Crowd-Fundamentals: Balancing Rapidly Advancing Crowdfunding Innovation with Protections for Consumers

Inspired by the proliferation of online crowdfunding sites and projects, Zachary Fialkow decided to look deeper into how law intersects with this particular type of innovation. What Filakow found was a revolutionary set of ideas hampered by legislative and judicial hangups. For example, equity crowdfunding, whereby small-time investors can buy equity in burgeoning companies, can bring power to people in a way previously unheard of. However, the same laws permitting equity crowdfunding in the U.S. are also preventing it from being truly useful, involving unfavorable funding limits and complex regulations.

In addition, rewards-based crowdfuning, of Kickstarter and Indiegogo fame, are simpler to use and less regulated, but also leave open great vulnerabilities to fraud. In fact, unlike equity crowdfuning, rewards-based crowdfunding could use more governmental regulation. Fialkow argues that balancing this need for consumer protection with the need for businesses to operate freely is key to ensuring online crowdfunding's viability in the future.