Bill Overview
Title: Improving Crowdfunding Opportunities Act
Description: This bill reduces regulations applicable to crowdfunding securities and portals. Crowdfunding is used to raise capital through a large number of individuals investing potentially small amounts of money. The bill exempts certain securities issued under crowdfunding regulations from state regulation of secondary transactions. It also exempts crowdfunding portals from certain anti-money laundering reporting and recordkeeping requirements. Finally, crowdfunding portals are exempted from liability for material misstatements or omissions unless the portal knowingly makes certain untrue statements or engages in fraud or deceit.
Sponsors: Rep. McHenry, Patrick T. [R-NC-10]
Target Audience
Population: People involved in crowdfunding activities globally
Estimated Size: 10000000
- Crowdfunding is a popular method for individuals and startups to raise capital; this can include entrepreneurs, startups, and small to mid-size businesses.
- Globally, there are millions of new businesses every year, many of which use crowdfunding for initial funding.
- Crowdfunding investors aren't just restricted to a single region and can participate internationally.
- With easing regulations, more individuals might be encouraged to participate globally, leading to an increase in the cross-border flow of capital.
Reasoning
- The target population primarily includes individuals and businesses involved in crowdfunding in the US, expected to benefit or be affected by the change in regulations.
- Budget constraints imply that the policy's immediate direct financial impact may be minor for individuals, but regulatory relief could spur increased participation and growth in crowdfunding.
- The plan does not allot funds directly to individuals, hence the main benefits are expected through increased ease and access to raise and invest funds.
- The range of impacts includes benefits to young entrepreneurs, small business owners, and individual investors who deal with platform fees and regulatory hurdles.
- Being mindful of small business representation in the selection of interviews, as they form a substantial part of the US economy and are heavy users of crowdfunding platforms.
- Not everyone in the field will see an immediate benefit, as some are indirectly involved or just on the periphery.
Simulated Interviews
Tech Entrepreneur (San Francisco, CA)
Age: 28 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 5/20
Statement of Opinion:
- The reduction in regulations will make it easier for me to focus on growing my business.
- Crowdfunding is a critical part of our financing strategy, and anything that lessens the administrative burden is welcome.
- I hope this leads to more international investors getting involved.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 6 |
Restaurant Owner (Austin, TX)
Age: 35 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- It might not affect me much immediately, but having crowdfunding as a viable and less complicated option for future expansions is good.
- I haven't experienced dramatic issues with the current system, but simplifications are always welcome.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Independent Investor (New York, NY)
Age: 42 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 6/20
Statement of Opinion:
- While reducing red tape is generally positive, my main worry is about reduced oversight leading to more fraud.
- If executed well, could see an increase in good investment opportunities.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Media Producer (Denver, CO)
Age: 31 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- It's been tough navigating the costs associated with launching a campaign. Looser regulations may lower some barriers.
- More investors might be willing to back creative projects like mine with easier regulations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
Small Business Owner (Miami, FL)
Age: 45 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- I have been considering crowdfunding but the legal requirements seemed daunting.
- This might encourage me to give it a try since bureaucratic hurdles might ease.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Financial Advisor (Los Angeles, CA)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 7/20
Statement of Opinion:
- Regulation is important for protecting investors. This relaxation could be beneficial, but it must be managed with caution.
- I will need to adjust my advisement strategies depending on how the policy is implemented.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Environmental Activist (Seattle, WA)
Age: 24 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 9/20
Statement of Opinion:
- Lowering barriers could help us gather more funds for community-driven environmental projects.
- It's crucial that the engaging mass is well-informed about frauds despite lesser regulations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Tech Investor (Chicago, IL)
Age: 38 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 2.0 years
Commonness: 5/20
Statement of Opinion:
- The prospect of reducing red tape in the crowdfunding sector sounds appealing but I worry about the potential for increased fraud.
- Most startups I fund already employ alternative funding solutions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Retired (Atlanta, GA)
Age: 60 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 3.0 years
Commonness: 8/20
Statement of Opinion:
- It would be wonderful to see more projects emerging thanks to simpler processes.
- I will continue to support initiatives that align with my interests, even if regulations change.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Startup Consultant (Boston, MA)
Age: 29 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 4.0 years
Commonness: 10/20
Statement of Opinion:
- Streamlining the process could make crowdfunding more accessible to new startups.
- May need to adjust consulting approach to accommodate new regulations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Cost Estimates
Year 1: $5000000 (Low: $3000000, High: $10000000)
Year 2: $3000000 (Low: $1500000, High: $7500000)
Year 3: $3000000 (Low: $1500000, High: $7500000)
Year 5: $3000000 (Low: $1500000, High: $7500000)
Year 10: $3000000 (Low: $1500000, High: $7500000)
Year 100: $3000000 (Low: $1500000, High: $7500000)
Key Considerations
- Determining the balance between regulatory flexibility and potential risks in terms of reduced oversight needs close monitoring.
- Assessing the impact on financial fraud and market integrity as a consequence of relaxed anti-money laundering obligations is crucial.
- Long-term GDP growth potential and indirect tax benefits need to be weighed against possible short-term costs in implementing changes and overseeing the relaxed regulatory framework.