Blue Sky, Regulators, Crowdfunding and “The Crowd”

By  Founder Raiseworth, CrowdFundBeat Sr. Guest Editor,

What the crowdfunding industry has taught us worldwide is that “the crowd” will “out” a bad actor long before any of the regulators do.

Regulators came out of the USA “blue sky” laws written state by state between 1911 and 1931. In these times there was no internet, little communication from town to town, regulators used broad laws to catch bad actors when they needed to, and when they found them. They may have got “tip offs” but as can be seen in this article the regulator often chooses their target.







It was a different world then. (1931)

  1.  Regulators were on the road or the local office as were the transactions
  2.  Local Regulations were implemented state by state
  3.  Regulator only got interested when people had already lost their money
  4.  It was difficult for citizens to voice concern as a group or to be involved
  5.  Transaction volume and complexity was relatively low

Now there are millions of transactions, many of them complex,  and a myriad of international players

  1.  Regulator resources are limited
  2.  Differing International Regulations by multiple regulators
  3.  “The Crowd” is often involved long before an investment offering manifests
  4.  Crowd can easily be included in the assessment or “outing” of issuers and their offering and publishing it
  5.  Transaction volume and complexity is high

In this environment,  building new “regulatory regimes” without basing them on the views and input of the millions of people involved in these transactions is neglecting reality. Campaigns can be closed down before the money leaves escrow accounts because the crowd simply communicated or shared that this entity or these people are not the ones you should be doing business with. This ability was not around in 1931. Back then the money was long gone before the regulator actually caught up with them.

Today’s currency is trust.

Todays asset is loyalty.

The need for transparency has huge traction.

Businesses and individuals disobeying this do not survive

All participants know that their deeds, good or bad, are public via the internet for the rest of their life and often that is motivation enough to curtail misrepresentation etc.  However this coupled with an ever watchful crowd and and social media channels  to gather and share views means that the government and their delegated regulatory entity would be far more effective if they empowered this army of vested interests and went lighter on the all encompassing rules like the soon to be implemented crowdfunding regulations.

Raising the bar to limit transactions due to deal size or investment amount is one way of running a regulatory regime.

A better way is to recognise that it is a different world now moving from centralized to decentralised transactions where the people that really know what is going on are the very people that know the people and stories behind the deals.

These are not intermediaries.

They are people doing their homework before recommending or investing. The crowd. They will catch a “bad actor” long before the regulator will even if the regulator keeps doing what they are doing on a larger scale with a bigger budget.



Tags: , , , , , , , , , ,


AZCentral.comTiny companies lure investors under Arizona crowdfunding lawAZCentral.comInvestors who make bets under the state's one-year-old crowdfunding law certainly have the potential to get in on the ground floor, but they must be patient and might not receive any returns. Th [...]

BloombergCouples Desperate For Children Turn to Crowdfunding FertilityBloombergCrowdfunding has become a popular mechanism for many couples who can't afford the high costs of IVF, or adoption and surrogacy. “It's not an easy thing to share publicly,” says Crystal Barrett, 33 [...]

WTTV CBS4IndyCrowdfunding effort to save Dorothy's iconic ruby red slippers from 'Wizard of Oz' raises $300000WTTV CBS4IndyThe Smithsonian has launched a campaign on Kickstarter aimed at raising $300,000 to preserve the ruby red slippers worn by Judy Garland in the belo [...]

Crowdfund InsiderMassive Rule 147 Amendments May Be On The Horizon Impacting ...Crowdfund InsiderAlmost a year ago, the SEC proposed certain amendments to the current Rule 147 which were intended to help foster, and increase the viability of, Intrastat.and more » [...]

Mountain XpressFaces in the crowd: WNC crowdfunding initatives | Mountain XpressMountain XpressEach week, Xpress highlights notable WNC crowdsourcing initiatives that may inspire readers to become new faces in the crowd. This week features a feature ...and more » [...]

MarketWatchWhy a crowdfunding site is giving out $10000 scholarshipsMarketWatchCrowdfunding site GoFundMe announced Thursday that it will award $10,000 to 10 students with pages on their site that fundraise for education. The award is part of a contest the site held throughout Septemb [...]

Android Authority (blog)Crowdfunding project of the week: Remix IO is an Android 4K set-top ...Android Authority (blog)The 'Crowdfunding project of the week' series is where we highlight some of the hottest campaigns from sites like Kickstarter and Indiegogo. There's pl [...]

Huffington PostReal Estate Crowdfunding's Pathway of ChangeHuffington Post“Crowdfunding is just the Internet,” stated Attorney Mark Roderick as he opened last month's RealCap Chicago. RealCap is an annual conference that joins crowdfunding leaders and innovators to propel th [...]

WestwordProgressive-Rock Band Marillion Pioneered CrowdfundingWestwordThat was the beginning of crowdfunding for us — and for every band, really.” When it came time for the recording and release of the followup to the 1999 record, Kelly and the band realized that one of [...]

BBC NewsNHS trust 'relies' on crowdfunding to equip wardBBC NewsAn NHS trust has launched a crowdfunding appeal to buy equipment for a new hospital unit because "it cannot get started without donations". The Royal National Orthopaedic Hospital (RNOH) in Stanmore, n [...]

CFB Finance

Press Release

CrowdFund Beat News


Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |