On November 13, the Federal Election Commission (FEC) issued a draft advisory opinion stating its belief that contributing one’s computational power to mine cryptocurrency to raise funds for political campaigns “is permissible,” but will still be classified as a contribution rather than an act of volunteering.
In the draft opinion, the FEC is responding to a letter the commission received from OsiaNetwork LLC in September of this year. In the letter, OsiaNetwork reportedly proposed “to provide services to political committees to enable individuals to use the processing power of their internet-enabled devices to mine cryptocurrencies,” with the political committees receiving the mining rewards.
OsiaNetwork proposed providing federal political committees with the tools necessary to create a web page on a committee’s existing website that provides a way for volunteers to donate their processing power. All contributors would have to do is accept the terms of service, designate a percentage of computing power they would like to donate, and keep the web page open for however long they wish their device to be a part of the mining pool.
Under OsiaNetwork’s proposal, supporters would be able to donate processing power to as many political parties as they wish but would have no ownership interest in or any rights to the mining rewards generated by their device. OsiaNetwork would have full control over these funds and would maintain a separate account for each client in an effort to track the digital currency mined by each individual device.
Along with a description of the services it proposes to offer, OsiaNetwork asked the FEC, among other things, if the contributions of processing power and the subsequently mined digital currency can be classified as an act of volunteering rather than an actual contribution, as to avoid contribution limits specified under the Federal Election Campaign Act.
According to the FEC’s response, the commission does grant exemptions from the definition of a “contribution.” Such exemptions include to groups or individuals who participate in “uncompensated internet activities for the purpose of influencing a federal election.”
Although this definition seems to connect directly to OsiaNetwork’s proposal, the FEC advisory opinion concluded that participation in the proposed mining pool could not be classified as an act of volunteering because the FEC’s definition of “internet activities” applies to, among other things, “communication distributed over the Internet,” while mining virtual currency involves “only the passive provision of processing power, and would not constitute a ‘form of communication distributed over the Internet.'”
In the draft advisory opinion, the FEC states:
“The Commission concludes that the proposed cryptocurrency mining pool does not fall within the volunteer internet activities exception to the definition of a contribution. Because an individual will be providing something of value to a political committee…the individual will be making a contribution to the political committee, equivalent to the usual and normal charge for the computing services used.”
Additionally, the FEC also claims that the proposed mining pool should be classified as a contribution because a percentage of the funds raised by the mining pool will be directly given to participating political parties, without the individual “exercising ownership or control of the funds.”
As per the draft, subject to certain exceptions, under the classification of a “contribution,” foreign nationals, federal contractors, corporations and labor organizations are prohibited from participating in the mining pool, and individuals under 18 must meet certain requirements before participating.
The FEC has made the draft available for public comment. OsiaNetwork LLL will respond to the draft by December 19.
Although the FEC has not given an official ruling, the draft advisory opinion may have an effect on states such as Michigan and California, which have declared cryptocurrency unfit for donations to political campaigns.