The JOBS Act and Crowdfunding: Harnessing the Power – and Money – of the Masses

6 Pages Posted: 8 Jul 2014 Last revised: 30 Jul 2014

See all articles by Abbey Stemler

Abbey Stemler

Indiana University - Kelley School of Business - Department of Business Law; Harvard University - Berkman Klein Center for Internet & Society

Date Written: 2013

Abstract

On April 5, 2012, President Barack Obama signed into law the Jumpstart Our Business Startups (JOBS) Act, dramatically changing the landscape for many companies raising capital. One of the most interesting sections of the Act is Title III, the CROWDFUND Act, which enables entrepreneurs and small business owners to sell limited amounts of equity in their companies to a large number of investors via social networks and various Internet platforms. Prior to the CROWDFUND Act, selling equity interests in companies via crowdfunding was for all practical purposes illegal under United States securities laws. The Act attempts to exempt crowdfunding from expensive registration requirements and allow crowdfunding websites to avoid the classification of broker, which would impose substantial registration costs on such sites. Through the CROWDFUND Act, equity-based crowdfunding has the potential to open funding opportunities to countless underfunded entrepreneurs and small businesses. In addition, it can provide investors with new ways to diversify their portfolios. However, the benefits of crowdfunding do not come without substantial risks. Given the combination of unsophisticated investors, inherently risky businesses, and the zeitgeist that changed regulations quickly, crowdfunding must be approached with caution.

Keywords: JOBS Act, CROWDFUND Act, Equity-based crowdfunding, Small business, Entrepreneur

Suggested Citation

Stemler, Abbey, The JOBS Act and Crowdfunding: Harnessing the Power – and Money – of the Masses (2013). Business Horizons, Vol. 56, p. 271, 2013, Indiana Legal Studies Research Paper No. 295, Available at SSRN: https://ssrn.com/abstract=2463488

Abbey Stemler (Contact Author)

Indiana University - Kelley School of Business - Department of Business Law ( email )

Bloomington, IN 47405
United States

Harvard University - Berkman Klein Center for Internet & Society ( email )

Harvard Law School
23 Everett, 2nd Floor
Cambridge, MA 02138
United States

HOME PAGE: http://https://cyber.harvard.edu/people/abbey-stemler

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