Coinbase Denies Allegations of Campaign Finance Law Violations

Coinbase has been accused of violating US campaign financing laws by making a recent contribution to a super political action committee.

Paul Grewal, Coinbase's chief legal officer, took to X to debunk this claim. Grewal said Coinbase is not a federal contractor and is not bound by some campaign finance regulations.

Popular crypto critic Molly White said in a July 31 report that Coinbase's $25 million donation to the Fairshake crypto super political action committee (PAC) in May violates campaign finance laws.

Did Coinbase's Donation Violate Campaign Finance Laws?

According to Molly White, Coinbase was still actively negotiating a federal government contract. White believes the donation to the PAC appears like Coinbase was lobbying for the contract.

Grewal refuted this assertion in his tweet, describing it as misinformation. The legal officer noted that Coinbase isn't a federal contractor. Therefore, the 11 Code of Federal Regulations 115.1 clause does not apply to the crypto exchange.

1/3 Whether intentional or not, this is misinformation. Coinbase is not a federal contractor under the plain language of 11 CFR 115.1. USMS isn't paying us with appropriated funds-something it made clear in the public RFP. https://t.co/72T22m8rI5

- paulgrewal.eth (@iampaulgrewal) August 1, 2024

Further, Paul Grewal explained that the US Marshals Service (USMS) isn't paying Coinbase with appropriated (public) funds. According to him, the agency clarified this via a public request for proposal (RFP).

Notably, the US Marshals Service is an arm of the US Department of Justice that oversees asset forfeiture. The agency recently selected Coinbase Prime to provide advanced trading services and custody for its Class 1 digital assets.

In a July 1 announcement, Coinbase said the USMS considered its robust track record and its platform's security before choosing it for the job.

The USMS contract with Coinbase must have fueled Molly White's suspicion. White might have suspected that the crypto exchange donated money to gain favors.

Donations to the Fairshake Super PAC

Coinbase has actively supported political causes that will promote crypto regulatory clarity in the US. One such endeavor is its donations to the Fairshake super political action committee, an organization created to support pro-crypto political candidates.

In November 2023, it donated $5 million to this committee and another $15.5 million in December of the same year. Coinbase's most recent donation to the Fairshake super PAC was $25 million on May 30, 2024.

The $25 million donated coincided with the period when Coinbase was vying for the contract with the USMS. Its request for a proposal came on March 4, and it made the $25 million donation on May 30. Shortly after, the USMS awarded Coinbase the $32.5 million contract on July 1.

White claimed the donation falls within the prohibited period for campaign financing.

Moreover, White's report revealed that a campaign finance expert, Dr. Craig Holman, acknowledged that a federal contractor making campaign donations to a federal committee is illegal. And this guideline also applies to a super PAC like Fairshake.

According to the report, Dr. Holman confirmed that filing a complaint with the FEC against the crypto exchange is appropriate.

However, in response, Grewal said the USMS is paying Coinbase with proceeds from sales of forfeited property deposited in the Assets Forfeiture fund. According to Grewal, these funds have nothing to do with money allocated by the federal government.

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