I have not sat on a 501(c)3 board for more than a decade, but I remember being regularly concerned that how we did things could put our tax status in jeopardy, making significant capital gains might be such a problem for them.

How disappointing.  Seems like the EFF is case of "dogs that bark don't bite".  A charity that doesn't practice what it preaches will not be getting my donations anymore.  Perhaps I'm being too harsh?

Anyhow, soon Bitcoin won't need the EFF to speak out for it anymore.  The money will take care of the talking.

Have you guys considered what might happen if EFF were mounting a vigorous defense of Bitcoin, if they were sitting on a huge pile of it?  What if the shit hits the fan a year and a half from now and those 3k coins or whatever are then with 1.2 billion USD?  Do you think that would help the Defense or the Prosecution in the Federal racketeering and money laundering case against your Bitcoin shoe-shine and haircut parlor? 

They should send their coins to the bitcoin faucet if they do not want them.

JUNE 20TH, 2011       
EFF and Bitcoin
Announcement by Cindy Cohn

For several months, EFF has been following the movement around Bitcoin, an electronic payment system that touts itself as "the first decentralized digital currency." We helped inform our members about this unique project through our blog and we experimented with accepting Bitcoin donations for several months in an account that was started by others.

However, we’ve recently removed the Bitcoin donation option from the Other Ways to Help page on the EFF website, and we have decided to not accept Bitcoins. We decided on this course of action for a few reasons:

1.   We don't fully understand the complex legal issues involved with creating a new currency system. 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. 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.

2.   We don't want to mislead our donors. When people make a donation to a nonprofit like EFF, they expect us to use their donation to support our work. Because the legal territory around exchanging Bitcoins into cash is still uncertain, we are not comfortable spending the many Bitcoins we have accumulated. Because of this, we’re giving the Bitcoins that have been accumulated, or that may accumulate in the future, in the account set up in our name to the Bitcoin faucet, so that they can continue to circulate in the community.1

3.   People were misconstruing our acceptance of Bitcoins as an endorsement of Bitcoin. We were concerned that some people may have participated in the Bitcoin project specifically because EFF accepted Bitcoins, and perhaps they therefore believed the investment in Bitcoins was secure and risk-free. While we’ve been following the Bitcoin movement with a great degree of interest, EFF has never endorsed Bitcoin. In fact, we generally don’t endorse any type of product or service – and Bitcoin is no exception.

We appreciate the outpouring of support we have received from the Bitcoin community and we share that community's commitment to privacy and innovation. We also appreciate their frustration with the privacy problems posed by existing on-line payment systems. However, EFF will no longer be accepting or spending Bitcoins.

[1] We understand that we cannot close the account that has been set up in EFF’s name and that returning the donations to the individual donors would be complex and difficult.