Campaign Finance 101: How Elections Are Funded in the US

Campaign finance forms the backbone of elections in the United States, enabling candidates to run competitive campaigns, engage voters, and convey their platforms. Understanding how elections are funded in the US is key to comprehending the complexities of democracy and the role money plays in shaping political outcomes. This guide categorizes funding methods into major and minor approaches, highlighting their significance and evolution.

Major Ways Elections Are Funded

These funding methods are the most impactful, shaping the majority of campaign financing strategies.

1. Individual Contributions

Individual contributions are direct donations from citizens to political candidates, parties, or campaigns. These contributions reflect voters’ support and help fund critical campaign activities such as advertising, events, and voter outreach.

As the backbone of campaign finance, individual contributions often serve as the primary funding source for candidates. They foster direct engagement between voters and candidates, giving supporters a sense of ownership in the democratic process. For instance, in the 2020 election cycle, individual contributions made up approximately 60% of total campaign funds raised by candidates.

A historic example of their impact is Barack Obama’s 2008 campaign, which raised over $500 million from grassroots supporters. This record-breaking achievement highlighted the transformative power of small donors in modern elections.

The Federal Election Campaign Act (FECA) was introduced after the Watergate scandal to curb undue influence from large donors. It established contribution limits and required transparency in campaign finance. As of 2024, individuals can contribute up to $3,300 per candidate, per election cycle. (Learn more from the FEC)

Individual contributions remain a cornerstone of campaign finance, reflecting the collective voice of voters and empowering candidates to run competitive campaigns.

2. Political Action Committees (PACs)

Political Action Committees (PACs) are organizations that pool resources from members—such as businesses, unions, or advocacy groups—to support candidates, policies, or legislation. PACs bridge the gap between individual contributors and political campaigns, representing collective interests and influencing policymaking. (Learn more about PACs)

PACs operate within strict Federal Election Commission (FEC) rules. For example, they can contribute up to $5,000 per candidate, per election, ensuring transparency and limiting undue influence. Despite these limitations, PACs are instrumental in shaping policies aligned with their stakeholders’ interests.

A notable example is the National Association of Realtors PAC, which contributed over $15 million during the most recent election cycle to advocate for policies favorable to the real estate sector. Historically, PACs have influenced pro-business policies, with Ronald Reagan’s presidential campaigns benefiting significantly from industry-specific PACs.

PACs remain a vital part of campaign finance, giving collective groups a voice and ensuring diverse perspectives are considered in policymaking.

3. Super PACs

Super PACs, or independent expenditure-only committees, are political entities that can raise and spend unlimited funds to support or oppose candidates. Unlike traditional PACs, Super PACs are prohibited from directly coordinating with campaigns.

Citizens United v. FEC was the 2010 Supreme Court decision that gave rise to Super PACs, ruling that restricting independent expenditures by corporations and unions violated free speech protections. This decision revolutionized campaign finance, allowing unprecedented levels of spending by these groups.

In the 2020 election, Super PACs collectively spent over $2.1 billion, with groups like the Senate Leadership Fund dominating ad buys. This particular group alone spent over $142 million, demonstrating the immense financial power wielded by Super PACs in shaping public opinion and influencing election outcomes.

While effective at amplifying political messaging, Super PACs are often criticized for their role in increasing the influence of wealthy donors and corporations. Critics argue that they exacerbate inequality in political influence, potentially overshadowing the voices of average voters. Despite these criticisms, Super PACs have become a controversial yet indispensable part of modern elections, shaping narratives and driving voter perceptions on a massive scale.

4. Party Committees

Party committees, including the Democratic National Committee (DNC) and Republican National Committee (RNC), are central players in campaign finance. They provide candidates with critical financial support, voter data, and strategic resources, particularly in competitive districts and battleground states.

The Federal Election Campaign Act (FECA) imposed stricter regulations on party committees following revelations of fund misuse during Richard Nixon’s 1972 re-election campaign. These reforms introduced greater oversight to ensure transparency and accountability in how party funds are raised and spent.

In the 2020 elections, party committees collectively spent over $3 billion, focusing on swing states to maximize their influence. They played a vital role in funding get-out-the-vote initiatives and providing operational support to candidates at every level.

Party committees remain a cornerstone of campaign finance, ensuring that national political strategies are effectively executed and that candidates have the resources they need to succeed.

5. Candidate Self-Funding

Candidate self-funding is when individuals dip into their personal wealth to finance their campaigns, bypassing the need for external donors. This approach gives candidates complete control over their messaging and strategy, free from outside influence.

Take Ross Perot’s 1992 presidential campaign, for example. He contributed $63.5 million (over $120 million in today’s dollars) from his own fortune to fund his run. More recently, Donald Trump’s 2016 primary campaign leaned heavily on self-funding, showcasing how personal wealth can reduce dependence on traditional fundraising methods.

Source: https://www.britannica.com/event/United-States-presidential-election-of-1992

While self-funding offers financial independence, it raises important questions about fairness in the political process. Critics argue that it creates an uneven playing field, giving wealthier candidates a significant advantage and making it harder for less affluent individuals to compete.

Candidate self-funding is a double-edged sword: a powerful tool for financial autonomy, but one that highlights ongoing concerns about equity and accessibility in politics.

6. Public Funding

Public funding is a method designed to reduce reliance on private donations by offering candidates federal matching funds—but with a catch. To qualify, candidates must agree to strict spending limits, creating what’s intended to be a more level playing field.

This system was introduced after the Watergate scandal through the Federal Election Campaign Act (FECA) as part of broader reforms aimed at tackling corruption and promoting transparency. It was initially seen as a major step toward fairer elections.

For example, John McCain used public funding during his 2000 primary campaign but opted out in 2008, citing the spending restrictions as a disadvantage. Similarly, candidates like Barack Obama have forgone public funding in favor of private contributions, finding the financial caps too limiting in today’s high-cost campaigns.

Whenever I watch a beat reporter’s attempt to catch a Giants player or coach in a “gotcha” moment, I’m reminded of Steve Carell when he was on “The Daily Show” asking a question to John McCain during his 2000 Presidential campaign, which will never not be hilarious: pic.twitter.com/SQND0zoZ0V

— NYGfaninCLT (@clt_ny) July 29, 2023

While public funding was once a cornerstone of campaign finance reform, its relevance has waned as modern campaigns increasingly outgrow the limitations it imposes.

7. Small-Dollar Fundraising

Small-dollar fundraising has revolutionized campaign finance, making it easier for everyday people to participate. This approach focuses on collecting small contributions, often under $100, from a large number of donors, typically through online platforms like ActBlue and WinRed.

Howard Dean’s 2004 campaign paved the way by leveraging the internet to raise millions in small donations, proving the potential of this method. In 2020, Bernie Sanders took it to new heights, raising over $100 million with an average contribution of just $27.

The beauty of small-dollar fundraising is its ability to democratize campaign finance. It shifts the balance of power away from large donors and amplifies the voices of everyday citizens. This method has become a cornerstone of modern campaigns, particularly for candidates with strong grassroots appeal, giving them the financial backing they need to compete.

Small-dollar fundraising is more than just a funding method. It’s a movement that empowers voters and reshapes the way campaigns connect with their supporters.

Minor or Supporting Ways Elections Are Funded

8. Bundling

Bundling is a fundraising strategy where individual donations are collected and grouped into a single, large contribution. It’s often spearheaded by influential individuals or groups, known as bundlers, who leverage their networks to secure substantial funding for campaigns.

During Barack Obama’s 2008 campaign, bundlers raised over $100 million, channeling grassroots small-dollar donations into a significant financial advantage.

Similarly, George W. Bush’s 2004 campaign relied on “Pioneers,” a network of bundlers who brought in millions to support his re-election effort.

While bundling is an efficient way to consolidate resources and maximize fundraising potential, it raises ethical concerns. High-performing bundlers often gain political influence, such as ambassadorships or other appointments, sparking debates about transparency and fairness.

Bundling remains a powerful and frequently used tool in modern campaigns, balancing its fundraising efficiency with ongoing scrutiny of its implications for campaign finance ethics.

9. Dark Money Groups (501(c)(4), 501(c)(6))

Dark money groups are nonprofit organizations—such as 501(c)(4) social welfare groups and 501(c)(6) trade associations—that play a significant role in campaign finance. These groups can raise and spend unlimited amounts of money on political activities without disclosing their donors, often funding issue ads or advocacy campaigns that indirectly influence elections.

In the 2020 election, dark money groups funneled over $1 billion into political campaigns, shaping public opinion while remaining shielded from transparency requirements.

The anonymity afforded to dark money donors raises concerns about hidden agendas and the disproportionate influence of wealthy individuals or corporations. Critics argue that this undermines accountability in democracy by allowing significant political influence to remain in the shadows.

Despite these concerns, dark money groups continue to wield considerable power in elections, fueling debates about the need for stricter regulations to promote fairness and transparency.

10. Crowdfunding Platforms

Crowdfunding platforms are a modern fundraising tool, enabling campaigns to raise money from a wide base of small donors. By leveraging social media and digital outreach, these platforms amplify the campaign’s reach while democratizing the fundraising process.

Platforms like GoFundMe have been successfully used in local and state elections, allowing candidates with limited resources to tap into community support.

Crowdfunding campaigns streamline fundraising, making it easier to collect small contributions quickly and efficiently.

Crowdfunding opens doors for candidates who don’t have access to traditional fundraising networks, making it easier for them to compete. It also encourages stronger connections with supporters by offering a simple, direct way for people to contribute to the causes or candidates they care about.

As a growing tool in campaign finance, crowdfunding is transforming the landscape by broadening participation and making fundraising more inclusive and accessible for candidates at all levels.

11. Public Events and Merchandise Sales

Public events and merchandise sales are a classic yet effective way for campaigns to raise money and engage supporters. Instead of relying solely on traditional donations, campaigns host rallies, dinners, and meet-and-greets, or sell branded merchandise to bring in funds while building excitement around their message.

For example, Donald Trump’s campaign turned branded items like Make America Great Again (MAGA) hats into a fundraising powerhouse, generating millions while simultaneously promoting his brand. These hats didn’t just raise money—they became symbols of his campaign, worn by supporters everywhere.

Ticketed events, like grassroots meet-and-greets or high-profile dinners, offer a personal touch, allowing supporters to connect directly with candidates. It’s a win-win: supporters get a memorable experience, and campaigns secure much-needed funds.

These methods don’t just raise money—they create a sense of ownership and belonging among supporters. Merchandise sales, in particular, transform fans into ambassadors, spreading the campaign’s message every time they wear or use branded items.

Public events and merchandise sales remain a cornerstone of campaign finance, proving that the best fundraising strategies are also about building community and visibility.

12. Loans

Loans are a practical but high-stakes method of campaign financing. Candidates borrow money to fund their campaigns, often bridging financial gaps during critical moments when expenses outpace fundraising. These loans are typically repaid through future fundraising efforts, but they come with strict oversight from the Federal Election Commission (FEC) to prevent conflicts of interest.

During his 2008 presidential campaign, Mitt Romney relied on loans to sustain operations early in the race. These funds allowed his campaign to maintain momentum before sufficient donations rolled in from supporters.

Source: https://www.nbcnews.com/id/wbna17152240

Loans can provide a vital safety net, keeping campaigns on track during cash flow shortages. However, they come with significant risks. If fundraising efforts fail to meet expectations, candidates could be left with substantial personal debt—a financial burden that can linger long after the campaign ends.

While loans offer a lifeline for campaigns in need, they require careful management and strict compliance with regulations to ensure transparency and fairness in campaign finance. For candidates willing to take the risk, loans can be a critical tool for staying competitive.

13. In-Kind Contributions

In-kind contributions are a powerful way to support campaigns without writing a check. These non-monetary donations can come in many forms—goods, services, or even volunteer time—and they provide essential resources that help campaigns thrive.

For example, a local business might donate office supplies or offer their event space for free. Others might pitch in with professional services, like legal advice, graphic design, or advertising. Campaigns also benefit from lent equipment or technology, all of which can make a huge difference, especially for grassroots efforts.

To keep things transparent, all in-kind contributions must be reported to the Federal Election Commission (FEC). Their value is calculated based on fair market rates to ensure compliance with donation limits and campaign finance laws.

These contributions are particularly valuable for candidates with limited funding. They reduce costs, foster community involvement, and allow supporters to contribute in meaningful, practical ways. In-kind contributions highlight how collective effort and resourcefulness can drive a campaign forward, making them an indispensable part of campaign finance.

14. Crypto Donations

Crypto donations are shaking up campaign finance by bringing a digital twist to traditional fundraising. Instead of cash or credit cards, supporters can contribute using cryptocurrencies like Bitcoin or Ethereum. While it’s still a relatively rare option, it’s catching on as an innovative way to raise funds, especially with tech-savvy audiences.

One of the trailblazers in this space was Andrew Yang’s 2020 presidential campaign, which embraced Bitcoin donations to signal its forward-thinking approach. By accepting crypto, Yang tapped into a younger, tech-oriented demographic, aligning his campaign with the digital future

WATCH: “Being your candidate has been the privilege of my life," Andrew Yang says as he suspends his 2020 presidential campaign. "Together we will continue to do the work and move this country forward, because the Yang Gang isn't going anywhere." pic.twitter.com/kFgnHwbq0h

— NBC News (@NBCNews) February 12, 2020

But crypto donations come with their own set of challenges. Campaigns need to navigate Federal Election Commission (FEC) guidelines, ensure donor identities are verified, and address transparency concerns. Add the ever-evolving nature of cryptocurrencies, and it’s clear this isn’t a simple fundraising tool to implement.

Still, accepting crypto sends a message: the campaign is innovative and willing to explore modern approaches to connect with supporters. While it’s not mainstream yet, crypto donations are carving out a small but growing niche in the world of campaign finance, showing how technology and politics continue to intersect.

15. Social Media Monetization

Social media monetization is a creative and modern way for candidates and advocacy groups to fundraise while connecting with audiences. Instead of relying solely on traditional donations, they generate revenue through platforms like YouTube, TikTok, or Instagram. These platforms allow campaigns to earn money through ads, sponsorships, or fan contributions tied directly to their content.

For example, advocacy groups often create engaging, monetized videos to raise awareness for their issues while generating funds. Some campaigns even use YouTube’s ad revenue or TikTok’s creator fund to supplement their financing efforts, combining outreach with fundraising in a unique way.

What makes this approach stand out is its ability to attract younger, tech-savvy supporters who spend a lot of time online. It’s not just about fundraising—it’s about building a deeper connection with voters in spaces where they’re already engaged.

Of course, this method isn’t without challenges. Social media platforms and campaigns have to follow Federal Election Commission (FEC) rules to ensure transparency, especially when monetized content is tied to political messaging.

Still, social media monetization is changing the game, giving campaigns a modern, relatable way to fundraise while expanding their digital reach. It’s proof that in the age of technology, campaigns are finding new ways to thrive and connect.

Understanding how elections are funded in the US is critical to appreciating the complexities of campaign finance. From individual contributions to innovative methods like crypto donations, each funding source shapes modern elections in unique ways. By fostering transparency and embracing reform, campaign finance can continue to support democratic ideals while maintaining public trust.

References

• Federal Election Commission. Public Funding of Presidential Elections.
• Caltech Science Exchange. Campaign Funding and Finance Explained.
• EffectiveGov at the University of Chicago. Public Funding of U.S. Elections.
• National Conference of State Legislatures (NCSL). Prohibiting Private Funding of Elections.
• USA.gov. Federal Election Commission (FEC).