The New Crowdfunding Exemption: Only Time Will Tell
Ryan Sanchez
Posted Friday, May 16, 2014

The new crowdfunding exemption, signed into law by President Obama on April 5, 2012, is Congress’s response to a demand for easier access to capital for small businesses and entrepreneurs. The provision allows for a broader range of potential investors to support projects that otherwise might not have obtained funding under the prior regulations. Before the exemption, limits on the number and type of investors who could take part in an Internet securities offering without having to register largely prevented use of the crowdfunding model. While this exemption may herald the bringing of securities regulations into the twenty-first century, other changes to existing securities laws may ultimately undermine its application. Because the SEC has been late to enact many of the new crowdfunding regulations, only time will tell whether the exemption will be the boost to the economy for which Congress had initially hoped.