SEC’s New Crowdfunding Rules

The following article isn't about a game. If your a small indie team looking to use crowd-funding the article is important. The SEC might pass new regulations, and laws that go in affect this year.

Link- http://venturebeat.com/2014/01/02/it-might-cost-you-39k-to-crowdfund-100k-under-the-secs-new-rules/

On October 23, 2013 the Securities and Exchange Commission (SEC) issued the proposed rules for Regulation Crowdfunding. The 585-pages included an explanation of the rules, the feedback it received, and a cost/benefit analysis.

A cost/benefit analysis is common in many regulations to give the public an estimate of the costs associated with implementing the proposed regulation. It answers the question, “Do the costs outweigh the benefits?” For Regulation Crowdfunding it sheds light on the question, “How much will it cost to raise money via crowdfund investing, and how do I keep it to a minimum?” Here’s a closer look at what that analysis tells us.

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The good news is it wont cover Kickstarter completely. It's meant to regulate other crowdfunding sites.

Seems to me that the question is whether these rules are intended as a government cash grab or if it's just a backstop so they have some actual laws to use if they go after scam artists. That will all depend on how they choose to enforce it.

these rules are intended as a government cash grab

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That. Millions are now running through crowdfunding and it can't be neglected by "authorities".

It doesn't affect the kind of crowdfunding many people may be thinking - as Couch correctly points out it has no effect on Kickstarter. From my admittedly lay understanding, it concerns crowdfunding where projects would sell or reward securities. Think of it as addressing things that would combine crowdfunding with a sort of IPO - crowdfunding where backers are rewarded shares in the company for example. The regulations seem aimed at ensuring transparency in this sort of offering and possibly preventing the sorts of scams that could cripple the viability of this flavor of crowd funding.

At the same time however, the fees seem prohibitive at the low end of the scale making it very difficult to fund what would - in the venture capital world- be considered micro-startups. At the scale of funding that many small businesses need - anything as costly or costlier than say a food-truck - the fees become far less onerous though are still not insignificant. It would be prohibitive though to anyone looking to crowdfund something like a hotdog cart if they were planning to reward investors with shares or securities instead of say 5 free hotdogs.

It is not so much a cash grab - it is unlikely to generate much money and certainly not much more than the cost of implementation any time soon since it does not attempt to take a slice of the kind of crowdfunding that is currently raking in hundreds of millions of dollars- as it is a hamfisted and clumsy attempt to nip what would or will likely be a real source of fraud in the relatively near future. It may certainly be an example of poorly thought out attempts by regulators to avoid a potential future problem resulting overly burdensome costs on the littlest of little guys who might have gone this route instead of the indiegogo or kickstarter route. In that sense it may create problems in addition to any it may partly solve.

You had to know this was coming. Hopefully it will be regulated as it should.

I doubt I would attempt this in the future as I'm building capital of my own. Still, I'm glad someone came up with the idea.