is Kickstarter and crowd funding illegal?

May 24, 2012 — 9 Comments

So… How is Kickstarter, or “crowdfunding” not illegal?

Consider this point-of-reference article, The Kings of Crowdfunding.

What type of regulatory filings or qualifying standards are involved?

NOTE: Another aspect of crowd funding is tied into the JOBS Act which allows for a wider pool of smaller investors with fewer restrictions. The Act was signed into law by President Obama (naturally) on April 5, 2012.

The SEC is going to have approximately 270 days from the enactment date to set forth specific rules and methods to ensure that funding will actually take place. So, technically it’s probably not illegal due to that evaluation period. But, investors are going to get hurt. And, eventually, the programs will need to be radically altered. As the saying goes… If it’s too good to be true… And, it’s right up the, collective, alley of self-entitled entrepreneurs that think it’s okay to cut regulatory corners along with the offering of white lies to get what  they believe is due them.

It’s crazy to me. This flies in the face of every effort by the SEC and state regulators to protect against pillaging small investors?

More later.

Let’s be part of the Solution.

brian patrick cork

About these ads

9 responses to is Kickstarter and crowd funding illegal?

  1. 

    Crowdfunding as it currently exists is NOT about investing – it is about micropatronage. While investors may wish to turn it into an investment platform we sincerely hope you do not destroy this totally different DONATION model.

    The requirements being discussed would impose such financial burdens on those who do NOT want to operate under an investment model that it will shut out the best and most brilliant ideas and permit only those who ALREADY HAVE financial resources, accounts, and attorneys to obtain funding.

    What investors want and what we want are totally different beasts – totally different. We believe in a world where we can voluntarily support ideas that make a better world which has little to nothing to do with the traditional view of control and making everything about the quest for money.

    • 

      Good morning Gail.

      While the primary objective of crowdfunding organizations, as openly stated, is not a platform for investors, that is what is happening (both the crowdfunding company leaders and companies that are benefitting are quick to tout that result in almost giddy fashion i.e. “XYZ company just “raised $250,000 through crowd funding”).

      An ugly underside to all of this is the use of credit cards. So, in effect, you have people making tangental efforts to invest in startup companies using credit cards. This is likely the foundation of a blog post in it’s own right.

      I understand micropatronage. And, there is an opportunity for that on the crowdfunding platform. And, that might be a savings grace once the Securities and Exchange Commission (“SEC”) gets involved – and, they are.

      Mind you, I don’t have a “dog in this fight”. I know better than to try and invest in this manner, or raise money through this process as well. It’s viewed by many as the “easy button”. But, the end result is going to look more like shock-treatment when many of the givers/ investors get hurt.

      All that said, if the influencers in the space can drive thinking and activity towards a true donation model, crowdfunding can make sense. I’, a founder in http://www.roiministry.org, and I can see crowdfunding being a simple way to virally regulate and finance such initiatives. But, that might include the automated issuance of a receipt that validates a charitable contribution and eliminates any notion of this being an investment of some kind that might result in a financial Return on Investment (“ROI”).

      In closing, I’m curious about both your age and experience in the marketplace. I don’t intend to be a generalist, here. But, your notions about a world vision without regulation might be naive and promise only disaster with the most likely prospect being uninformed decision-making. State and Federal rules and regulations relative to raising money exist more to protect the uninformed, and less so to impede progress.

      brian patrick cork

  2. 

    I am 55 and you can see my background on Linkedin.com/in/GrowMap and the Press page linked to this comment. I do understand that in a world view where money is the most important value where people buy into the concept that everything must be controlled and ROI is imperative that my beliefs are so alien that it seems “naive”.

    The most telling line in your reply is “when many of the givers/ investors get hurt” because it confirms another line that no one gives because it is the right thing to do, or to create a better world, or because they want to be part of something worth growing – they only give to GET their ” automated issuance of a receipt that validates a charitable contribution”.

    I find the idea that “regulation” will save us laughable. We have the big banks and multi-national corporations “regulating” themselves through revolving door positions that have enabled the wealthy few to suck the life out of economies around the world. THAT regulation?

    The market is the biggest con game that ever existed to part the “wannabe rich” who have bought into “The American Illusion” from what little part of the pie they have managed to obtain. Meanwhile, the working classes only became “investors” when the Corporations they worked for who promised them REAL pensions IN WRITING had them STOLEN through conversions to cash pensions – illegal at that time by the way – as the original ruling obtained by the IBM employee class action lawsuit proves – so that they could be separated from their promised retirements through 401ks and the stock market.

    The working classes have always struggled to just make ends meet and they live in a world so different from yours that those born into the actual upper middle class that did once exist can easily be convinced that it is THEIR fault they are poor because they are lazy (while working THREE jobs!) and just want government assistance (which many still do not take).

    Now the former working middle class are ending up homeless and hungry – but laws that make living in your car or camping somewhere illegal keep that hidden – that and their embarrassment and buy-in that it is their own fault when it is anything but. See the links on my causes page at smbcontest.com/causes for more on that sorry state of affairs.

    It is the comfortable who will be the most shocked as the dollar comes to the inevitable end-of-life stage that ALL debt-based Fiat currencies have throughout history – without exception. When all that money won’t keep a roof over YOUR heads and food in YOUR mouths either – because it is near worthless little pieces of paper.

    Hopefully the wiser investors have moved their money out of anything that can lose value into either the necessities of life everyone will need and will barter for or into what the mega-rich who always still have money because they control the game will crave. Everyone else will be bartering or time banking or either finally creating communities again or killing each other to survive.

    So you may conclude I am either crazy or visionary – most choose the former – but time will tell and probably not too much more time at this point. My best advice to anyone is decide what you put first in your life. If you worship money, that path is wide and you most likely will keep treading it.

    • 

      All of this would make for an incredible and lively panel discussion.

      I think I understand where elements of your thinking realize their origins. But, I don’t want to come across as arrogant, or a know-it all. And, let’s set aside the “naive” word. It may not be fair, and will only create emotion.

      But, ROI does, at least help, facilitate, or allow people to pace their interest, and leverage as some form of validation point that helps the ranking and ordering of next steps. The erstwhile “triple bottom line” was a potential candidate for this, and even your own thinking. Society, the ecology, and the investor could all benefit, and this type of synergy created impetus. ROI Ministry can play on those terms as well. Under that umbrella, “givers” understand that the money they release is used under a formula that has success-drivers they can relate too. Maybe the objective is “saved” souls. Maybe it’s wrapped in a technology initiative that cleans water that can drive economics. But, even that must be regulated at some level. If only to protect the infrastructure.

      No… I’m not referring to banking regulations that are driven by lobbyists and self-interest groups and banks that are taking tax dollars while stifling entrepreneurs that could compete with public companies. I’m more focused on basic rules that protect people that want to give or invest money. Perhaps one day Sarbanse Oxley will find its way into the non-profit side. But, that dialogue aside, many people lose entire pensions and savings to predatory opportunities that plunder the uneducated, inexperienced and ill-informed. State and Federal regulations around how investment dollars and gift dollars are recognized and accounted for simply exist to protect many people that can’t protect themselves. On the other hand, if we are talking about people that might meet the standard of “accredited” and have access to professional people such as accountants, wealth managers and lawyers to help them make informed decisions, than I agree that they could manage with less regulation. Does that help, just a bit?

      My family puts a lot of money, under any definition, to work. THe focus is education, but also the arts, and some youth sports. Having tools (even receipts) connected to that activity simply falls under being good stewards and having a process to track and fine-tune the decision-making process. I’ll never buy into the notion that everyone should be allowed to simply do as they please with the hopes that altruism will prevail.

      The stark truth is that there are typically two camps… The people and organizations that are seeking capital in the form of revenue, investment or giving, and the people and organizations that provide the capital. And, whenever we can provide an open-forum for clear decision-making both sides have a better chance of recognizing their best interests. Evil happens as readily as simple mistakes and also errors in judgment. So, there does need to be a formula, call it rules, that help channel the process.

      I agree with I think is your point about building wealth in the stock market. That is illusive, indeed. But, mostly because of a clear lack of sophisticated decision-making, an inappropriate role by the media, and a clear conflict of interest between stock market analysts, fund managers and small investors.

      All of this said, I feel that you’ve wandered a bit from your point in the latter half of your missive.

      I’m not prepared to call you crazy. Frustration certainly creeps into your words. And, I don’t really know what you are qualified to pundit over. So, I doubt you are visionary.

      THe bottom-line, and relative to the original post, while crowdfunding is provocative, it offers a platform for people to make poor choices – if only because they think they are doing one thing, and actualizing another. So, that’s can’t be good. And, the SEC is already getting involved.

      Rules and then laws probably exist more to protect the weaker. So, unfortunately people are already reading your comments and taking the position that your “free-for-all” thinking will open the door for laws of natural selection. Let the buyer beware, eh. I don’t “invest” much support for that thinking. I prefer to use my super powers for good.

      brian patrick cork

  3. 

    Thank you for your extensive replies and willingness to engage in dialog. First I want to clear up that I have no issue with regulations regarding investing. If people wish to use crowdfunding as an investment vehicle whatever regulations and oversight the investors feel are beneficial are for them to decide.

    My concern is that in seeking to regulate the investment use of crowdfunding platforms that the door could be closed to their use for whatever other purposes will benefit us.

    I hope to get across a concept that is so foreign to the lives of those who have resources – both financial and human in the form of trusted advisors, accountants, attorneys, etc. – and therefore believe in having everything in writing and legally tied up.

    The majority of the population of the U.S. and every other country does not have any of that nor do we want it or feel the need for it. We do not want to trade our freedom that we see as a God given right to earn a living and have a roof over our heads and enough to eat for the illusion of government protection.

    In our world we want safe water, real food, and shelter. We appreciate a few luxuries like hot running water, air conditioning, heat, a fast computer and Internet access, and the freedom to blog and use social media. We want to be free to work at what we choose and sell the fruits of our labor.

    All these fees, fines, regulations, mandatory insurance, paperwork, etc., etc., etc. are used to take what little we have away and keep us from competing – as though we had any interest in that in the first place. They suck up our time and what money we have that could be going to important things – like eating.

    Life can not be made safe by laws. If that was all it took there would be no crime. It can not be “protected” by insurance – especially by mandatory liability insurance that does not even protect the person who buys it or their vehicle nor even the person who can afford insurance who if they have any sense has uninsured motorist insurance. It only pays the insurance companies twice for the same coverage – which they will do their best to not pay out on anyway – and creates a whole new class of “criminals” who are being imprisoned because they can’t pay the fines that were levied on them because they couldn’t afford insurance but needed to get to work to feed their families.

    The world you live in is NOTHING like the world WE live in. What is pocket change to you is the difference between homelessness and hunger for an ever growing number of people both in America and in every other country.

    The last people to become aware of where this is all REALLY going will be those who are comfortably living their lives as they always have. I reach out on occasion to someone intelligent who might actually look into the Brave New World those less financially blessed are already living in. It is always a pleasure when that person is open-minded and will engage in sharing what the view is like from their side of the economic divide.

    When they regulate crowdfunding – as they most certainly will – I just hope some like you will champion the idea of not killing it for those of use who are not incorporated, don’t know an attorney we could trust and don’t have the money to pay one anyway.

    • 

      I promise to always use my super powers for good.

      Rules both protect the weak, and can also deflate the strong. So, my objective is to keep the truth and facilitate informed decision-making. That’s the light I shed on the world, and things in it. And, how I run my companies.

      Cork

  4. 

    Cool blog! Is your theme custom made or did you download it from somewhere?

    A theme like yours with a few simple tweeks would really make my blog jump out. Please let me know where you got your design.

    Thanks a lot.

Trackbacks and Pingbacks:

  1. The Unsinkable brian cork™ » Blog Archive » Social Networking is like a Sexual Orgy - February 15, 2013

    [...] is Kickstarter and crowd funding illegal? [...]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s