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Federal Judge Allows Investigation of Fundraising Platforms
Federal Judge Allows Investigation of Fundraising Platforms

Investigations into the techniques of politically-focused online fundraising platforms by four state attorneys general can continue after a Minnesota federal judge ruled last week that federal law does not preempt state law, dismissing a motion for declaratory relief.

State attorneys general in Connecticut, Maryland, Minnesota and New York have raised questions about whether donors to political campaign committees in the 2020 presidential election unwittingly made their gifts into recurring donations.

Leaders of WinRed, an online fundraising platform used by Republican candidates and committees, filed a complaint in July against all four AGs, seeking “declaratory relief” in federal district court in Minnesota and asking the court to confirm that the Federal Election Campaign Act preempts state law with respect to its application to WinRed’s activities.

In a statement on its website last summer, WinRed leaders argued that federal law governs activities of federal political committees and accused the AGs of “exploiting their positions of power for partisan gain.” 

Chief Judge John Tunheim of the U.S. District Court in Minnesota last week ruled that federal law would not preempt inquiries by states and dismissed WinRed’s attempt for declaratory relief, ruling that he did not have jurisdiction.

Attorneys general for Connecticut, Maryland, Minnesota and New York sent letters of inquiry to both ActBlue, a nonprofit that works with Democratic candidates and committees and progressive organizations, and WinRed, a for-profit donation service. Both fundraising firms employed pre-checked boxes in online donation forms, automatically opting donors into recurring donations.

“No company has the right to use politics as an excuse for misleading consumers,” New York Attorney General Letitia James said via a statement in response to the Minnesota judge’s decision. “It’s their responsibility to be honest and transparent with their services, and it’s the responsibility of the states to fight back against deceptive behavior in all its forms,” she said. “Today’s decision by the court affirms our right to investigate WinRed.”

The Trump campaign refunded $122 million, more than 10% of what it raised in 2020 via WinRed, according to a New York Times investigation. The Biden campaign refunded 2.2% of the online donations raised on ActBlue.

WinRed announced Jan. 18 that it processed $559 million during 2021 across 3,200 campaigns and organizations. Starting this month, WinRed shifted its fee model, from 3.8% + $0.30 per transaction to a flat 3.94% processing with no per-transaction fees, what it described as a 15% reduction in cost when it was announced in September.

ActBlue, which charges a 3.95% processing fee, reported raising some $1.3 billion in 2021 from 4.5 million unique donors who gave 35.3 million contributions to 17,876 campaigns and organizations.