Senate passes legislation to legalize crowdfunding

The US Senate passed amended legislation to legalize crowdfunding today. The CROWDFUND Act was approved by nearly a 3-to-1 ratio.

<a href='http://meincmagazine.com/business/news/2012/03/senate-passes-legislation-to-legalize-crowdfunding.ars'>Read the whole story</a>

 

[Control Group]

Is Kickstarter affected by this? *gonna read the laws if i find them*

If I understand this correctly, no. Kickstarter isn't really an investment platform, it's a speculative pre-order system. All you get for your money is a product and/or perks for your funding level. That is, the Kickstarter model has no means for you to get a return on your investment; it's a purchase.

These bills - I think - deal with actual investing, in which you get equity in the business for your money. It's venture capital, rather than a product purchase, meaning you're investing with the expectation/hope of making money on the investment.

AIUI, the laws as they currently stand prevent engaging in VC funding in small amounts, presumably to protect average individuals from being conned out of their life savings by phony investment schemes.

 

[Control Group]

Is Kickstarter affected by this? *gonna read the laws if i find them*

No, kickstarter works off of a donation model with rewards, while this apparently authorizes true investment.

Personally, I'm a bit confused, because this seems to already be covered by the original intent of a corporation.

Also, it seems that the average funder on crowdfunder is donating over $13,000, which seems to be a great deal more than a 'democratic' funding system would have.

There are various rules about who can be involved in an IPO. Once the stock is being traded on the open market, individual "average" investors can obviously buy and sell shares. At the IPO stage, though, the average Joe can't get in on the action.

I believe this legislation addresses the possibility of crowdsourcing venture capital/IPO investment money.