Coinbase Faces Allegations Over $25M Donation Amid Federal Contractor Dispute

• Coinbase’s $25M donation is under scrutiny for potential violations of federal campaign finance laws concerning contractor contributions.
• Molly White claims Coinbase’s donation fell within a restricted period, as they were a federal contractor at the time.
• Coinbase’s CLO argues their funds aren’t from appropriated sources, challenging claims from legal experts who view the AFF as appropriated.

Leading US cryptocurrency exchange Coinbase is in the news after donating $25 million to Fairshake, a super PAC that backs politicians that embrace cryptocurrencies. Allegations have been raised that the May 30, 2024 gift broke federal campaign finance laws. Political contributions from organizations that are either present or potential federal government contractors are prohibited under these statutes.

Donation Timing and Federal Contractor Status

After cryptocurrency critic Molly White brought attention to the fact that Coinbase’s gift took place during a restricted period, the criticism grew more intense. White claims that on March 4, 2024, the U.S. 

Marshals Service (USMS) released a contract opportunity for the management and disposal of amounts of bitcoin assets. The deadlines for bids on this contract were July 1, 2024, and April 1, 2024. On July 1, 2024, Coinbase was ultimately given the $32.5 million contract.

Federal Election Commission (FEC) regulations stipulate that federal contractors are barred from making political contributions from the time a request for proposals is issued until the contract is completed or negotiations are terminated. 

In light of this, White contends that Coinbase’s $25 million donation was made during this time-limited window. Furthermore, White noted that Coinbase had made a second $500,000 payment to the Congressional Leadership Fund on March 20, 2024, raising the possibility that it was also being investigated.

Coinbase’s Defense Against Allegations

Paul Grewal, the Chief Legal Officer (CLO) of Coinbase, strongly refuted the accusations in response. According to Grewal, Coinbase has not broken any federal laws. In response to the allegations made on X, he emphasized that the exchange does not fall inside the description of a federal contractor as stated in 11 CFR 115.1. Grewal clarified that the USMS contract is not supported by allocated monies, but rather by the Department of Justice’s Asset Forfeiture Fund (AFF).

Legal Dispute and Implications

Grewal argued that the AFF’s funding source, from forfeited property sales, does not qualify as appropriated funds. This distinction, he claims, exempts Coinbase from being categorized as a federal contractor under campaign finance regulations. Nevertheless, legal experts from Public Citizen challenge Grewal’s interpretation. 

They argue that the Supreme Court defines appropriations as any law authorizing expenditures from public funds. Furthermore, a Congressional Research Service report describes the AFF as appropriated by Congress.

The debate centers on whether Coinbase’s $25 million donation to Fairshake contravenes federal campaign finance laws. The outcome could impact Coinbase and other companies engaged in federal contracts while making political contributions.