With election season upon us, the amount of money influencing American politics, who is spending it, and why is getting a new focus. In particular, so-called “dark money” has become a concern. For example, recent media reports have noted a sharp increase in dark money spending by both the Democratic and Republican campaigns.
The term sounds scary and raises the specter of shadowy figures manipulating the nation’s politics. As a scholar of American democratic institutions, I think it’s worth unpacking what dark money is, what concerns it raises, and what can be done to address it.
Unidentified political donors
When people talk about dark money, they are usually referring to unidentifiable funds being spent on elections.
Federal and state laws place certain limits on donations and require that some political contributions and expenditures be disclosed. For example, candidates for federal office must report their campaign donors to the Federal Election Commission. The FEC makes these reports available to the public.
Similarly, super PACs — groups that are allowed to spend unlimited amounts of money on independent election campaigns — must report information about their contributions, including the identities of people who give more than $200 a year and the amounts they give.
But there are loopholes in campaign finance disclosure laws.
For example, federal law allows certain organizations (particularly nonprofits designated as “social welfare” or trade associations under tax code sections 501(c)(4) and 501(c)(6)) to raise and spend large amounts of money on election campaigns without disclosing their donors.
Another channel for dark money is making donations to a Super PAC through a shell company. A shell company is a company set up for the purpose of hiding the financial activities of another person or entity (in this case, political donations). Super PACs are legally required to report from whom they receive donations, but when the money comes through a shell company, the Super PAC may not know the actual source of the funds, and is not required to disclose it; that information is hidden from public view.
A lack of donor transparency raises a variety of concerns. Voters may find it harder to assess the relevance of political messages and discern whether candidates are beholden to special interests. Regulators and watchdogs may have a harder time detecting illegal activities such as foreign campaign financing. And unscrupulous people and groups may be able to spread misinformation and destructive rhetoric without being identified or held accountable.
Undisclosed political spending
While discussions of dark money typically focus on where the money comes from, the term can also describe a lack of transparency about where the money goes.
Federal law requires election committees to report direct expenditures, such as payments to vendors and consultants. But those vendors and consultants sometimes act as pass-through organizations that receive campaign funds and then purchase undisclosed goods and services. And any such recipients may be set up as shell companies, making it even more difficult to trace the flow of funds.
For example, Hillary Clinton’s 2016 campaign and the Democratic National Committee were both subjected to complaints by the Federal Election Commission for failing to disclose payments made indirectly through the campaign’s law firm to researchers who compiled a report on Donald Trump’s ties to Russia. The Clinton campaign and the DNC paid fines to settle the matter without admitting wrongdoing.
But enforcement can be difficult. In 2020, a watchdog group filed a complaint with the FEC alleging that President Trump’s reelection campaign improperly transferred hundreds of millions of dollars to pass-through organizations to hide spending, including payments to top advisers and family members that legally should have been disclosed. The FEC dismissed Trump’s complaint in 2022 after commissioners split 3-3 on whether to proceed with the case.
Like underdisclosure of donors, underdisclosure of expenditures can deprive voters and regulators of valuable information. A lack of transparency can also lead to questionable campaign practices, such as using donations in a way that benefits candidates, campaign staff, or their associates.
nicodemos/E+ via Getty Images
Federal reform stalled
Advocates for greater transparency in campaign finance have been pressuring federal lawmakers and regulators to address dark money, but with little success.
Since 2010, Democratic lawmakers have proposed a bill called the DISCLOSE Act, which would require dark money organizations to reveal the identities of major donors and limit the use of shell companies to hide donors’ identities, among other requirements. Several versions of the bill have passed the House but have stalled multiple times in the Senate. Opponents argue that these measures would violate people’s privacy rights and stifle constitutionally protected speech.
Advocates have also made little progress in persuading Congress or federal agencies to impose new disclosure rules or strengthen enforcement.
The FEC’s six commissioners are evenly split among party lines, but they often lack majority consent to take action. The FEC’s most notable recent decisions have been to loosen campaign finance regulations rather than tighten them. Congress has prohibited the Securities and Exchange Commission from enacting new political finance disclosure rules for public companies, but some companies self-report more than is required by law.
State efforts to curb dark money
Dark money is also a problem in state and local elections. State and local transparency laws vary in strength, and because these elections receive less attention and oversight than federal elections, money flows can be even more opaque.
Unlike the federal government, many states and localities have tightened disclosure rules in recent years. Arizona, California, Colorado, New Jersey and Washington, for example, have passed new laws requiring more information about donors, including the original source of funds that are transferred between multiple entities before being used in election campaigns.
Meanwhile, states including Iowa, Massachusetts and Texas have enacted laws requiring consultants and vendors to provide campaigns with details about how they spend campaign funds.
Even in these states, disclosure gaps remain. In reality, efforts to improve transparency may seem like a game of whack-a-mole; each new regulation tends to produce new workarounds. But the experiences in these and other states may provide models and lessons for other jurisdictions.
Fred Schilling, United States Supreme Court Collection
Constitutional Questions
In addition to the political challenge of imposing stronger transparency regulations, proponents of such measures could also face constitutional challenges from opponents of disclosure.
In several cases, including Citizens United v. Federal Election Commission in 2010, the U.S. Supreme Court has rejected First Amendment claims by political donors who wanted to conceal their identities. In that case, the Court noted that transparency helps voters “make informed decisions and give appropriate weight to different speakers and messages.”
But the Supreme Court has also upheld the right to anonymous political speech. And in recent years, the court’s conservative majority has grown somewhat skeptical of disclosure rules, including in Americans for Prosperity Foundation v. Bonta, a 2021 case that struck down a state law requiring charities to identify their major donors. Justice Sonia Sotomayor, in her dissent, warned that the court’s arguments could also apply to campaign finance disclosure restrictions.
Therefore, even if public opinion grows in favor of stronger transparency regulations, the Supreme Court may stand in the way of such reforms.
