Last Week At The FEC: Commission Issues Bitcoin Opinion, Questions Remain

by Holland & Knight LLP

On May 8, after nearly three months of consideration, the Federal Election Commission issued an Advisory Opinion in response to Make Your Laws (MYL) PAC's request that it approve a framework within which political committees may accept contributions made in Bitcoins. Yet questions remain over whether Bitcoins should be treated as in-kind or cash contributions and the Commission deadlocked on whether PACs may acquire goods and services with Bitcoins received as contributions. The Commission did not meet during the week of May 12.

Commissioner's Disagree Regarding $100 Bitcoin Limit

As this blog discussed in February, MYL PAC's request was specifically limited to approval of Bitcoin contributions with a current value of $100 or less, which is the limit for cash contributions intended to avoid large anonymous contributions. The question of anonymity was a key issue during the Commission's April 23 Open Meeting, when Commissioners focused on how a Bitcoin donor's identity could be determined within the virtual currency's current framework. 

In April, Commissioner Weintraub argued that a formal rulemaking on virtual currencies was necessary, but that MYL PAC's request for a temporary approval with a self-imposed $100 limit could be approved. Commissioner Goodman, however, asserted that the $100 limit should not be applicable, that Bitcoins should be treated like in-kind contributions, and that issuing a "temporary" advisory opinion could result in imposing an ad hoc limit without proper consideration or basis in law.

Despite being a focus of debate during the deliberations, the Commission's final Advisory Opinion does not provide a clear answer on whether or not MYL PAC's self-imposed $100 limit is necessary.  Instead, it nebulously finds that Bitcoins are "money or anything of value" and explicitly limits its approval to acceptance of Bitcoins as proposed in MYL PAC's advisory opinion request. As a result, in what has become a common refrain this year, the Commissioners released dueling statements describing the reason for their decision. 

Democrat appointed Vice-Char Ann Ravel and Commissioners Walther and Weintraub issued a statement in which they likened Bitcoins to cash, and stated that "the $100 limitation…was a material aspect of the proposed transaction upon which [they] relied" when approving the request.  On the other hand, Chairman Lee Goodman noted that "bitcoins will be regulated and reported…as in-kind contributions" and argued forcefully that "the Commission lacks statutory authority to impose a $100 limit on bitcoin contributions" and that the Advisory Opinion "in no way establishes the outer boundary for contributions and use of bitcoins."

Interestingly, the Bitcoin Foundation chose to intercede at the last minute to urge the Commission to approve the use of Bitcoins to make contributions, but explicitly took "no position…on whether bitcoin contributions are treated as cash or in-kind" contributions, and urged the Commission to adopt a flexible approach to this evolving technology.  

While the Commission did precisely that—avoiding the issue in its formal opinion and retaining future flexibility—the resulting ambiguity is sure to spawn additional controversy moving forward.  This is particularly true because, while some candidate are just now taking advantage of bitcoins within the $100 limit, others, like Representative Steve Stockman, were already accepting bitcoins valued in excess of $100 prior to the Commission's decision.  This issue remains ripe for a future complaint to the divided Commission, with no clear path forward for committees accepting contributions valued at greater than $100—aside from relying on the Commission's internal divisions to avoid further review.

Although questions certainly remain, the Commission's decision was a significant step forward for virtual currencies' acceptance by candidates and committees and for technological innovation's expansion of individuals' access to the political process.

Meeting Schedules

The Commission is scheduled to meet in executive session today, Tuesday May 20, and in open session on Thursday, June 5. Agendas have not yet been released for those meetings, but the Commission may review an advisory opinion request from Enterprise Holdings, Inc. regarding preemption of a New York State law purported to prohibit payroll deduction by federal PACs.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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