Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Equity Crowdfunding Goes Local With Adoption of State Regulations
Author: Dan Brecher
Date: June 19, 2015
Key Contacts
Back
Twenty-two states and the District of Columbia have now legalized some form of equity crowdfunding at the local level. Many more, including New Jersey, have proposed legislation that would allow entrepreneurs to solicit financing from “everyday” investors, otherwise known as the “crowd.”
Equity crowdfunding was supposed to be a centerpiece of the Jumpstart Our Businesses (JOBS) Act. The statute authorizes companies to raise up to $1 million in any 12-month period from everyday investors using Internet funding portals approved by the Securities and Exchange Commission (SEC). Under existing laws, only “accredited” investors who meet certain net worth and income requirements can purchase these securities.
Unfortunately, the SEC continues to miss its rule making deadlines for enacting crowdfunding rules. While SEC Chair Mary Jo White maintains that completing rulemakings under the JOBS Act is a top priority, the comment period for the agency’s proposed rules expired on February 3, 2014. To date, the SEC has failed to take further action.
To fill the void, states are taking matters into their own hands and enacting their own crowdfunding regulations. Under these state laws, issuers can sell securities via the Internet to investors who reside in the same state, subject to certain caps. For instance, New Jersey’s proposed crowdfunding bill would allow local entrepreneurs to seek up to $1 million in private investment in increments of up to $5,000 from unaccredited investors residing in New Jersey.
As highlighted in a recent New York Times article, locally based crowdfunding has the potential to help get start-ups off the ground. Under a new Wisconsin law, a brewery called MobCraft raised $67,000 in growth capital from 52 Wisconsin residents. Equally impressive — almost all were first-time business investors.
Given the scarcity of traditional funding, crowdfunding presents a unique opportunity for entrepreneurs and start-ups to solicit capital directly from the public. However, despite the rapid adoption of state crowdfunding laws, entrepreneurs and investors have yet to fully buy into the new opportunity. According to the New York Times, less than 100 companies filed applications under state crowdfunding laws to date. Going forward, it will be interesting to see if the finalization of the SEC rules will provide the “jumpstart” the equity crowdfunding industry needs.
- Locations: Red Bank, NJ, Little Falls, NJ, New York City
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Author: Jesse M. Dimitro
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Author: Jesse M. Dimitro
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Author: Scarinci Hollenbeck, LLC
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
Author: Dan Brecher
What Is a Trade Secret? Key Elements and Legal Protections Explained
What is a trade secret and why you you protect them? Technology has made trade secret theft even easier and more prevalent. In fact, businesses lose billions of dollars every year due to trade secret theft committed by employees, competitors, and even foreign governments. But what is a trade secret? And how do you protect […]
Author: Ronald S. Bienstock
What Is Title Insurance? Safeguarding Against Title Defects
If you are considering the purchase of a property, you may wonder — what is title insurance, do I need it, and why do I need it? Even seasoned property owners may question if the added expense and extra paperwork is really necessary, especially considering that people and entities insured by title insurance make fewer […]
Author: Patrick T. Conlon
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Equity Crowdfunding Goes Local With Adoption of State Regulations
Author: Dan Brecher
Twenty-two states and the District of Columbia have now legalized some form of equity crowdfunding at the local level. Many more, including New Jersey, have proposed legislation that would allow entrepreneurs to solicit financing from “everyday” investors, otherwise known as the “crowd.”
Equity crowdfunding was supposed to be a centerpiece of the Jumpstart Our Businesses (JOBS) Act. The statute authorizes companies to raise up to $1 million in any 12-month period from everyday investors using Internet funding portals approved by the Securities and Exchange Commission (SEC). Under existing laws, only “accredited” investors who meet certain net worth and income requirements can purchase these securities.
Unfortunately, the SEC continues to miss its rule making deadlines for enacting crowdfunding rules. While SEC Chair Mary Jo White maintains that completing rulemakings under the JOBS Act is a top priority, the comment period for the agency’s proposed rules expired on February 3, 2014. To date, the SEC has failed to take further action.
To fill the void, states are taking matters into their own hands and enacting their own crowdfunding regulations. Under these state laws, issuers can sell securities via the Internet to investors who reside in the same state, subject to certain caps. For instance, New Jersey’s proposed crowdfunding bill would allow local entrepreneurs to seek up to $1 million in private investment in increments of up to $5,000 from unaccredited investors residing in New Jersey.
As highlighted in a recent New York Times article, locally based crowdfunding has the potential to help get start-ups off the ground. Under a new Wisconsin law, a brewery called MobCraft raised $67,000 in growth capital from 52 Wisconsin residents. Equally impressive — almost all were first-time business investors.
Given the scarcity of traditional funding, crowdfunding presents a unique opportunity for entrepreneurs and start-ups to solicit capital directly from the public. However, despite the rapid adoption of state crowdfunding laws, entrepreneurs and investors have yet to fully buy into the new opportunity. According to the New York Times, less than 100 companies filed applications under state crowdfunding laws to date. Going forward, it will be interesting to see if the finalization of the SEC rules will provide the “jumpstart” the equity crowdfunding industry needs.