This question has been the subject of a lot of debate over the years since the JOBS Act was enacted. Some lawyers (and many platforms) take the view that their diligence obligations are limited to those set out in Rule 301 of Reg CF (make sure the issuing company tells you it has complied with its obligations, make sure there's a record-keeping mechanism, and make sure the company isn't disqualified by reason of the bad actor prohibitions). Others point to the provisions of Section 4A(c) of the Securities Act, which says "issuers" are responsible for any misstatements unless by exercise of reasonable due diligence they couldn't have known there was a misstatement, and provides that "issuer" includes anyone "selling" the securities. People in the limited-liability camp argue the portals aren't "selling" and thus aren't "issuers". The SEC says, under certain circumstances, portals may be liable for misstatements by issuers.

This debate may have become largely moot since the 2019 Supreme Court decision in Lorenzo, which provides a separate cause of action under Rule 10b-5 for anyone who "disseminates" a misleading statement. I cannot work out why this decision does not worry portals more.

The other liability provision that should concern portals is Section 9(a)(4) of the Exchange Act, a relatively new addition to that Act, which provides that liability for misleading statements extends to anyone who "willfully participates" in an offering.

In all these cases, liability can be addressed by undertaking due diligence to ensure that the statements made by a company are not misleading.

The costs depend on various factors.  Do you need a lawyer to draft the documents for whatever security you plan to offer?  Do you need help completing the Form C and making sure you do it correctly?  Do you need an accountant to prepare your financials in accordance with GAAP?  Do you need help with marketing and communications?  These services could cost $20-25k or more.  Then of course there is whatever fee the platform charges.

Real estate is in my blood.  I'm an architect and urban designer by training, and cut my teeth as a real estate developer in Pittsburgh, on important and challenging projects in neighborhoods that were just a little neglected. These were difficult projects to finance, and yet the community always rooted for them.  My hope was that Small Change would become a place to raise capital for community-centric projects - a community bank of sorts. Real estate is a powerful tool and we believe that every developer has the choice to make (or break) a community with their investment.  We choose to support the real estate deals that will build better cities.

Crowdfunding is now allowing athletes to monetize their brand in a way previously unheard of. They can now create campaigns where their fans can invest in their future - and actually trade their holdings on a secondary market, just like you would a regular stock. We've created a landing page for athletes who would like more information on how this can work for them here:

https://prosportsbroker.com

... and here's a link to a podcast episode I did that describes the opportunity further:

https://mapableusa.com/new-sports-platform-allows-fans-to-invest-in-their-favorite-athletes-and-sports-stars/

The bottom line is this: With approximately 46 million fantasy sports fans out there, crowdfunding is truly a game changer that can provide both athletes and investors with a new path to generational wealth! Thanks!

- Ron

Ron Costa
ron@regamoney.com
702-336-5554
www.RegAMoney.com