Electronic Transactions, P2P, Twitter, Mobile Apps at Issue

The Federal Election Commission (Commission) is seeking comments on how it should regulate political contributions and expenditures made by new and emerging electronic payment technologies, Internet-based payment processing, online banking, and text messaging. 78 Fed. Reg. 25635 (May 2, 2013). Over $7 billion was raised and spent in the last election cycle, a growing amount of which was made with new electronic means of payments.

The Commission emphasized that it was seeking comment on whether and how it should issue regulations governing electronic transactions “that provides sufficient guidance to the regulated community while reducing the need for serial revisions to reflect new and emerging technologies.” To that end, the Commission asked for information on current industry practices: “How are commercial and consumer electronic transactions conducted generally? How might practices change in light of emerging technologies? Are there other forms of electronic payment — such as by electronic wallet or swipe, P2P (or person to person) platform, mobile app, or Twitter hashtag — that the Commission should consider if it decides to revise its rules?” 78 Fed. Reg. 25635, 25636-37.

Last year, the Arent Fox Political Law group successfully petitioned the FEC to allow text messages to be used to make contributions to federal candidates and political committees. Advisory Opinion 2012-17 (Red Blue T LLC, ArmourMedia, Inc., and m-Qube, Inc.); Advisory Opinion 2012-26 (Cooper for Congress, Armour Media, Inc. and m-Qube, Inc.). The Commission is seeking comments on whether it should now amend its regulations to address contributions made by text message and, if so, whether the regulations should take the same approach as the advisory opinions and address issues, such as reporting requirements, that were not addressed in those advisory opinions.

The Commission noted that it has issued a series of advisory opinions dealing with electronic contributions to political committees that were processed by incorporated commercial vendors or payment processors. In those opinions, the Commission held that these transactions were permissible despite the Commission’s prohibition on corporations acting as “conduits” for political contributions because the incorporated entity was acting either as a vendor to the political committee or was providing a service to the contributors. See, e.g., Advisory Opinion 2007-04 (Atlatl); Advisory Opinion 2011-06 (Democracy Engine). The Commission is seeking comment on whether this approach to electronic payment processors should be translated into regulations.

Finally, the Commission emphasized that it is particularly interested in ensuring that any new regulations it adopts will not be a disincentive to innovation in this area: “Given the speed at which technology has been advancing, the Commission welcomes comments suggesting general regulatory criteria or standards that are flexible and adaptable enough to apply to new or emerging technology or business arrangements.” 78 Fed. Reg. 25635, 25638. Comments must be received by the Commission before June 3, 2013.