Our Comment on the Federal Election Commission’s Draft Opinion Rejecting a Special Cryptocurrency Loophole

Today, we submitted a comment on the Federal Election Commission’s draft opinion rejecting a proposal by a company called OsiaNetwork LLC that would allow unlimited campaign contributions in Bitcoin and other cryptocurrency on the theory that automated cryptocurrency mining is a form of “volunteering.” We believe the draft opinion is correct in its rejection of the “volunteering” exception, but recommend several improvements.

Background

Back in October, Free Speech For People asked the Federal Election Commission to reject a request for an advisory opinion from OsiaNetwork. The company is proposing that donors could lend unlimited amounts of computer processing power to the company for “mining” cryptocurrency, which could then be donated to political committees without counting as a contribution. Under the company’s theory, nobody has made a contribution; rather, they have simply “volunteered” their computer processing power.

We submitted a comment to the Commission highlighting the absurdity of this request. The danger of OsiaNetwork’s proposal is clear. There is no limit on the extent of an individual’s computing processing power. A wealthy donor might have access (including temporary, leased access) to vast amounts of computing power capable of generating millions of dollars’ worth of cryptocurrency. This could result in contributions substantially exceeding the federal contribution limits. Allowing OsiaNetwork’s request would create an enormous loophole by which wealthy donors (not even necessarily based in the U.S.) could circumvent all contribution limits and contribute large amounts of money directly to political committees, simply by doing it with a computer.

(For further background on OsiaNetwork’s request and our comment, see this article by the Center for Public Integrity.)

In November, the Commission’s staff circulated a draft opinion that saw through the company’s ruse and rejected the claim that automated cryptocurrency mining is “volunteering.” As the draft opinion summarized, “although the proposal is permissible under the Act and Commission regulations, it does not fall within the volunteer internet activities exception, and would result in contributions from both the individuals and OsiaNetwork to the participating political committees.”

That draft opinion is now before the full Commission for consideration at its December 13 open meeting.

Our comment on the draft opinion

Today, we submitted a comment on the draft opinion. We commend the Commission staff for correctly recognizing that those who use OsiaNetwork’s service to mine cryptocurrency and transfer it to political campaigns are not “volunteers,” but rather contributors. However, as we explain in our comment, the opinion should be improved in several ways.

Most importantly, the draft opinion says that the contribution should be valued at “the usual and normal charge for the computing services used.” However, the proper valuation of the contribution is the actual amount of U.S. currency transferred from OsiaNetwork to the political committee and attributable to that user. To give a concrete example, if a user spends $531 in computing resources acquiring one Bitcoin, which is then converted to U.S. currency at $3,406 and transferred to a political campaign, this should be valued as a $3,406 contribution, not a $531 contribution.

Next steps

The Commission will consider the draft advisory opinion, as well as our (and OsiaNetwork’s) comments on it, at its open meeting on Thursday, December 13.

Further reading:

Photo by Nanumas Nikhomkhai from Pexels.

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