By Patrick Clark, The crowdfunding movement has long flown a patchwork banner. There’s the Kickstarter variety, in which funders give money to worthy projects, sometimes for rewards. Peer-to-peer lending is sometimes described as crowdfunding for loans, and some companies have already used crowdfunding to sell shares to accredited (aka wealthy) investors. Others await U.S. Securities and Exchange Commission rules to open equity crowdfunding to a broader pool of investors.
See Crowdfunding USA conference in Atlanta , May 1, 2014 Atlanta, Gerogia
While entrepreneurs wait for federal rules, some states are hammering out their own regulations to enable crowdfunding within their borders. That includes Michigan, where Governor Rick Snyder recently signed a bill allowing companies in his state to use crowdfunding rules to sell equity stakes to Michigan residents, as well as Kansas, which has allowed in-state crowdfunding since 2011. (Investments made across state lines still require the SEC’s blessing.) Georgia also allows in-state crowdfunding, and legislatures in Alabama and North Carolina will consider similar measures in coming months.
The timing of the trend is somewhat curious. When I reported on equity crowdfunding in Georgia and Kansas last June, several sources described the rules as an attempt to increase access to capital even as the federal rule-making process stalled. In October the SEC proposed equity crowdfunding rules. That might have reduced the urgency for state legislators eyeing new laws. It hasn’t.