Georgetown Journal of International Law Online

By Clifford Hwang

Want to drink coffee and play with a cat in DC?  You can do that at Crumbs & Whiskers, thanks to a successful fundraising campaign on Kickstarter.  People can “invest” in all sorts of campaigns ranging from technological inventions to personal travel trips on a wide variety of platforms including Kickstarter, Indiegogo, or Go Fund Me.  Although some campaign starters will promise something in return for investments, these donation-based investments do not allow investors to share in the projects financial success.  In other words, investors cannot buy equity in the project or company, which can lead to serious outrage in certain instances. 

Often considered a new method of fundraising for small businesses and entrepreneurs, crowdfunding has great potential because it fills the financing gap that bank will not fill.  On the other hand, crowdfunding and other internet based financing is susceptible to fraud, especially if the majority of investors are not financially savvy. Cognizant of this potential, many countries around the world have enacted legislation to regulate crowdfunding and give opportunities to investors to buy shares in smaller companies.  For example, in the United States, under the SEC’s final crowdfunding rules that will take effect on May 19, 2016, investors will have the ability to buy equity through crowdfunding.  In Asia, China will also be regulating crowdfunding platforms.  In a few days, Belgium will be one of the first countries to allow crowdfunded securities to trade.  

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March 03, 2016