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Campaign Bitcoins Proliferate, but FEC Rules Unclear

Candidates testing the waters of bitcoin fundraising are following different sets of rules as they go along, a function of both the freewheeling culture of the digital currency world and of mixed signals from the Federal Election Commission.  

The FEC approved bitcoin fundraising in a unanimous advisory opinion on May 8, but the agency’s six commissioners immediately began a public dispute over what that decision actually means. At issue is whether digital currency contributions must be capped at $100 per election per donor, or whether candidates, political action committees and parties may accept the virtual currency in larger amounts.  

The commission’s three Democrats maintain that they approved of bitcoin fundraising only to the $100 cap, and in a statement cited “serious concerns” about the potential difficulty verifying virtual transactions.  

But the commission’s GOP chairman, Lee E. Goodman, countered in his own statement that bitcoins are in-kind donations, and must therefore be capped only at existing contribution limits — $2,600 for a candidate and $5,000 for a PAC per election. “Innovation and technology should not and will not stand idly by while the commission dithers,” he declared.  

The upshot is that some political players say they’ll collect large, even unlimited, virtual contributions, and others will be capping bitcoins at $100. The political action committee known as Bit PAC, for one, will take donations well over $100, said its treasurer, GOP election lawyer Dan Backer. Bit PAC operates both a conventional PAC and an unrestricted super PAC, and will therefore take bitcoins donations up to $5,000 in one account, and unlimited virtual donations in another.  

“The whole purpose of Bit PAC is to push the envelope” and “to move the ball on the full normalization of bitcoins in campaign finance,” Backer said in an interview with CQ Roll Call. Backer was the first to ask the FEC about bitcoin fundraising last fall. At that time, the commission deadlocked 3-3 and took no action.  

By contrast, GOP House candidate Paul Dietzel, a technology entrepreneur running for an open seat in Louisiana’s 6th District, will cap his bitcoin contributions at $100, “just to stay safe.” Dietzel, a free market conservative, posted a neon yellow “Donate Now With Bitcoins!” banner on his website as soon as the FEC issued its May 8 opinion — even though, as Dietzel put it, “it’s still slightly unclear” exactly how bitcoin fundraising will play out.  

Rep. Jared Polis, D-Colo., also lost no time collecting bitcoins, and like Dietzel, he will be capping  contributions at $100. Other federal candidates accepting bitcoins include Libertarian Jim Fulner, who’s running for Senate in Michigan, and Blaine Richardson, who’s running as an independent in Maine’s 2nd District.  

Rep. Steve Stockman, R-Texas, who lost his primary challenge to Sen. John Cornyn in March, was one of several candidates who accepted bitcoins prior to the FEC’s approval. Other bitcoin pioneers include the national Libertarian Party; Darryl W. Perry, a fringe presidential candidate from Alabama; and eight state legislative candidates in California, Maine, Michigan, New Hampshire and Texas.  

“The doors are opening instead of closing for the use of bitcoin in order to support candidates,” said Sinclair Skinner, treasurer of the 1911 United Political Action Committee, the first super PAC to accept bitcoins. Skinner called the FEC’s move a “positive step forward in using crypto currency in America.”  

“The important thing here is that the FEC actually agreed on the process,” concurred David Mitrani, an associate at Sandler Reiff Lamb Rosenstein and Birkenstock. But Mitrani acknowledged that the FEC’s frequent internal disputes can leave things hazy for political players: “When the commission votes 3-3, what does it mean?”  

Goodman downplayed the FEC’s clash over bitcoins, saying it was “like a lot of other areas where there appears to be some philosophical disagreement, or policy disagreement among commissioners.” But Democratic Commissioner Ellen L. Weintraub didn’t mince words: “I think our ability to provide clear guidance is undermined when commissioners take an advisory opinion and say it means something other than what it does.”  

Election law blogger Rick Hasen, who teaches law at the University of California, Irvine, summed it up on the day the dispute erupted: “You can bet your bottom bitcoin that Democratic and Republican Commissioners will continue to clash on just about anything controversial coming before the Commission.”

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