Firm Free to Market NFTs to Political Committees, FEC Says
WASHINGTON — A firm hoping to design and market NFTs to political committees under the same terms and conditions it applies to nonpolitical clients won’t run afoul of prohibitions on corporate contributions, the Federal Election Commission has determined.
DataVault, a for-profit corporation organized under Delaware law, creates and sells NFTs to companies in a wide range of industries including biotech, financial services and media.
An NFT is a digital token, typically corresponding to artwork, music, gaming or digital collectibles on a “blockchain.”
A blockchain is an online platform used to publicly record the authenticity and ownership of digital information.
Hoping to expand its business, DataVault reached out to the Federal Election Commission asking whether it would run afoul of either the Federal Election Campaign Act or agency regulations if it began selling the nonfungible tokens to political committees for use in their fundraising activities.
In making its inquiry to the FEC, DataVault stated it would provide NFTs to political committees on a nonpartisan basis and would not seek “to influence, affirmatively or negatively, the nomination or election of any candidate.”
Further, it said it envisioned political committees giving NFTs to their contributors as souvenirs “in a manner akin to a campaign hat.”
The company then outlined two scenarios it envisioned could happen if it was given permission to proceed.
In the first scenario, DataVault would provide political committees with customized NFTs that the political committees could offer to contributors who make contributions of a certain amount.
The NFTs would contain artwork, campaign literature, position papers or other digital content including video, audio and interactive social media.
The NFT could also conceivably provide the recipient with VIP access to certain campaign events.
Each political committee that transfers an NFT to a contributor would pay DataVault a fee for each NFT transferred to a contributor.
For instance, DataVault said, it would provide NFTs to a campaign committee that the committee would then offer to contributors who make a $10.00 contribution.
Once the campaign committee collected a contribution connected with the NFT, it would transfer the NFT to the contributor, record the $10.00 contribution and pay DataVault a fee of $3.00.
Under the second scenario, DataVault would provide political committees with two types of NFTs.
One type would be the same as in the first scenario, for transfer by the committees to contributors who make contributions.
The second type of NFT could be awarded by political committees to contributors who had already received the first type of NFT and had voluntarily enlisted others in making contributions of a certain amount.
The second type of NFT would have “greater apparent significance” than the first type of NFT, but “would hold the same monetary value as the first NFT.”
Here, too, the political committees would pay DataVault a fee any time they transferred an NFT to a contributor.
Under this scenario, DataVault would, say, provide “bronze” NFTs to a campaign committee. The campaign committee would offer the “bronze” NFT to contributors who make a $10.00 contribution.
Once the committee collects a contribution connected with the “bronze” NFT, it would record the $10.00 contribution and pay DataVault a fee of $3.00.
The first campaign contributor would then voluntarily find a second campaign contributor interested in obtaining the “bronze” NFT and contributing to the campaign committee.
The second contributor would make a $10.00 contribution to the campaign committee.
The campaign committee would then issue a “silver” NFT to the first contributor and pay DataVault a second fee of $3.00.
DataVault told the FEC that it expects that the price it will charge each political committee for transferred NFTs will enable DataVault to recoup its costs of providing the NFTs to the committee and make a reasonable profit.
Moreover, DataVault’s contract with each political committee would require the political committee to pay DataVault for transferred NFTs and to return to DataVault any NFTs that have not been transferred within a commercially reasonable period of time, the company said.
After consideration, the commission concluded the proposals would not result in prohibited in-kind contributions and therefore are permissible.
“The commission concludes that DataVault’s proposals to provide political committees with NFTs on the same terms that it regularly offers its nonpolitical clients would be a permissible extension of credit by DataVault in the ordinary course of business,” the commission said.
“Under the act and commission regulations, an incorporated commercial vendor may extend credit to political committees under terms substantially similar to those the vendor offers nonpolitical debtors,” it continued.
“Accordingly, because DataVault’s transfers of NFTs will be extensions of credit under 11 C.F.R. part 116 and otherwise consistent with prior commission interpretations of the act, DataVault’s proposed transactions with political committees, when performed by DataVault in the ordinary course of business, at the usual and normal charge, and under the same terms and conditions as DataVault applies to its nonpolitical clients, would not result in prohibited corporate contributions,” the FEC said.