TLDR
- Coinbase is facing allegations of violating campaign finance laws by donating $25 million to the Fairshake super PAC in May 2024
- The accusation claims Coinbase made the donation while engaged in negotiations for a federal government contract
- Coinbase’s chief legal officer Paul Grewal denies the allegations, stating the company is not a federal contractor under relevant regulations
- Grewal argues that funds from the U.S. Marshals Service contract are not from appropriated funds, exempting Coinbase from certain restrictions
- The Fairshake super PAC has raised over $200 million in 2024, with Coinbase being a major donor along with other crypto firms
Coinbase, one of the largest cryptocurrency exchanges in the United States, is facing allegations of violating campaign finance laws. The company has strongly denied these claims, calling them “misinformation.”
The controversy stems from a $25 million donation Coinbase made to Fairshake, a crypto-focused super Political Action Committee (PAC), on May 30, 2024. This donation, along with previous contributions totaling $45.5 million, has raised questions about potential violations of federal campaign finance regulations.
Molly White, a prominent crypto critic, brought these allegations to light on July 31. She claimed that Coinbase’s donation appears to violate federal laws prohibiting contributions from entities engaged in federal contract negotiations. White pointed out that the U.S. Marshals Service had issued a request for proposals on March 4 for a contract to manage and dispose of crypto holdings, with Coinbase being awarded a $32.5 million contract on July 1.
In response to these accusations, Coinbase’s chief legal officer Paul Grewal took to social media to refute the claims. In an August 1 post on X (formerly Twitter), Grewal stated, “Coinbase is not a federal contractor under the plain language of 11 CFR [Code of Federal Regulations] 115.1.”
He emphasized that the U.S. Marshals Service is not paying Coinbase with appropriated funds, a distinction made clear in the public request for proposal.
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
Grewal further explained that all funds associated with the request for proposal had been paid out of the Assets Forfeiture Fund, which receives proceeds from the sale of property forfeited to the U.S. Government under the purview of the Department of Justice. This distinction, according to Grewal, exempts Coinbase from certain campaign finance restrictions that apply to federal contractors.
Fairshake, the super PAC at the center of this controversy, has emerged as one of the most well-funded political action committees of the 2024 election cycle. It has raised over $200 million, with significant contributions from prominent crypto firms and executives.
Coinbase is not alone in its support for Fairshake. Other major players in the crypto industry, such as Ripple and the Winklevoss brothers, have also made substantial donations to the super PAC. Ripple, for instance, has contributed a total of $50 million, while Tyler and Cameron Winklevoss donated nearly $5 million in February 2024.
The allegations against Coinbase come at a time when the cryptocurrency industry is seeking greater political influence and regulatory clarity.
As the sector continues to grow and evolve, it faces increased scrutiny from regulators and lawmakers. The outcome of this controversy could have significant implications for how crypto companies engage in political activities and navigate campaign finance laws.
Coinbase maintains that it complies with all applicable laws, including those related to campaign finance. The company’s strong denial of the allegations and its detailed explanation of why it believes it is not subject to certain restrictions demonstrate the complexity of the regulatory landscape in which crypto firms operate.
