To become a crowdfunding funding portal under the JOBS Act, an entity must register with the Securities and Exchange Commission (SEC) as a "funding portal" and comply with certain regulatory requirements. Here are some of the key requirements:

1: Registration: The entity must register with the SEC as a funding portal by filing Form Funding Portal and must become a member of a national securities association (currently FINRA - the only game in town). Form Funding Portal requires information from the funding portal applicant, including information about the funding portal's business, principals, control relationships, and employees. See: https://www.sec.gov/tm/divisionsmarketregtmcompliancefpregistrationguidehtm

2: Restrictions on Activities: Funding portals are limited in the types of activities they can engage in. For example, they are prohibited from offering investment advice, soliciting transactions, or handling investor funds or securities. They may provide limited communication channels for issuers to communicate with potential investors, but all communication must be conducted through the portal and must be accessible to all investors. IMHO, some restrictions may be tighter than they should be given the capabilities of harnessing the crowd with technology.

3: Investor Protection: Funding portals must take steps to protect investors, including verifying the identity of each investor and limiting the amount of money each investor can invest in a given offering. They must also provide investors with educational materials and warnings about the risks of investing in crowdfunding offerings. It's important to remind investors at every turn that investing is risky - and they can lose all of their investment. Unlike the world of crypto where FOMO is the key selling point, this is REGULATED INVESTMENT CROWDFUNDING so education, disclosures, and caution is warranted.  

4: Disclosure Requirements: Funding portals must provide certain disclosures to investors, including information about the issuer, the terms of the offering, and the risks involved in investing in the offering. They must also provide ongoing updates about the issuer and the offering. When in doubt, build disclosures throughout your platform's workflow.

5: Record keeping and Reporting: Funding portals must maintain records of all transactions conducted through the portal and provide certain reports to the SEC.

Compliance with these requirements is essential for a crowdfunding funding portal to operate legally under the JOBS Act. It is important to note that these requirements may be subject to change as the SEC continues to learn from the experience of industry stakeholders and develop its regulatory framework for crowdfunding offerings.

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Unless the portal is a licensed broker-dealer, it may not offer investment advice or recommendations or solicit purchases, sales, or offers to buy the securities offered or displayed on its platform.

It may however apply objective criteria to highlight offerings on its platform where: 

(i) The criteria are reasonably designed to highlight a broad selection of issuers offering securities through the funding portal’s platform, are applied consistently to all issuers and offerings and are clearly displayed on the funding portal’s platform; 

(ii) The criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the number or amount of investment commitments made, progress in meeting the issuer’s target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; provided that the funding portal may not highlight an issuer or offering based on the advisability of investing in the issuer or its offering; and 

(iii) The funding portal does not receive special or additional compensations for highlighting one or more issuers or offerings on its platform.

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506(b) offerings are not typically considered to be a form of crowdfunding. Crowdfunding generally refers to a method of raising funds from a large number of people, often through online platforms, in exchange for equity or other forms of compensation.

506(b) offerings, on the other hand, are private placements that are typically offered to a limited number of accredited investors. While crowdfunding can also be used to raise funds from accredited investors, it often involves a much larger number of investors who may not meet the SEC's accreditation requirements.

However, it's worth noting that some online platforms have emerged that allow companies to conduct 506(b) offerings through crowdfunding-like platforms. These platforms typically provide tools and services to help companies comply with the SEC's regulations regarding private placements and may allow companies to market their offerings to a broader range of accredited investors. These types of platforms are sometimes referred to as "accredited crowdfunding" or "equity crowdfunding for accredited investors."

Overall, while there are some similarities between 506(b) offerings and crowdfunding, they are typically considered to be distinct methods of raising capital, with different regulatory requirements and target audiences.

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The Commission should examine ways to expand their access to capital, but it should do so in a way that mitigates the risks posed by offering investors fewer or no protections.
The author of this statement has a critical attitude towards private market access. They argue that retail investors lack the bargaining power and resources to access the same investments as venture capitalists, and they caution against expanding market access without better protections for investors. They ultimately advocate for increased access to capital, but argue that it must be done in a way that reduces risk for investors. less

Regulated investment crowdfunding, also known as equity crowdfunding, is the process of raising money from a large number of investors, often through online platforms, in exchange for equity in a company. While it can be an attractive way for startups and small businesses to access capital, there are several reasons why it can be difficult to navigate the regulatory environment surrounding investment crowdfunding.

1. Regulatory compliance: Investment crowdfunding is regulated by securities laws, which can be complex and vary by jurisdiction. Platforms that facilitate investment crowdfunding must comply with these laws, which can be difficult to navigate without legal expertise.

2. Investor protection: Securities laws are designed to protect investors from fraudulent or misleading investments. As a result, investment crowdfunding platforms must take measures to ensure that investors are adequately informed about the risks associated with the investment, and that they meet certain criteria for investing, such as income or net worth thresholds.

3. Capital raising limitations: Investment crowdfunding is subject to limitations on the amount of capital that can be raised from individual investors, as well as the total amount that can be raised through crowdfunding in a given period. These limitations can make it difficult for companies to raise the capital they need through investment crowdfunding alone.

4. Competition with other fundraising methods: Investment crowdfunding is not the only way for companies to raise capital. Other methods, such as traditional bank loans, venture capital, or angel investing, may be more attractive to some companies depending on their stage of growth, industry, or funding needs.

Overall, regulated investment crowdfunding can be a complex and challenging process due to regulatory compliance, investor protection requirements, capital raising limitations, and competition with other fundraising methods. However, it can also provide an opportunity for companies to access capital from a large pool of investors and reach a wider audience than traditional fundraising methods.

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Based on the report by the North American Securities Administrators Association (NASAA), it seems likely that they would have a cautious stance toward Regulation Crowdfunding. The report emphasizes the importance of defending public capital markets and raising concerns about efforts that expand the incentives for staying private. This suggests that NASAA may view Regulation Crowdfunding as a potential threat to public markets and the traditional principles of securities regulation.

The report expresses concerns that legislative proposals, such as those in the JOBS Act 4.0, could erode public markets and adversely affect businesses and investors that rely on those markets to raise investment capital. NASAA also highlights opposition to proposals that would limit the role of state regulators in overseeing capital raising in the private market. This stance suggests that NASAA is likely to be cautious about expanding exemptions for private offerings and other regulatory changes that could make it easier for companies to raise capital without going through public markets.

However, NASAA does support certain proposals that could enhance investor protection and improve coordination among state and federal regulators. For example, they advocate for a comprehensive enforcement database that covers everyone convicted or held liable in criminal, civil, and regulatory actions involving financial services. They also call for stronger coordination between state and federal regulators and improved regulatory data collection, particularly on activity in the private markets.

Overall, while NASAA is likely to be cautious about Regulation Crowdfunding, they are also interested in finding ways to improve investor protection and strengthen regulatory oversight in both public and private markets.

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Regulation Crowdfunding (Reg CF) and Reg CF are the same thing, Reg CF refers to Title III of the JOBS Act, which is also known as Regulation Crowdfunding. It is a set of rules and regulations put in place by the Securities and Exchange Commission (SEC) that allows small businesses and startups to raise funds from a large number of investors through crowdfunding platforms.

Regulation Crowdfunding allows companies to raise up to $5 million in a 12-month period from both accredited and non-accredited investors, via crowdfunding platforms that are SEC-registered intermediaries. The process of Reg CF is different from traditional fundraising methods, such as IPOs, venture capital, and angel investing, as it allows companies to raise money from a large number of small investors through online platforms.

Reg CF is a relatively new regulation and it has provided small businesses and startups with a new way to raise funds, by allowing them to tap into a large pool of potential investors. This has also opened up investment opportunities for smaller investors who may not have been able to participate in traditional fundraising methods.

In summary, Reg CF and Regulation Crowdfunding are the same thing, it's the legal framework that allow companies to raise funds from a large number of investors through crowdfunding platforms, by complying with certain rules and regulations set by the SEC.

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Great question! While we feel like we are about to enter into a heightened regulatory environment (due to FTX and similar), blockchain, crypto, NFTs and CBDCs will definitely innovate the space. Possibly not quite in 2023, but soon.

Because securities have heavy regulatory oversight (and that oversight has country borders) our prediction is that the focus will be on CBDCs (Central Bank Digital Currencies) as they act as a country's 'digital currency'. As more and more Equity Crowdfunding deals look to have global investors, these could play a key role.

What are CBDCs?

Central Bank Digital Currencies (CBDCs) are digital tokens, similar to cryptocurrencies that are essentially the digital equivalent of the country’s currency. Over 100 countries are currently experimenting with CBDCs, and some have even implemented them.

Essentially, CBDCs can play a key role in draining unnecessary intermediaries from the existing financial system into the digital realm. Besides reducing economic friction by reducing counterparties needed in payments, trade, and banking, the technology can slash financial services costs for consumers and enterprises alike by facilitating trusted, direct connectivity between transacting parties. 

There is less risk when compared to NFTs or crypto, where almost anyone with a computer can build a 'coin' and add it to a wallet.

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It is difficult to predict exactly how regulated investment crowdfunding will evolve in 2023, as it depends on a variety of factors such as changes in the regulatory environment, technological developments, and market trends. However, here are a few potential developments that could shape the future of regulated investment crowdfunding:

1. Increased use of blockchain technology: Blockchain technology could potentially be used to streamline the crowdfunding process, making it faster and more secure.

2. Development of new regulatory frameworks: Governments around the world may develop new regulatory frameworks to address the unique challenges and opportunities presented by crowdfunding.

3. Growing popularity of alternative forms of financing: Crowdfunding may become more popular as an alternative to traditional forms of financing, such as bank loans or venture capital.

4. Increased competition: As crowdfunding becomes more popular, more platforms may enter the market, leading to increased competition among platforms.

5. Greater focus on investor protection: As the industry evolves, there may be a greater focus on protecting the interests of investors, including through the use of measures such as disclosure requirements and investor education.

Overall, it is likely that regulated investment crowdfunding will continue to grow and evolve in the coming years, with a focus on using technology to improve the efficiency and effectiveness of the process. 

*Written by OpenAI's ChatGPT* 

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