Key Takeaways:
- More states are beginning to regulate the use of cryptocurrencies in campaign finance. Most recently, Ohio surprised many by approving two advisory opinions concerning digital payments and virtual currency donations to political campaigns.
- How do other states regulate the intersection of campaign finance and FinTech? It’s a mess. Cryptocurrency donations to political campaigns are subject to a patchwork of state laws, utilization of the technology for campaign purposes is growing, and not every state is on-board with the revolution.
September 27, 2022 update: On May 27, 2022, California adopted Regulation 18421.2 repealing the state’s previous ban on cryptocurrency in state election contests. Under the new rule, cryptocurrency contributions may be solicited as in-kind contributions with the amount of the contribution being the fair market value of the cryptocurrency at the time a US-based cryptocurrency processor receives the contribution for processing. California committees seeking to solicit contributions in cryptocurrency must select a processor as a vendor authorized to act on behalf of the committee prior to accepting these contributions.
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More states are beginning to regulate the use of cryptocurrencies in campaign finance. For the uninitiated, cryptocurrencies like Bitcoin and Ethereum are digital currencies supported by a decentralized network based on blockchain technology, what the IRS calls a distributed ledger. Unlike traditional currency, cryptocurrencies are not legal tender in the U.S. but can be exchanged for traditional currencies such as the U.S. dollar.
Most recently, the Ohio Elections Commission approved two advisory opinions (1 and 2) to permit in-kind Bitcoin contributions and to permit election committees to utilize peer-to-peer payment apps (e.g., Venmo) accounts in the state. The actions in Ohio come as a school board candidate in suburban Cincinnati accepted donations through the Venmo app in the November 2021 elections, in potential violation of state campaign finance laws.
The United States currently has a patchwork of laws governing the use of cryptocurrencies and payment apps in campaign finance. The Federal Elections Commission led the way in authorizing the use of cryptocurrencies in 2014 and more states have begun to follow suit. Currently, here’s where states stand on accepting cryptocurrency donations for a political campaign.
- Five states have expressly approved cryptocurrency use for campaign donations. Additionally, Georgia and Illinois do not expressly authorize the use of cryptocurrency but state candidates have been accepting donations in cryptocurrency with little pushback from their respective campaign finance commissions.
- Five states have pending legislation, regulations, or advisory opinions to permit the use of cryptocurrency.
- Four states prohibit cryptocurrency use in campaign finance.
- The remaining 34 states and D.C. have not considered or enacted legislation or regulations to permit cryptocurrency use leaving its legality in state and local elections questionable
Below is a table denoting the states with permitted cryptocurrency donations. Reviewing state legislation, regulation, and advisory opinions from 2021 and previous years, it’s evident that many states are focusing on adopting legislative and regulatory frameworks for accommodating cryptocurrencies in their jurisdictions (e.g., taxation, permitting agencies to accept cryptocurrency as payment). As these states establish frameworks and as more donors contribute cryptocurrency to candidates, we expect states to turn their focus to regulating how political campaigns interact with this novel type of donation.
State | Status |
Arizona | The Arizona Secretary of State’s office has deemed cryptocurrency to be a method of “electronic transfer” authorized pursuant to Arizona Revised Statutes §16-907(F). |
California | Cryptocurrency contributions to political campaigns were banned in 2018 by the Fair Political Practices Commission. |
Colorado | Colorado’s Secretary of State finalized a regulation permitting the acceptance of cryptocurrency in 2020 for campaign finance purposes. Committees (candidate committee, political committee, small donor committee, issue committee, small-scale issue committee, independent expenditure committee, political party, and political organization) may accept cryptocurrency contributions up to the “acceptable limit for a cash or coin contribution.” Colorado’s rule follow’s the FEC’s rule in that the amount of the contribution that must be reported is the value of the cryptocurrency at the time of the contribution. Gains or losses after the contribution (i.e. during conversion to cash) must be reported as other income or receipts. |
Georgia | Candidates for state office in GA are accepting cryptocurrency donations in 2022. Georgia’s campaign finance law defines a contribution as “... anything of value conveyed or transferred for the purpose of influencing the nomination for election or election of any person for office …”. The state’s Campaign Finance Commission’s Executive Director, David Emadi, has said that cryptocurrency contributions are legal provided the committee immediately converts the donation into hard currency to avoid exceeding contribution limits. |
Illinois | Cryptocurrency contributions are currently a gray area in the State of Illinois. Candidates have previously accepted cryptocurrency from donors but the State Board of Elections nor the General Assembly have yet to provide formal guidance on the practice. |
Michigan | The Michigan Department of State issued an advisory opinion in 2018 prohibiting the use of cryptocurrency for campaign contributions. |
Minnesota | Two bills were introduced in the Minnesota Legislature in 2020 to prohibit the use of cryptocurrencies in campaign finance. HF 2884, and its companion SF 2670, were introduced in 2020 but died in committee when the legislature adjourned sine die. New legislation has not been introduced as of December 2021. |
North Carolina | The State Board of Elections & Ethics Enforcement released an advisory opinion in 2018 prohibiting the use of cryptocurrencies in campaign finance. |
Ohio | As mentioned earlier, Ohio is the most recent state to expand the permissible forms of campaign finance in the state to include cryptocurrency.
Donations in Ohio must be treated as in-kind contributions when reporting receipt in a campaign finance report and are subject to Ohio’s campaign contribution limits ($13,704.41 for individual donors to statewide, Senate, and House candidates per election period) at Ohio Revised Code Section 3517.102. Additionally, the value of the contribution is the value of the cryptocurrency at the time the contribution is accepted (gains and losses in value must be shown on the campaign finance report as either ‘other income’ or as an expenditure). |
Oklahoma | The Oklahoma Senate Rules Committee reported legislation as “do pass” in 2019 that would permit cryptocurrency contributions to political campaigns. SB 809 (2019) did not receive a third or fourth reading and died when the 2020 session adjourned sine die. It has not been reintroduced as of December 2021. |
Oregon | Oregon prohibited cryptocurrency contributions to political campaigns in 2019 with Governor Kate Brown’s signature on HB 2488. |
South Carolina | H 3529 would amend the Code of Laws of South Carolina, 1976 to permit cryptocurrency contributions to political candidates and committees. As of December 2021, the legislation has received its first reading in the House Judiciary Committee. South Carolina does permit legislative carryover from an odd-numbered year to an even-numbered year. |
Tennessee | Tennessee’s campaign finance law permits the acceptance of “digital currency” by campaigns. Contributions given via digital currency have a value of “the market value of the digital currency at the time the contribution is received”. |
Texas | In September 2021, the Texas Ethics Commission proposed to permit candidates, officeholders, political committees, and legislative causes to accept cryptocurrency contributions. Under the proposed rule, cryptocurrency contributions, like federal cryptocurrency contributions, would be considered “in-kind” contributions. Also following the FEC’s lead, the reportable value of the cryptocurrency is the fair market value of the cryptocurrency upon receipt and candidates and others required to report must report a gain from the sale of the cryptocurrency. However, under the proposed rule, a gain would only be required to be reported if the gain exceeds the reporting threshold in Texas. The Ethics Commission is set to discuss, and possibly vote to adopt, the proposed rule at its February 25, 2022, meeting. |
Washington | The Public Disclosure Commission released guidance in 2018 permitting the acceptance of cryptocurrency contributions by political campaigns. Under this guidance, cryptocurrency donations are limited to $100 and the cryptocurrency must be converted to legal tender and deposited in the campaign bank account within five business days of receipt. |
Wisconsin | The Wisconsin Ethics Commission held a public hearing in 2018 on guidance for the use of cryptocurrencies in political campaigns but referred the matter to the legislature. As of December 2021, the legislature has not developed a regulatory or legislative framework for cryptocurrencies other than to amend the Revised Uniform Unclaimed Property Act to address the disposition of virtual currencies. |
Federal | The Federal Elections Commission has permitted cryptocurrency contributions to political committees since 2014. |
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