SEC Decision on Crowdfunding: Will It Affect Nonprofit Fundraising?


October 23, 2013; PBS NewsHour, “The Rundown”


Will opening up the field of crowdfunding business affect the market of donors to nonprofits? Some only see an upside, but will the ability of people with less wealth to contribute to development of business “crowd out” contributions to nonprofits? We would love to hear your thoughts on the matter.

“I think it’s going to unleash another wave of entrepreneurship all across the nation,” said Steve Case, philanthropist and co-founder of AOL. “We need to really make sure we’re doubling down on our nation’s entrepreneurs, and the JOBS Act will help do that by providing more entrepreneurs in more places in more sectors of our economy the ability to raise the capital either to get started or to grow their company.”

But what effect will it have, if any, on fundraising?

On Wednesday, the Securities and Exchange Commission (SEC) released a long-awaited set of proposed rules today to allow companies to use crowdfunding to raise up to $1 million annually from the general public, providing equity or a stake in the company in return for the investment. This changes securities laws that have been in place since the Great Depression that restricted those persons from whom money could be raised to “accredited investors,” or those who earn at least $200,000 per year or are worth at least $1 million.


The proposal being floated under the JOBS Act allows anyone to invest, but in specified proportions to income. For instance, those earning less than $100,000 are allowed to invest $2,000 or 5 percent of their income or net worth, whichever is greater, while those who earn between $100,000 and $200,000 would be able to invest up to 10 percent.

The JOBS Act also would require that these investments flow through “funding portals,” where purportedly they will be regulated by the SEC and the Financial Industry Regulatory Authority (FINRA). The companies raising the funds would also have to observe varying levels of disclosures to investors, depending on how much money they want to raise.

Crowdfunding is by no means new. We have been doing it for years as grassroots fundraising and through such stuff as workplace campaigns. There are certainly new twists, with online platforms offering the ability to fund everything from technical doodads to films and protest movements, but how will this change people’s sensibilities about the uses to which they can put “disposable” income?—Ruth McCambridge

  • Gabriel Moses Lopossa

    This law does nothing for the individual, the everyday person who goes to work and comes home with enough to eat dinner, take his wife out once every week or so, and play a games before bed. These people like myself, who live poor, who must either do everything we can to suck the government dry or be bled to death by the feeding of it, are tired of self-destructive legislation.

    Many of us that participate in crowdfunding are not wealthy individuals, but when someone demonstrates a capacity to deliver a product not otherwise available, that resonates with us, we are willing to take a calculated risk to see it become available. If it does come to fruition as planned, we are treated most of the time with a product that we could otherwise not afford, or reconcile.

    By the deferring the receipt of the product for a year or two, we are able to help shape its development and receive it at a discount had it come at retail price. For example: I am interested in a game. This game will take two years to make, and will be made by someone who in my judgement is capable of delivering. So I volunteer some money, usually less than the same product would cost if I were to buy it off the shelf. Then I get to follow along as I see the development of my product, give feedback, and save a few dollars in the long run. I may tell my friends about it, which drops a few more bucks into the project, making it a little bit better at no cost to me! How amazing is that! This little principle is probably the single most exciting aspect of crowdfunding.

    When like-minded individuals band together to bring an otherwise unavailable product to market, one tailored explicitly to their needs and desires, the resources that are marshaled allow for some really amazing products, at a price point otherwise impossible. Every person that purchases the product makes the product a little better for everyone else, because unlike companies that have large overhead, nearly all the money pledged goes directly into the development of and improvement of that product. That improvement draws in even more funding and interest.

    What this legislation proposes undermines the most powerful and exciting aspect of crowdfunding, by preventing large quantities of pledgers. Not only that, but had it been in place a year ago it would also have prevented the best projects that I am now the most excited about, and proud to have been a part of. Please don’t let our fat and bloated government poison one of the last watering holes as we trudge onward to hell.