EFF Straight Up on Bitcoin

Nobody’s perfect, and even the regularly sharp and interesting Technology Liberation Front blog can miss the point sometimes, a hazard of trying to push the envelope. And that’s what I think has happened in EFF Gone Wobbly on Bitcoin.

The Electronic Frontier Foundation‘s Cindy Cohn announced yesterday that EFF would no longer take BitCoins.1 She gave several reasons:

1. EFF’s holding and spending of Bitcoins created some legal issues that EFF didn’t fully understand.

Bitcoin raises untested legal concerns related to securities law, the Stamp Payments Act, tax evasion, consumer protection and money laundering, among others. And that’s just in the U.S.

2. Doing something that raises legal questions risks making EFF the subject of a legal action, rather than the lawyer defending someone else.

While EFF is often the defender of people ensnared in legal issues arising from new technologies, we try very hard to keep EFF from becoming the actual subject of those fights or issues. Since there is no caselaw on this topic, and the legal implications are still very unclear, we worry that our acceptance of Bitcoins may move us into the possible subject role.

3. Donors might be misled. Donors who give EFF Bitcoins (and there were quite a few of them!) would expect EFF to spend them to support its mission. But because EFF feels unable to spend Bitcoins, due to the legal issues they raise, that expectation would be dashed. That’s bad for the donors — they waste their Bitcoins — and it’s bad for EFF, as it risks disappointing the donors (and, I might add, crowding out donations in currency it would actually use).

4. Some people might take EFF’s high-profile acceptance of Bitcoins as an endorsement of Bitcoins. But EFF is not in the endorsement business.

Cindy is an old and valued friend, so I’m likely biased here, but I think that in the face of true uncertainty, EFF did the wise and courageous thing.

But Jim Harper of the TLF writes that he thinks EFF’s decision is an error:

My insta-reaction was to joke: “Related: ACLU to stop bringing ‘right to petition’ cases.” That’s a little ambiguous, so: Imagine that the government took a position in litigation that suing the government was not protected by the First Amendment, but was in fact actionable. Under EFF’s logic—avoid becoming the subject of a rights fight—the ACLU would not fight the government on that issue. Luckily, the ACLU would fight the government on that issue—as fiercely or more fiercely than any other!

I think this misses Cindy’s second point above, which to me is probably the most critical one: An organization like EFF exists to fight for our rights by advocacy, by offering legal representation, and by other means. Prudent stewardship of an institution like EFF requires that it not lightly risk the organization on any one issue. (I’m not foreclosing the possibility that there might some day be some existential issue worth betting the farm on, but I think no one seriously suggests Bitcoin is The Big One.) When EFF represents clients, it donates its time, effort, and good name; it doesn’t stand as a guarantor for damages if the case goes wrong. Thus, if EFF loses — and that happens — EFF lives on to fight another day. Becoming a party directly means risking substantial direct civil (and for all I know criminal) liability. That’s unwise because it means a loss in one matter will impose costs that will undermine EFF’s ability to function in other areas and might, in the worst case, take down the entire organization.

This concern does not strike me as excessively fanciful. The US government today is busy prosecuting reporters and whistle-blowers on new and expansive legal theories. The Justice Department has taken a litigation posture in state secrets cases that is at least as aggressive as the Bush administration did. EFF has been a leader in pushing back against secret surveillance, and is undoubtedly a thorn in the Justice Department’s side. Would, say, a Stamp Act, or money laundering, or securities law charge against what may have been the largest single holder of Bitcoins be impossible to imagine? No. While I don’t know how likely such a prosecution would be, the prudent thing for EFF management to do is not to expose itself to that risk.

Jim Harper’s second complaint is that,

refusing donations in Bitcoin seems to detract from EFF’s mission because it denies the organization a source of funds. The donors who gave U.S. dollars expecting EFF to defend things like Bitcoin may feel mislead by EFF’s reluctance to do so.

Again, I think this is exactly wrong. People who give dollars to EFF will have their reasonable expectations fulfilled: EFF will use the money to fight for cyber-rights and expressive freedom. People who gave Bitcoins to EFF had their reasonable expectations frustrated once EFF decided, prudently (or even excessively prudently), that it couldn’t safely spend them without perhaps becoming a (rather visible) target itself.

Were the federal government to prosecute a participant to a Bitcoin transaction, that might well be a good case for EFF to take on, subject to the usual case intake issues. But as a lawyer or advocate, not as the defendant.

  1. I am a member of EFF’s Advisory Board. However, I had no part in the decision on Bitcoin, and have no inside info regarding the decision other than knowing from a brief personal conversation that the concerns set out in the EFF memo are sincerely held by EFF’s lawyers and result from their having put some real time into the issue. The views expressed in this blog post are my own, and I do not speak for EFF on this — or indeed any — issue. []
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