Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Sunday, April 15, 2012

Is Crowdfunding the New Lottery?

Marc Wilson, a former Kansas securities regulator, has written a column in which he is cautiously optimistic about the crowdfunding exemption, but warns that

Like the lottery, both investors and entrepreneurs must ask themselves if they are playing, or getting played by, the crowd.

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Crowdfunding exemption was made even more useless by the SEC's recent interpretive guidance. the SEC said that although crowdfunding investors will not count toward the total number of record shareholders for Section 12 registration purposes, transferees of these exempt securities will. Bottom line, expect to be filing a registration statement shortly after the securities sold via crowdfunding are no longer restricted.

Posted by: Gustav | Apr 16, 2012 11:54:28 AM

Strongly disagree that its a lottery. Crowdfunding leverages on the wisdom of the crowd.

The wisdom of the crowd is the process of taking into account the collective opinion of a group of individuals rather than a single expert to answer a question. A large group's aggregated answers to questions involving quantity estimation, general world knowledge, and spatial reasoning has generally been found to be as good as, and often better than, the answer given by any of the individuals within the group.

The crowds are you customers, so if they dont fund it, they would not buy what your selling.

This is the beauty of all of this!

Carmelo Milian

Posted by: Carmelo Milian | Apr 17, 2012 11:06:39 PM

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