Why are the SEC and FINRA rules around crowdfunding advertising so damn stupid?
Second Chance Response (A-level?)
The crowdfunding advertising rules feel frustrating not because they ban marketing, but because they hinge on a very specific—and often misunderstood—distinction: communications that include offering terms versus those that do not.
Under Regulation Crowdfunding, issuers are actually allowed to engage in broad, public, and persuasive communications, even during a live offering, so long as they do not include the terms of the offering (such as price, valuation, target amount, or deadline). These “non-terms” communications can be descriptive, emotional, and promotional, provided they are not misleading.
The restrictions everyone complains about apply only when an issuer chooses to mention offering terms. Once terms are included, the communication must be limited to a tombstone-style notice—factual, non-promotional, and directing investors to the funding portal where the full disclosures are available. That constraint is not about solicitation per se; it’s about keeping term-level investment information centralized and standardized.
This structure is not an SEC invention. It’s a policy choice made by Congress in the JOBS Act, reflecting a compromise between allowing widespread public marketing and preventing fragmented or selective disclosure of investment terms. In fact, the SEC deliberately softened the statute by creating a clear safe harbor for non-terms communications, something that does not exist in the same way in other exempt offering regimes.
Where the system breaks down in practice is not in its intent, but in application. Modern marketing rarely separates “story” from “terms” cleanly, and issuers often stumble into restricted territory unintentionally—sometimes by adding a single number, date, or link. That makes compliance feel arbitrary and overly technical, even though the underlying rule is conceptually simple.
So the rules aren’t stupid—but they are rigid, and they require founders and marketers to internalize a legal distinction that doesn’t map neatly onto how people naturally communicate online.
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Appendix: Public-Facing Explainer for Founders
Why Crowdfunding Ads Feel Confusing (and How to Stay Compliant)
If you’re raising money under Regulation Crowdfunding, here’s the one rule to remember:
You can promote your company freely — until you mention the investment terms.
Two types of communications
1. Non-terms communications (mostly unrestricted)
You may publicly and enthusiastically talk about:
Your product or mission
Why the company exists
Traction, customers, or milestones
Why you’re excited about what you’re building
As long as you do not include investment terms, these messages can be persuasive and emotional (just don’t say anything misleading).
2. Terms communications (highly restricted)
Once you mention things like:
Price or valuation
Amount you’re raising
Minimum or maximum raise
Offering deadline or end date
…the message must become a simple, factual notice that points people to the funding portal. No hype, no persuasion, no storytelling.
Why this rule exists
The law is designed to ensure that:
Everyone sees the same investment terms
Those terms live in one place (the funding portal)
No one gets partial or selective disclosure
This was a deliberate choice by Congress — not an accident or a mistake by the SEC.
Practical takeaway
- Tell your story everywhere
- Save the numbers for the portal
- If you want to include numbers, keep it factual and link out
- When in doubt, ask: Am I selling the company, or am I describing the investment?
- Understanding that distinction makes Reg CF marketing far less painful.
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Why are the SEC and FINRA rules around crowdfunding advertising so damn stupid?
It’s a fair question - and one that nearly every founder, issuer, and portal marketer has asked at some point. The truth is, the rules aren’t stupid so much as stuck in another era. They were written before social media, analytics dashboards, or API-based ad targeting even existed, and they’ve never caught up with the way modern marketing actually works.
Under Regulation Crowdfunding (Reg CF), almost any public communication that even hints at a live investment opportunity is treated as solicitation. The SEC’s framework requires that offering-related messaging be limited to “tombstone-style” notices - factual, stripped of persuasion, and always directing readers back to the funding portal where the full disclosures live.
Why? Because the system is designed to prevent selective solicitation - the idea that someone could cherry-pick who sees an offering, giving certain investors an informational advantage. Regulators want everyone to have the same disclosures, at the same time, in the same place. On paper, that protects fairness and transparency. In practice, it makes every modern marketer feel like they’re working under rules written for the fax-machine era.
The irony is that today’s digital tools could make crowdfunding more transparent, measurable, and accountable - if only the rules allowed sensible use of them. Instead, compliance officers and ad managers spend their lives parsing whether a headline, emoji, or URL parameter “conditions the market.” It’s exhausting, expensive, and, yes, it feels damn stupid.
The hopeful news: the Crowdfunding Professional Association (CfPA) and other policy advocates are pressing the SEC to modernize these rules - to recognize that responsible data-driven marketing can coexist with investor protection. Until that happens, issuers and portals are left threading every campaign through a regulatory needle that was forged in the 1930s and polished once more in 2015.
This response omits any discussion of "non-terms" communications. If the "terms" are not discussed then the communication can be as descriptive and persuasive as the issuer wishes (providing no misleading statements are made).
It also conflates the concepts of "offer", "conditioning the market" and "solicitation" and misunderstands what it is that triggers the need to analyze the contents of a communication.
And while the whole "terms versus non-terms communications" issue is indeed confusing to many, it's a policy choice made in the JOBS Act (and deliberately softened by the SEC).
I'd give this one a C.
Second Chance Response (A-level?)
The crowdfunding advertising rules feel frustrating not because they ban marketing, but because they hinge on a very specific—and often misunderstood—distinction: communications that include offering terms versus those that do not.
Under Regulation Crowdfunding, issuers are actually allowed to engage in broad, public, and persuasive communications, even during a live offering, so long as they do not include the terms of the offering (such as price, valuation, target amount, or deadline). These “non-terms” communications can be descriptive, emotional, and promotional, provided they are not misleading.
The restrictions everyone complains about apply only when an issuer chooses to mention offering terms. Once terms are included, the communication must be limited to a tombstone-style notice—factual, non-promotional, and directing investors to the funding portal where the full disclosures are available. That constraint is not about solicitation per se; it’s about keeping term-level investment information centralized and standardized.
This structure is not an SEC invention. It’s a policy choice made by Congress in the JOBS Act, reflecting a compromise between allowing widespread public marketing and preventing fragmented or selective disclosure of investment terms. In fact, the SEC deliberately softened the statute by creating a clear safe harbor for non-terms communications, something that does not exist in the same way in other exempt offering regimes.
Where the system breaks down in practice is not in its intent, but in application. Modern marketing rarely separates “story” from “terms” cleanly, and issuers often stumble into restricted territory unintentionally—sometimes by adding a single number, date, or link. That makes compliance feel arbitrary and overly technical, even though the underlying rule is conceptually simple.
So the rules aren’t stupid—but they are rigid, and they require founders and marketers to internalize a legal distinction that doesn’t map neatly onto how people naturally communicate online.
+++ +++ +++ +++ +++ +++ +++ +++
Appendix: Public-Facing Explainer for Founders
Why Crowdfunding Ads Feel Confusing (and How to Stay Compliant)
If you’re raising money under Regulation Crowdfunding, here’s the one rule to remember:
You can promote your company freely — until you mention the investment terms.
Two types of communications
1. Non-terms communications (mostly unrestricted)
You may publicly and enthusiastically talk about:
Your product or mission
Why the company exists
Traction, customers, or milestones
Why you’re excited about what you’re building
As long as you do not include investment terms, these messages can be persuasive and emotional (just don’t say anything misleading).
2. Terms communications (highly restricted)
Once you mention things like:
Price or valuation
Amount you’re raising
Minimum or maximum raise
Offering deadline or end date
…the message must become a simple, factual notice that points people to the funding portal. No hype, no persuasion, no storytelling.
Why this rule exists
The law is designed to ensure that:
Everyone sees the same investment terms
Those terms live in one place (the funding portal)
No one gets partial or selective disclosure
This was a deliberate choice by Congress — not an accident or a mistake by the SEC.
Practical takeaway
- Tell your story everywhere
- Save the numbers for the portal
- If you want to include numbers, keep it factual and link out
- When in doubt, ask: Am I selling the company, or am I describing the investment?
- Understanding that distinction makes Reg CF marketing far less painful.
+++