The main difference between hard money and soft money is that hard money refers to highly regulated contributions to candidates or political parties. Soft money refers to unregulated contributions to political parties or candidates, and there is no limit whatsoever to the amount of money one can give.
Soft money has traditionally been used to get the voters out to vote and to register as voters, as well as for advertisement purposes. It is used for party-building purposes and for advertisements provided that the ads do not tell voters to vote in a particular way. Hard money can only come from individuals or political committees, and it must be in accordance with the set guidelines.
In addition to individuals and political committees, soft money can also come from corporations. However, soft money cannot be used for advocating for a particular candidate during an election campaign. The Washington Post points out that there have been a number of loopholes in the use of soft money campaign contributions. For instance, much of the soft money contributed in 1996 was spent on issue ads, which theoretically supported party positions as opposed to supporting specific candidates. Soft money is passed by the government in form of debt or bonds. Even though it is used as a currency, it still needs hard material to back the value.