Coinbase Faces Complaint Over Campaign Finance Violations

Consumer advocacy group Public Citizen and writer Molly White, known for her criticism of crypto, have filed a complaint with the Federal Elections Commission (FEC). They allege that Coinbase violated campaign finance laws by donating $25 million to the pro-crypto group Fairshake Super PAC while negotiating contracts with the U.S. Department of Justice (DOJ).

The complaint claims that since the U.S. Marshals Service (part of the DOJ) is paying $32.5 million for a contract with Coinbase Prime for custody services, this constitutes a breach of campaign finance laws. The increasing influence of crypto in election funding is evidenced by the significant contributions to super political action committees like Fairshake, which received most of its funding from Coinbase’s June 3 donation.

Rick Claypool, a research director at Public Citizen, stated, “Among all big businesses that have aggressively exploited Citizens United since 2010, Coinbase’s conduct stands out as especially shocking and egregious.” He emphasized the need for stricter enforcement by the FEC to prevent corporate lawbreaking.

The 2010 U.S. Supreme Court decision in Citizens United v. FEC allows corporations and outside entities unlimited spending in elections. In their complaint dated August 1, White and Claypool argue that Coinbase qualifies as a federal contractor due to its contract with the U.S. Marshals Service, which disallows federal contractors from contributing to political organizations.

In response, Coinbase Chief Legal Officer Paul Grewal stated that Coinbase is not a federal contractor and labeled the complaint as misinformation. He clarified that the U.S. Marshals Service is not paying with appropriated funds, as reflected in the public request for proposal (RFP).

On August 5, a supplemental filing countered Grewal’s assertion, arguing that Coinbase is indeed a federal contractor due to payments from Congressional appropriations. Grewal later criticized this claim, reiterating that seized crypto assets do not involve Congress-appropriated funds. He also noted Coinbase’s balanced political contributions to both Democratic and Republican super PACs for the 2024 elections.

Update: August 5, 9:57 p.m. UTC added comments from Paul Grewal.