129:
campaigns can be run today, without the need for businesses to wait on the SEC's rule making process. Second, the overall cost of capital associated with raising money under the JOBS Act crowdfunding exemption is estimated to be approximately $ 39,000 for a $ 100,000 crowdfunding campaign. Most of this cost is a consequence of the requirements for the issuers to have certified or audited financial statements, go through a FINRA registered broker/dealer or funding portal, and produce expensive disclosure materials for investors. By contrast, a similar capital raise under an intrastate exemption is likely to be significantly cheaper for a similar campaign as a result of the absence of many of these requirements at the state level.
133:
of such state. This restriction significantly curtails the potential audience that a crowdfunding campaign might reach. In addition, although the SEC has recently provided guidance on how issuers may protect themselves from making 'accidental offers' to residents that are not located within the issuer's state, compliance with the SEC Rule 147 (the intrastate exemption) can still be a technically challenging and legally difficult prospect.
91:
individual cap ranging from $ 500 to 1% of income to 2% of income, depending on the investor's annual income. Around the same time, academic proposals for a crowdfunding exemption included a project cap of $ 250–500k and an individual cap of the greater of $ 500 or 2% of income, proposed by Steven
Bradford, and $ 250k total and $ 1000 individual per six months, proposed by Nikki D. Pope.
649:
of securities offered in reliance on this paragraph does not exceed $ 250,000 in any sixmonth period, if the maximum aggregate purchase per investor is no more than $ 1000, if there is no advertising or public solicitation, and if the issuer files such notice with the
Commission as the Commission shall prescribe.
119:
Many states have enacted (or are in various stages of enacting/considering) their own intrastate crowdfunding exemption laws. As of July 2016, 31 states have intrastate crowdfunding exemptions in place and seven states are in various stages of enacting/considering sponsored legislation regarding such
78:
Through 2011, with the assistance of the Small
Business and Entrepreneurship Council and a newsworthy endorsement from Whoopi Goldberg, the Startup Exemption met with members of Congress, White House staff, and others to lobby for a crowdfunding exemption. The Startup Exemption's $ 1m/$ 10k caps were
648:
To ensure the exemption of crowdfunded offerings, this author proposes the addition of the following new exemption to the
Securities Act as Section 4(6) that would exclude offerings made by issuers: (6) transactions involving offers or sales by an issuer, if the aggregate offering amount of an issue
141:
Certain broad based and niche platforms are currently operating in the intrastate crowdfunding space as funding portals and crowdfunding consultants. Georgia was the first state to permit intrastate securities based crowdfunding through portals, and the first successful securities based crowdfunding
132:
The intrastate crowdfunding exemptions also carry certain disadvantages for companies wishing to run a crowdfunding campaign. Principally, companies must be domiciled in the state in which they wish to run the campaign, and may not offer securities to any potential investors who are located outside
613:
This article considers the costs and benefits of crowdfunding and proposes an exemption that would free crowdfunding from the registration requirements, but not the antifraud provisions, of federal securities law. Securities offerings for an amount less than $ 250,000–500,000 would be exempted if
98:
in March 2012. The JOBS Act went through a number of amendments; the most significant of these was when the Senate replaced the H.R.2930 section with a version of S.1970 that was modified by raising its tiered individual investment caps to $ 2000, 5%, and 10% of income. On April 5, 2012, President
160:
New Jersey's first
Crowdfunding Platform (www.CrowdFundingNJ.com) went live in April 2018; as of January 2020 the platform had five issuers. Intrastate Crowdfunding works well as a first step for companies raising funding—most investors at this level are local to the business anyway—think of as a
90:
The White House endorsed the
Entrepreneur Access to Capital Act on November 1, 2011 and it passed the House the following day with a vote of 407-17. In the Senate, two new crowdfunding bills followed: S.1791, with caps of $ 1m and $ 1k, and S.1970, with a total offering cap of $ 1m, and a tiered
58:
for a crowdfunding exemption. After the campaign met its funding goal, SELC interns Aroma Sharma and
Kathleen Kenney researched and wrote the petition, which lists the names of all of its financial supporters in the first footnote. The SEC posted the petition as File No. 4-605 on July 1, 2010.
128:
Intrastate crowdfunding exemptions provide issuers of securities with several advantages over the federal crowdfunding exemption found in the JOBS Act, Title III. First, for those companies residing in one of the states where an exemption has been put into place, securities based crowdfunding
142:
transaction in the United States in over 80 years, was posted on the
Georgia intrastate only platform SparkMarket in October 2013. The campaign—run by Georgia-based Bohemian Guitars—raised approximately $ 129,000. Georgia currently has several operational general and market niche platforms.
67:, led by Jason Best, Sherwood Neiss and Zak Cassady-Dorion, proposed crowdfunding exemption caps of $ 1m for the total offering and $ 10k or 10% of income for each individual investment to the SEC in December 2010, and in early 2011 to the Startup America initiative, which was launched by
23:
in the U.S. is the effort to exempt relatively small investment offerings (typically $ 1 million or less), sold to the general public in small blocks, from the registration and compliance requirements demanded of large public companies. Inspired by the growth of non-investment
120:
intrastate crowdfunding. To date only one state has reviewed, and rejected, an intrastate crowdfunding exemption. Based on available information to date, the remaining states do not appear to be investigating the possibility of enacting an intrastate crowdfunding exemption.
28:, advocates see such exemptions as a way to spur innovation, economic activity, and small-business job creation, but opponents see such changes as invitations to fraud that will target unsophisticated investors. The movement has seen success with the passage of the
145:
The first successful intrastate crowdfunding campaign pursuant to the
Michigan Invests Locally Act (the MILE Act) was run by the Tecumseh Brewing Co., and was successfully closed at $ 175,000, in May 2014, on the multi-state platform Localstake.
62:
To limit abuse and protect investors, the SELC petition proposed a $ 100k cap on the entire offering, and a $ 100 cap on individual investments. Other crowdfunding exemption proposals followed the same two-cap strategy. The lobbying group
83:(R-NC) on September 14, 2011. As his initial inspiration for H.R.2930, McHenry points to the website BuyaBeerCompany.com, which launched in Nov 2009 and gathered over 5 million pledges for a notional group purchase of the
614:(1) each investor invests no more than the greater of $ 500 or 2% of the investor's annual income; and (2) the offering is made on an Internet crowdfunding site that meets the exemption's requirements.
461:
204:
79:
repeated in the White House's first crowdfunding exemption endorsement, on Sept 8, 2011, and in the first crowdfunding bill, the
Entrepreneur Access to Capital Act introduced by Rep.
72:
71:
to celebrate, inspire, and accelerate high-growth entrepreneurship throughout the nation. Sherwood Neiss was asked to testify twice in Congress. His congressional
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AL, AZ, CO, DC, FL, GA, ID, IL, IN, IA, KS, KY, ME, MD, MA, MI, MN, MS, MT, NE, NC, NJ, NM, OR, SC, TN, TX, VT, VA, WA, and WI; See
661:
566:
541:
462:"House Committee on Oversight, "The JOBS Act in Action: Overseeing Effective Implementation That Can Grow Jobs," see 59:00-1:00:20"
775:"It might cost you $ 39K to crowdfund $ 100K under the SEC's new rules | VentureBeat | Business | by Meghan Kelly"
55:
890:
272:"SELC | Education, research, and advocacy for just and resilient local economies. | Sustainable Economies Law Center"
407:
386:
762:
http://crowdfundinglegalhub.com/2015/01/16/state-of-the-states-list-of-current-active-and-proposed-intrastate-exemptions/
749:
http://crowdfundinglegalhub.com/2015/01/16/state-of-the-states-list-of-current-active-and-proposed-intrastate-exemptions/
736:
http://crowdfundinglegalhub.com/2015/01/16/state-of-the-states-list-of-current-active-and-proposed-intrastate-exemptions/
104:
29:
628:"Crowdfunding Microstartups: It's Time for the Securities and Exchange Commission to Approve a Small Offering Exemption"
804:
714:
366:"Have the SEC create a $ 1M exemption for Crowd Fund Investing - Reducing Barriers to Entrepreneurship - by IdeaScale"
157:
as a registered crowdfunding portal effective August 2016. However, the site appears to be inactive as of May 2019.
494:
848:
54:
launched the Crowdfunding Campaign to Change Crowdfunding Law to fund the legal work to draft a petition to the
225:
111:, was attended by many members of the "crowdfunding crowd" that collectively lobbied for the exemption.
205:"Will Crowdfunding Unleash Innovation, Encourage Securities Fraud, or Both? - US News and World Report"
826:
340:
567:"Bill Summary & Status - 112th Congress (2011 - 2012) - S.1970 - THOMAS (Library of Congress)"
542:"Bill Summary & Status - 112th Congress (2011 - 2012) - S.1791 - THOMAS (Library of Congress)"
108:
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magazine, Jenny Kassan of the Sustainable Economies Law Center (SELC), and Danae Ringelmann of
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8:
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C. Steven Bradford. "The New Federal Crowdfunding Exemption: Promise Unfulfilled".
177:
C. Steven Bradford. "The New Federal Crowdfunding Exemption: Promise Unfulfilled".
32:, which went into effect in 2016, and a growing number of state-level exemptions.
80:
68:
64:
46:
412:
910:
827:"Bohemian Guitars: "First In The United States" Equity Crowdfunding Campaign"
16:
Effort to exempt small investment offerings from some compliance requirements
292:
100:
25:
891:"Michigan's First Crowdfunding Campaign, Tecumseh Brewing Co., a Success"
521:"Entrepreneur Access to Capital Act (2011; 112th Congress H.R. 2930)"
94:
The Entrepreneur Access to Capital Act, H.R.2930, became part of the
51:
627:
592:
251:"U.S. securities-based crowdfunding under Title III of the JOBS Act"
95:
229:
805:"Compliance and Disclosure Interpretations: Securities Act Rules"
387:"Whoopi To SEC: Let Small Firms Raise Capital - In Charge - WSJ"
869:
715:"Seeing the Crowdfunding Exemption Become Legal | MAKE"
341:"Small Business Offering Exemption – Problem & Solution"
506:
424:
154:
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the Secretary of State has approved the application of
271:
218:
44:exemption came in April 2010, when Paul Spinrad of
688:"Obama Signs Bill to Promote Start-Up Investments"
632:University of Pennsylvania Journal of Business Law
185:(3). University of Nebraska College of Law: 4–6.
908:
849:"'Crowdfunding' Gets State-Level Test Run - WSJ"
408:"Fact Sheet and Overview | The White House"
321:(3). University of Nebraska College of Law: 5.
123:
593:"Crowdfunding and the Federal Securities Laws"
312:
176:
824:
870:"The new finance, raised to the power of us"
544:. Thomas.loc.gov. 2011-11-02. Archived from
368:. Reducingbarriers.ideascale.com. 2010-02-01
75:reviewed the pros and cons of crowdfunding.
437:
603:(1). Columbia University Libraries: 1–2.
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228:. State Crowdfunding Law. Archived from
136:
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107:into law. The signing ceremony, in the
56:U.S. Securities and Exchange Commission
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638:(4). University of Pennsylvania: 128.
264:
151:Illinois Intrastate Offering Exemption
846:
464:. Oversight.house.gov. Archived from
161:Friends & Family II (FF2) round.
764:|publisher=Crowdfundinglegalhub.Com|
751:|publisher=Crowdfundinglegalhub.Com|
738:|publisher=Crowdfundinglegalhub.Com|
625:
487:"STATEMENT OF ADMINISTRATION POLICY"
747:AK, CA, HI, MO, NV, NH and WV; See
591:Bradford, C. Steven (2014-05-18) .
87:before being shut down by the SEC.
30:Jumpstart Our Business Startups Act
13:
14:
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315:Securities Regulation Law Journal
179:Securities Regulation Law Journal
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664:. Thomas.loc.gov. Archived from
569:. Thomas.loc.gov. Archived from
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21:crowdfunding exemption movement
686:Landler, Mark (5 April 2012).
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207:. Money.usnews.com. 2012-11-21
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40:The first big push towards an
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626:Pope, Nikki D. (2011-08-26).
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825:Charles Luzar (2013-10-16).
597:Columbia Business Law Review
124:Advantages and disadvantages
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389:. Blogs.wsj.com. 2011-03-23
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662:"see page S1806, Sec. 302"
293:"Petitions for Rulemaking"
35:
893:. Lenawee Now. 2014-05-02
777:. VentureBeat. 2014-01-02
226:"State Crowdfunding Law"
109:White House Rose Garden
829:. Crowdfundinsider.com
137:Operational platforms
85:Pabst Brewing Company
717:. Blog.makezine.com
42:equity crowdfunding
693:The New York Times
794:17 C.F.R. 230.147
507:National Archives
438:Patrick McHenry.
425:National Archives
65:Startup Exemption
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917:Crowdfunding
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101:Barack Obama
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26:crowdfunding
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440:"H.R. 2930"
103:signed the
897:2015-02-21
876:2015-02-21
855:2015-02-21
833:2015-02-21
811:2015-02-21
781:2015-02-21
721:2013-10-03
672:2013-11-26
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527:2013-10-03
472:2013-11-26
446:August 19,
420:2013-10-03
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372:2013-10-03
299:2013-10-03
278:2014-01-26
236:2013-10-03
211:2013-10-03
165:References
149:Under the
807:. Sec.gov
295:. Sec.gov
73:testimony
52:Indiegogo
911:Category
760:UT; See
501:14 April
350:14 April
105:JOBS Act
96:JOBS Act
699:6 April
644:1916985
609:1916184
327:2066088
258:SEC.gov
191:2066088
36:History
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155:VestLo
490:(PDF)
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701:2012
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