Crowdfunding is Illegal in the U.S.

DeJager

DeJager

Crowdfunding via websites such as Kickstarter and IGG is currently illegal (reason = The ability to solicit business investment over the Internet is currently illegal in the United States). . .

Congress (how awesome... more government involved in my life) is seeking to not only place limits of $500,000 to $1,000,000 on crowd source investment projects, but also prohibit issuance of securities through anything other than an SEC registered broker-dealer or “funding portal.” Bills also would prohibit investment over anywhere from 2%-10% of annual income of the investor. (DoddleNews)

The JOBS Act will have a lot of influence on this situation and it's currently stalled in Congress.
 
I am not sure this will effect Kickstarter. Kickstarter is more of a donation funding via the crowd. I don't really see it as a business investment. Correct me if I am wrong. Most people that invest in Kickstarter are not expecting much of a return other than the awards like dvd and credits on the film. If they are not getting any of the profit from the film I don't see how it could be considered a business investment.

Now IGG could be a different story since it is more of a business investment from what I have read.
 
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Yup, it's NOT illegal at all.

They don't sell securities or make promises of return on your 'investment' which is NOT an investment to begin with... it's a donation. In fact the site FORBIDS of any kind of repayments !
The only thing you can do is offer trinkets for the donation.

Am sad to see the site is a faux money raising adventure for some who wants 100K to 1 Mill or more. With that kind of money there is plenty of shady things can happen. No one is checking and no one is responsible from the site to make sure money spent what it was proposed.

I'd like to see a site where an indie can raise money to shoot something. Nothing else but film productions would be allowed. The site's officers would decide on the merit of the project. The investors would get a percentage of the project. It can be an LLC based project.
As far I remember, there were two or more groups like that before the internet. Maybe they're still around...
 
Exactly, kickstarter and indiegogo are purely donation based. The crowdfunding aspects of the JOBS bill are specifically about crowdsourcing investment, not donations. If it passes it might enable something like p38 is describing, although my guess is that kickstarter & indiegogo will also offer investment-type funding as simply another option for people using their services.
 
DeJager said:
We'll see in the end whether or not Kickstarter and IGG will be affected. They are on the edge by stating they are donations. I have some some projects offer back-end points for "pledges".
Click to expand...

Maybe that will just mean that anyone utilizing these types of sites won't be to make offers like that...
 
DeJager said:
Here's one:

http://news.doddleme.com/news-room/crowdinvesting-bills-stalled-in-senate/


We'll see in the end whether or not Kickstarter and IGG will be affected. They are on the edge by stating they are donations. I have some some projects offer back-end points for "pledges".
Click to expand...

That's illegal, and against the kickstarter TOS. If someone does that they just sold someone a security and have to comply with SEC regulations.

Done the way it's SUPPOSED to be done it's no different than PBS offering you a tote bag for your pledge.
 
The beauty of kickstarter is there is NO WAY you should take one penny from anybody as an "investor" without first having the money to have everything handled by an attorney. It's a VERY complicated legal topic and if somehow you wind up handling it in a way that falls under the definition of selling a security and you don't file the proper paperwork you may get to spend some time chatting with your roomie in federal prison.
 
yeah, dejager your a big off.. consider your self spanked!

I AM interested to see an example of a site that IS soliciting investments online? What about forums and stuff where investors hang out.. ??
 
Learned this from an entertainment lawyer at a panel discussion at the Phoenix Film Festival for example...

In most situations you can't have a "partner" in a film making LLC or Partnership who doesn't know anything abut film making or the film business. They aren't a "partner". A partner contributes and takes part in decision making. A person with no knowledge can't reasonably do that. If the SEC decides to look at it they are going to say "No, he's not a partner, he's an investor, and you sold him a security".
 
Gonzo

I assumed it was done by 'industry' people as in the past.
LLC can be satisfied in the event you suggested, by making the investors 'Executive producers. The Gov don't care if the person is really there and do that job. Well, anyway, this is a different subjects and there is absolutely no problems with LLC because I see it every day by certain people.

Anyone can be an executive producer.... because they don't know anything, so what's the big deal :)
(OK I don't want corrections. It was a JOKE!)
 
In Texas (not sure about other states) there's such thing as a limited partnership where one or more partners has control of operations and may put money up and then one or more partners is "silent" and puts capitol in and gets takes. Differs from a general partnership where all parties have a percent of control governed by the partnership agreement alone, not necessarily by the percent initially invested.

You can also apply/register your General Partnership or Limited Partnership as Limited Liability and be protected like an LLC but keep all the benefits of a partnership, becoming LLP or LLLP.

Business organizations and benefits are a State thing. Not so sure about investments and SEC but after all the research I've done I'd be willing to take on a partner putting up money and myself and team putting up services, at least here in Texas.

Note: This isn't business advice, don't take it as such. This is just what I've observed for potential personal endeavors.
 
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