Change Crowdfunding Law

From 2010 to 2012, I blogged my and others’ flabbergastingly successful efforts in changing federal securities laws to let people invest in each other’s small-scale projects and businesses without the expensive DPO registration that’s required of large companies. Long story short, this new “crowdfunding exemption” became federal law in 2012, and simplified intrastate versions have since been legalized (as of Jan 2014) in Georgia, Kansas, Michigan, and Wisconsin– with more states on the way.

Here’s what I saw of the crowd movement that began with my blogging a far-out idea on Boing Boing and wound up taking me to the White House. But don’t just take my word for it; the academic literature and other sources describe the same history.

The Change Crowdfunding Law blog’s subtitle was, “Campaign for an SEC regulatory exemption covering public securities offerings with individual investment capped at $100, and the people who love them.”

The SEC Petition for a Crowdfunding Exemption

Here is the petition that the Sustainable Economies Law Center (SELC) just sent to the SEC proposing a crowdfunding exemption.

Read the whole thing??? it???s so well researched and reasoned! Jenny Kassan, Kathleen Kenney, and Aroma Sharma at the SELC did fantastic work on this.


The work was funded via this successful IndieGoGo campaign by the following highly-respected, well-liked, kind, smart, and sexy people:

Anonymous (4)

Zebulon Bartels

Ed Baum

Thomas Beckett

David Bienvenu

Noah Carpenter

Brian Chaikelson

David Cohn

Sean Corbett

Mackenzie Cowell

Andrew Day

Chris Duesing

Marcy Eiben

Jodie Emmett

Stanley Florek

Todd Harris

David Hauser

Jordan Hayes

Mike Hedge

Fran Kaplan

Tim Kappel

Jennifer Kassan

Kathleen Kenney

Keith Kosmin

Gijsbert Koren

John Kraemer

Christen Lee

Harold Lee

Justin Layne May

Holly Minch

Andrew Neuschatz

Charles Neveu

James Parkhill

Ross Pruden

Ellen Raynor

Kurt Reinhold

Danae Ringelmann

Ileana Rizescu

Timothy Rood

Daniel Schreiber

Aroma Sharma

Michael Shuman

Paul Spinrad

Jason Stetler

Mari Tamburo

Brian Tsuchiya

Gever Tulley

Vanessa Warheit

Nicholas Weininger


Not on this list? This is just the beginning, and it’s not too late to help with this. The important part now is to send (and encourage others to send) comments to the SEC regarding this petition, which you can do once they give it a File No. and post it, hopefully this coming week. Stay tuned!

Why I Am Doing This

Here’s an observation from my friend Liz, who’s the most politically experienced person I know: every real political movement is driven by the personal stories of the participants, and what got them involved.

Without these stories, a movement won’t move. It’s kind of like Alcoholics Anonymous: everyone in the room wants to know who everyone else is, what their lives are like, and why (and how) they came here to change something, rather than just doing their usual thing.

I know the phrase “The Personal Is Political,” but I’m a privacy freak who’s generally put off by identity politics. Still, this issue is interesting and important enough to me that I want to share how I got involved. There’s nothing dramatic here– it’s just a longtime interest that I’ve found time to pursue.

I am a flex-time, work-at-home (read: unshowered and unshaven) writer/editor and the father of two toddlers, with whom I frequent the playgrounds in and around the San Francisco neighborhood of Cole Valley.

Like many people, I have more ideas than I follow through on, and I believe many of them have commercial potential. But I work best under the expectations of others. So I’ve long wondered: how can someone like me get buy-in to pursue something that I think is a good bet?

In 2003, I built the website Premises, Premises as an experiment, to sell and support investment in inexpensive ideas. It didn’t catch on, and I now know that one of the main activities I was aiming to support (selling shares of future profit, i.e. securities, unregulated over the web) would be illegal anyway. But I had a great time making the site, and I added material to it for about year before letting it fall onto the dustheap of dead websites.

In 2006 I was very interested to learn about Fundable, which was the first crowdfunding platform I’d heard of. In 2008 I learned about the community-supported journalism site Spot.Us and was similarly excited, writing a brain-dump fan letter to Spot.Us founder David Cohn, who posted most of it to his blog.

Later that year, inspired by Spot.Us, I pitched the idea of an “E-vite for Makers” site to some of the folks I work for at MAKE, as a kind of online resource to help DIY’ers through a combination of external expectation, peer support, crowdfunding, curated how-to resources, and even dedicated pestering (for premium level subscribers) fromGetFriday-like offshore-assistant whipcrackers. The scheme didn’t gain support, and I didn’t find the time to build it myself on spec.

But meanwhile, sites like Kickstarter and IndieGoGo were starting up, I wasn’t surprised at how active and exciting they quickly became. They got the recipe right, and are now the magnets for interesting projects that Premises, Premises never was! I also felt that they were just one step away from something even more important. If they could offer return on investment instead of just nice prizes for donations, it would really change the game. It could be a big win for innovation, culture, and our economy as a whole. Doing this wouldn’t be a big deal technically, so I wondered why it hadn’t been done yet.

I talked to some lawyers and found out why such Idea Futures type platforms hadn’t been launched: it’s illegal, unless you register each offering with the SEC, which is prohibitively expensive. Any investment you make where the return doesn’t depend on your own work is considered a security, and there is no de minimis dollar limit on securities offerings or individual investments below which the SEC does not regulate. In other words, investing in a lemonade stand is subject to SEC regulation, unless it falls under some existing exemption (which it almost certainly wouldn’t).

I reported this in a post on the peerless Boing Boing blog last year, where I was enjoying a stint as a guestblogger. In the post, I said that I wanted to make crowdfunded securities legal by introducing a low value de minimis regulatory exemption, and perhaps use crowdfunding itself to secure the funds needed for the legal work. I also invited people to contact me for updates. My post elicited many nice comments and emails from interested people– including Tim Kappel, a lawyer whose article I had cited

Encouraged, I called the SEC to discuss the topic and wound up talking with Anthony Barone in their Office of Small Business Policy. He told me that the SEC can change its own regulations, without congressional review (which sounds like a recipe for corruption, but I won’t go there). He also said that the idea of an exemption based on the low value of individual investment had been brought up at the SEC’s last annual Government-Business Forum on Small Business Capital Formation, which took place November 2009. So the idea was already on their radar!

I soon found the Petitions for Rulemaking page on the SEC’s website and was delighted to see that anyone can submit a public petition for rulemaking to the SEC’s Office of the Secretary, as well as comments on any such petition (during its commenting period, which is 90 days I think).
From an online-activism viewpoint, I thought this process seemed too good to be true– the SEC really posts any and all rulemaking petitions and relevant comments it receives on its own website?

Most of the petitions are very technical and few have received much comment from the public– but what if I could get a serious, well-argued “crowdfunding exemption” petition drafted and submitted to the SEC– and then, once it was posted, encourage the crowdfunding crowd to bombard the SEC with positive comments. I wondered whose job it was at the SEC to scan and post every comment that anyone submits scribbled on notebook paper.

I started looking for a lawyer who might be interested in this scheme, and came to Jenny Kassan, whose great article “How to Raise Money But Not Break the Bank” my friend Peter had clipped and sent to me. As managing director of Katovich Law Group and co-director of the Sustainable Economies Law Center (SELC), Jenny is very knowledgeable about small enterprise investment and how it is affected by securities law. I queried her about the SEC petition idea, and we wound up having a great conversation. She explained that others had also been advocating for a de minimis investment exemption, and said yes, why not submit a public petition on it, to help bring the issue out into the open? We agreed that it was a common cause that united the hardworking, local community-focused entrepreneurs that she knows and the aspiring artist types that I saw funding their hopeful fame-bombs on Kickstarter.


Jenny would charge a token $1000 for the legal work, so on the fundraising side, I met with Danae Ringelmann of IndieGoGo, who lives near me
. She helped concoct the plan for the Crowdfunding Campaign to Change Crowdfunding Law, which launched on April 26th and reached its funding goal eight days later.

At the SELC, the summer legal interns were due to start in a few weeks, so Jenny figured they would be great for drafting the SEC petition, under her supervision. And since the project would then be done under the auspices of the SELC, which is a nonprofit, everyone’s donations would be tax-deductible. Bonus!


After the summer interns were settled working at the SELC, we all met at The Hub in Berkeley (a.k.a. Hub Berkeley) to discuss the petition: me, Jenny, and SELC interns Aroma Sharma, Erin Byers, Chris Curran, and Kathleen Kenney. SELC co-director Janelle Orsi also stopped by to say Hi. Over the next few weeks, Aroma and Kathleen did a fantastic job researching and writing the petition, and on June 24th, they sent it to the SEC.

The SEC’s autoresponder said they typically post what they receive within 2-3 business days– and once that happens, it will be time to spread the word about this campaign and encourage people to send in those comments. I’m excited– more soon!

UPDATE – (Aug 2012)

I’m updating old blog entries to include more relevant external documents listed by date. Here are four that predate the entry above:

8 Oct 2008
“Evite For Projects” proposal by Paul Spinrad, – emailed internally at MAKE magazine while I was Projects Editor there.

This was a proposal for MAKE to create what we would now call a crowdfunding platform, a website designed “to help aspiring makers follow through on their project ideas.”  It’s interesting to read this now — the “Free version” is what happened, but not the “Premium features.” The idea was rejected at MAKE, and Kickstarter launched in the Spring of 2009.

Microsoft Word - Document1

13 Dec 2009
Adventures in Ex Ante Crowdfunded Securities Law” by Paul Spinrad, Boing Boing

This is the post that I wrote as a guestblogger for Boing Boing which first proposed the idea of a crowdfunding exemption to securities law, and gauged interest in launching a crowdfunding campaign to support lobbying for such a law.


28 April 2010
“Crowdfunding Campaign to Change Crowdfunding Law” home page and “Prospectus” by Paul Spinrad, Indiegogo

This campaign funded the SELC petition that was sent to the SEC on June 27, 2010. IndieGoGo limits the word count of pitch pages, so I offloaded a longer explanation onto my own “Prospectus” page hosted elsewhere.