Hard money is donations that are regulated through the Federal Elections Commission (FEC) and there are firm limits on these types of donations.
Soft money is campaign donations that are unregulated and therefore no limit on the amount donors can give to a party as long as it’s classified as such.
In 1978, the Federal Election Commission issued an administrative ruling that the funding rules established by law only applied to political campaigns, and not to “party building” activities. However, “party building” was not clearly defined, which leaves a grey area when donating for political purposes.