Are NFTs the Future of Campaign Finance?

By Virginia Saylor:

In March 2021, Twitter’s former CEO, Jack Dorsey, auctioned off a NFT of his first tweet for over $2.9 million, donating all proceeds to GiveDirectly—a charity giving cash to people living in poverty.[1] Although largely a new phenomenon at  the time, this method of fundraising with NFTs has taken off with the evolution of blockchain.

To fundraise with NFTs, nonprofits generally partner with larger corporations, NFT creators, or crypto donation networks to hold charity auctions, and then receive the proceeds from the NFT sales.[2] For example, NFT creators started the NFT4Good project which minted animated trading cards of various Asian American influencers, celebrities, and athletes, and raised over $80,000 for #HateIsAVirus, an organization that works to dismantle racism.[3] The Giving Block provides a similar donation solution that connects nonprofits and charities to NFT projects—the most successful of which is Generative Art Community Project on Artblocks, raising over $3 million for MSF Australia (or, “Doctors Without Borders” Australia).[4]

Nonprofits can also fundraise by developing tokens and hosting their own auctions. To name a few, Alex’s Lemonade Stand Foundation (“ALSF”) minted three gold-ribbon NFTs to raise funds for pediatric cancer research,[5] and Taco Bell similarly launched a series of taco-themed NFTs, raising more than $180,000 for their Live Más Scholarship.[6] And there are many more.

Largely, nonprofits have turned to NFTs for fundraising because they are generally easy to administer, generate greater visibility of the philanthropic initiative, and can embody any number of digital formats.[7] For these reasons, NFTs have likewise gained momentum as a method for campaign finance.

As with nonprofit and charitable fundraising, NFTs are powerful tools in campaign finance because they “connect and build a community of [] supporters.”[8] In effect, they are not only an effective fundraising tool, but also a “low-dollar way for people to become engaged with their candidate and receive something of value in return for their donation.”[9] For example, Scott Jensen, a Minnesota gubernatorial candidate, raised roughly $25,000 after releasing NFTs depicting Jensen at the state fair eating a corn dog or carrying a cow.[10] Similarly, Arizona Senate candidate, Blake Masters, raised approximately $575,000 for his campaign following the release of limited edition NFTs of the cover of his book, “Zero to One.”[11]

While the number of political campaigns that have launched NFTs remains low, interest has certainly been growing.[12] It follows that as more campaigns begin to employ NFTs in campaign finance, it begs the question of whether the sale of NFTs could trigger regulations that prohibit corporations from making contributions to federal candidates and to political committees contributing to federal candidates.[13]

While the Federal Elections Commission (“FEC”) has issued guidance for accepting cryptocurrency contributions, until recently, there was little to no guidance addressing the sale of NFTs for campaign finance.[14] In December 2022, however, the FEC issued an advisory opinion that granted Data Vault Holdings (“DataVault”)[15] permission to create and sell nonfungible tokens (“NFTs”) to political committees for fundraising endeavors.[16] This decision followed after DataVault’s legal team proposed that the firm be allowed to send NFTs to individuals who contributed to political campaigns as souvenirs “in a manner akin to a campaign hat.”[17] In its proposal, DataVault provided that the token holders would have the option to use the NFT on a volunteer basis to promote the campaign without compensation, and that any issuing or transaction fees would be reported as fundraising expenditures pursuant to the Federal Election Campaign Act (“the Act”).[18]

In its review, the Commission considered whether  DataVault may design and market NFTs to political committees in the ordinary course of business, and under the same terms and conditions as its non-political clients. Ultimately, the Commission concluded that this activity would not result in prohibited in-kind contributions under the Act and Commission regulations,[19] which prohibit corporations from making contributions to federal candidates and to political committees, because DataVault offers “the same service, for the same fee, and under the same terms and conditions to both its political and its non-political clients.”[20]

This decision comes at an important time as more and more political campaigns seek to use NFTs as both a campaign and fundraising method. While we cannot say for sure whether NFTs will become the new political tote bag, or what this will mean for the future of campaign finance, the commission’s decision makes one thing is clear: a corporation may sell NFTs to political committees and campaigns in the ordinary course of business. Thus, this unanimous approval not only solidifies DataVault’s “leadership in the area of Web 3.0 campaign finance and marketing for political campaigns,” but also paves the way for corporations to partner with political clients to fundraise with NFTs.[21]

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[1] Sina Estavi, CEO of Bridge Oracle, won the auction, stating that his primary motivation was “to encourage involving [] charities in the crypto space.” Taylor Locke, Jack Dorsey sells his first tweet ever as an NFT for over $2.9 million, CNBC (Mar. 22, 2021), https://www.cnbc.com/2021/03/22/jack-dorsey-sells-his-first-tweet-ever-as-an-nft-for-over-2point9-million.html.

[2] What is NFT Fundraising, The Giving Block (Feb. 17, 2023), https://thegivingblock.com/resources/what-is-nft-fundraising/.

[3] Mela Seyoum, Charites see NFTs as a new way for people to donate, USA Today (Jun. 29, 2021).

[4] Nonprofits & NFTs Explained; A New Vision for Charitable Fundraising, The Giving Block (Oct. 12, 2021), https://thegivingblock.com/resources/nonprofits-nfts-explained-a-new-vision-for-charitable-fundraising/.

[5] @AlexsLemondae, Twitter (Sep. 29, 2021, 8:04 PM), https://twitter.com/AlexsLemonade/status/1443365987890388997.

[6] Mitchell Clark, The brands are at it again—Taco Bell is hopping on the NFT train, The Verge (Mar. 8, 2021), https://www.theverge.com/2021/3/8/22319868/taco-bell-nfts-gif-tacos-sell.

[7] Joe Lepper, The pros and cons of NFTs, Charity Digital (Apr. 19, 2022), https://charitydigital.org.uk/topics/topics/the-pros-and-cons-of-nfts-9786. 

[8] Laura Romera & Soo Rin Kim, Not just for artwork, NFTs are being used by political candidates to raise money, attract young supporters, ABC News (Jan. 26, 2022), https://abcnews.go.com/Politics/artwork-nfts-political-candidates-raise-money-attract-young/story?id=82445596.

[9] Id.

[10] @drscottjensen, Twitter (Sep. 1, 2021, 8:23AM), https://twitter.com/drscottjensen/status/1433045203812814848?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1433045203812814848%7Ctwgr%5Ecc83784240de9f6bd2106e1452605b321dc0896a%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.coindesk.com%2Fbusiness%2F2021%2F09%2F01%2Fcandidate-for-minnesota-governor-releases-campaign-nfts%2F.

[11] Mike Allen, Arizona Senate candidate brings NFTs to politics, Axios (Dec. 27, 2021), https://www.axios.com/2021/12/27/blake-masters-nft-senate-arizona.

[12] For example, Numero, a fundraising software firm that will make money by providing an NFT fundraising platform for campaign clients, had more than 300 campaigns on its waitlist at the time of its launch of electables.com in March 2022. Romera, supra note 8.

[13] 52 U.S.C. § 30118(a), (b0(2); 11 C.F.C. § 114.2(b); see Dopal Ratnam, Nonfungible tokens the new fad for campaign fundraising, Roll Call (Jan. 4, 2022), https://rollcall.com/2022/01/04/non-fungible-tokens-the-new-fad-for-campaign-fundraising/.

[14] Fed. Elections. Comm’n, Advisory Opinion 2014-02 (May 8, 2014),  https://www.fec.gov/help-candidates-and-committees/filing-reports/bitcoin-contributions/; see Sam Sutton, Forget T-shirts and tote bags. NFTs are the hot new campaign swag, Politico (Jan. 8, 2022), https://www.politico.com/news/2022/01/08/campaign-fundraising-nft-526787.

[15] DataVault Holdings is a cloud-based data analytics service for the delivery of branded data-backed cryptocurrencies on the blockchain. Although DataVault serves a wide range of clients, DataVault seeks to help their clients in the political market win elections and fund their campaigns through patented Web 3.0 tools (including NFTs) and platforms that provides data monetization, mobile marketing, and two-way interactive mediums. See DataVaultHoldings, https://datavaultholdings.com (last visited Mar. 17, 2023); see also Federal Election Commission Unanimously Approves Patented Datavault Platform for Use by Federal Political Campaigns across the United States, PRNewswire (Dec. 22, 2022), https://www.prnewswire.com/news-releases/federal-election-commission-unanimously-approves-patented-datavault-platform-for-use-by-federal-political-campaigns-across-the-united-states-301709148.html.

[16] Fed. Elections. Comm’n, Advisory Opinion 2022-22 (Dec. 15, 2022), https://www.fec.gov/files/legal/aos/2022-22/202222.pdf.

[17] Id. at 2.

[18] 52 U.S.C. 30104(c); (§ 11 C.F.R. § 114.10(b)

[19] 52 U.S.C. § 30118(a)(b)(2); 11 C.F.R § 114.2(b).

[20] Fed. Elections. Comm’n, Advisory Opinion 2022-22 (Dec. 15, 2022), https://www.fec.gov/files/legal/aos/2022-22/202222.pdf.

[21] PRNewswire, supra note 1.