The FEC has interpreted the prohibition on contributions to political committees as including contributions to hybrid PACs and independent expenditure-only political committees (“IEOPCs” or “super PACs”), a position they have made clear including in a statement regarding published after the 2011 Carey v. FEC.
7. FECA additionally prohibits any person from knowingly soliciting any such contribution from a federal contractor. 52 U.S.C. 30119(a)(2).
8. The prohibition on campaign contributions from federal contractors applies from when a request for proposals is sent out or when negotiations commence (whichever is earlier) until the completion of performance under the contract or the termination of negotiations (whichever is later). 52 U.S.C. 30119(a)(1); 11 C.F.R.§ 115.1(b)

Coinbase is a federal contractor subject to the FECA prohibition

9. Coinbase is a federal contractor, holding a current government contract with the United States Marshals Service (USMS), a federal agency within the United States Department of Justice. This contract has a $7 million obligated amount, and a $32.5 million total contract value.
10. The USMS contract opportunity was first published on March 4, 2024, and offers were due on April 1, 2024. Coinbase was awarded the contract on July 1, 2024, which was also the day the contract commenced. As of July 31, 2024, the contract is marked as “in progress,” with a current end date of June 30, 2025.
11. As defined in 11 F.R.§ 115.1(b), Coinbase was prohibited from making campaign contributions from the time requests for proposals were sent out on March 4, 2024, and the completion of performance or termination of the contract, which is still ongoing.
12. On information and belief, Coinbase, Inc. is the entity that is a party to the federal government contract with the Department of Justice and is the same entity responsible for the contributions to the Congressional Leadership Fund and to Fairshake.
13. Publicly available records for the federal contract awarded by the Department of Justice to Coinbase reflect a recipient of “COINBASE INC” at the address 550 West 34th Street 4th Floor, New York, NY, 10001-1304.
14. Publicly available records for the campaign contribution to the Congressional Leadership Fund reflect a contributor name of “COINBASE” at the address 548 Market Street #23008, San Francisco, CA, 94104-5401.
15. Publicly available records for the campaign contribution to the Fairshake PAC reflect a contributor name of “Coinbase” at the address 248 3rd St. Suite 434, Oakland, CA, 94607-4375.
16. Coinbase describes itself as a “decentralized company, with no headquarters”, suggesting that different addresses used by the same entity may be a reflection of the company’s distributed nature.
17. Coinbase is providing its “Coinbase Prime” service to the USMS, and has publicly announced that the contract involves the provision of “custody and advanced trading services”. As noted on Coinbase’s website, businesses using the Coinbase Prime service beyond its “Custody only” offering (of which trading services are not a part) contract with Coinbase, Inc. and either the Coinbase Custody Trust Company, LLC or Coinbase Custody International, Ltd subsidiary.
18. Several state business registries, including California’s and Florida’s, reflect a principal address for the Coinbase, Inc. entity that matches the New York address used by Coinbase for the federal contract, and a mailing address for Coinbase, Inc. that matches the Oakland, California address used for the Fairshake political contribution. Coinbase, Inc. has also widely used the San Francisco address used for the Congressional Leadership Fund contribution, including as the company’s headquarters before the company declared itself “remote-first” in May 2020.
19. Complainant contacted Coinbase via email to inquire about the Coinbase entities involved with the federal contract and the contribution to the Fairshake PAC. While she received a reply from a Coinbase spokesperson, it did not address those questions.

The Congressional Leadership Fund Received a Prohibited Contribution from Coinbase

20. Founded in October 2011, the Congressional Leadership Fund is a political committee with both contribution and non-contribution accounts (a “hybrid PAC”) that is “dedicated exclusively to one goal: winning a Republican Majority in the House of Representatives.”
21. The Congressional Leadership Fund acknowledges on its donations page at WinRed, which is prominently linked from its official website, that “Contributions from foreign nationals and Federal contractors are prohibited.”
22. The $500,000 contribution from Coinbase to the Congressional Leadership Fund on March 20, 2024 occurred during the time period (beginning on March 4, 2024 and ongoing) during which Coinbase is barred from making campaign contributions.

The Fairshake PAC Received a Prohibited Contribution from Coinbase

23. Founded in March 2023, Fairshake is an independent expenditure-only political committee (“IEOPC” or “super PAC”) that “supports candidates committed to securing the United States as the home to innovators building the next generation of the internet,” with a focus specifically on “blockchain innovators”.
24. Fairshake acknowledges on its donations page that “Contributions from federal government contractors, national banks, foreign nationals without permanent residency status, and foreign corporations are prohibited,” and notes that “By donating, I affirm the following: . . . . 4. I am not a federal contractor.”
25. The $24,999,995 contribution from Coinbase to Fairshake on May 30, 2024 occurred during the time period (beginning on March 4, 2024 and ongoing) during which Coinbase is barred from making campaign contributions. As the contribution occurred after April 1, 2024, the offer deadline set by the USMS, Coinbase likely submitted its bid for the government contract almost two months prior to its Fairshake contribution. However, regardless of when Coinbase submitted its bid, FEC regulations define the start of the prohibition period as the date when a request for proposals is sent out or when negotiations commence (whichever is earlier), which in this case would be March 4, 2024.
26. Complainant contacted a spokesperson for Fairshake to inquire about which Coinbase entity was responsible for the contribution to the Fairshake PAC, whether Fairshake solicited the donation, and whether Fairshake confirmed at the time of either solicitation or acceptance whether Coinbase was prohibited from making campaign contributions as an entity that was, at the time, involved in federal contract negotiations. Although she received an acknowledgement from the spokesperson, he did not answer the questions.

Conclusion

27. FECA and FEC regulations prohibit a federal contractor from making a contribution to any political committee during the period in which a federal contract is being negotiated or performed.
28. According to the definitions of the prohibited time period outlined in FEC regulations, Coinbase was prohibited from making campaign contributions beginning on March 4, 2024. The prohibition will continue until the completion of performance under the contract or the termination of negotiations (whichever is later). As the contract is still ongoing, Coinbase has been prohibited from making any contributions from March 4, 2024 through to the date of this complaint.
29. Consequently, there is reason to believe Coinbase violated the federal contractor contribution prohibition by making a $500,000 contribution to a hybrid PAC, the Congressional Leadership Fund, and a $24,999,995 contribution to a super PAC, Fairshake, during the period it was negotiating and/or performing its federal contracts.
30. Furthermore, both the Congressional Leadership Fund and Fairshake are aware of the prohibition on accepting contributions from federal government contractors, and may have violated FECA and FEC regulations if they had reason to believe Coinbase was negotiating a federal contract at the time they solicited and/or accepted the contributions.

August 5, 2024 Supplement to the Complaint

On August 1, 2024, Molly White submitted this complaint, pursuant to 52 U.S.C. § 30109(a)(1), alleging that Coinbase violated the Federal Election Campaign Act of 1971 (“FECA”). That day, Coinbase’s General Counsel Paul Grewal posted on social media that “Coinbase is not a federal contractor under the plain language of 11 CFR 115.1. USMS isn’t paying us with appropriated funds….”, pointing to the fact that Coinbase’s contract is being paid from funds from the Department of Justice’s Assets Forfeiture Fund.

Mr. Grewal is incorrect. As the Supreme Court has recently explained, “an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes.” Consumer Fin. Protection Bureau v. Cmty. Fin. Servs. Ass’n of Am., 601 U.S. 416, 424 (2024). Under this definition, Congress’s enactment 28 U.S.C. § 524(c)(1), creating the Assets Forfeiture Fund and authorizing the Attorney General to make expenditures from that fund for specific purposes, was an appropriation. See also Perri v. United States, 340 F.3d 1337, 1341 (Fed. Cir. 2003) (recognizing that section 524(c)(1) is “a money-authorizing statute”). Indeed, over the past five decades, both courts and the Department of Justice have considered the statutory creation of the fund to be an appropriation. San Antonio Hous. Auth. v. United States, 143 Fed. Cl. 425, 480 (2019) (discussing Perri, 340 F.3d at 1341 (Fed. Cir. 2003)); Attorney General’s Guidelines on Seized and Forfeited Property, 50 Fed. Reg. 24052, 24052 (June 7, 1985). The Congressional Research Service has similarly described the statute as a “permanent appropriation.” Cong. Res. Serv., No. 97-139, Crime and Forfeiture 24 (updated 2015), available at https://crsreports.congress.gov/product/pdf/RL/97-139/13.

To the extent Mr. Grewal is asserting that the given contract is not funded by an annual appropriation, that may be correct. But the plain language of the 11 C.F.R. § 115 does not limit the definition of federal contractors to those paid out of annual appropriations. Rather, the definition of federal contractor under 11 C.F.R. § 115 applies where a “payment for the performance of a contract… is to be made in whole or in part from funds appropriated by the Congress,” with no qualification as to the kind of appropriation.

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.