Coinbase chief legal officer Paul Grewal claimed that the exchange is being incorrectly labeled as a federal contractor. Grewal’s comments were in response to Molly White’s accusing Coinbase of violating campaign finance laws with a $25 million donation to the crypto advocacy group Fairshake while working as a federal contractor for the United States Marshals Service [USMS]. Campaign finance law prohibits federal government contractors from making contributions, or promising to make contributions, to political entities including super PACs like Fairshake.
Per, the critic, the donation was the largest of the three made by the exchange to the Fairshake PAC and falls within the period that is prohibited by the FEC. The contributions to the crypto-focused group came in three installments: $5 million donated in November 2023, $15.5 million in December 2023, and another $25 million on May 30, 2024.
According to the FEC website, “The prohibition begins when the request for proposals is sent out or the negotiations have begun [whichever is earlier] and ends when performance under a contract is completed or negotiations have terminated [whichever is later].” This prohibition, and similar such laws, are sometimes called “pay-to-play” laws.
Coinbase Lawyer’s Rebuttal
Denying the charge, Grewal stated that Coinbase is not being paid by the USMS using government funds [appropriated funds]. He cited publicly released Request for Proposal or Public RFP, which is a document outlining the terms of a contract. The top lawyer argued that the RFP clearly states that Coinbase will not be paid with government funds. In essence, he disputes the classification of Coinbase as a federal contractor based on the specific definition in 11 CFR 115.1 and the nature of the payment arrangement with the USMS.
The Fairshake PAC is majorly backed by Coinbase and its CEO Brian Armstrong which aims to support pro-crypto candidates from both parties. Fairshake styled itself as “the first super-PAC dedicated to advancing the crypto economy and protecting the rights of crypto users.” PAC’s strategy is to leverage the “crypto’s superpower of grassroots support” and spend big to elect crypto-friendly lawmakers and defeat crypto-hostile ones. It also plans to educate voters and policymakers about the benefits of crypto and the risks of overregulation.