CfPA Presents Case for Nuanced Reg CF Reform at SEC Small Business Forum

On April 10, 2025, the Crowdfunding Professional Association (CfPA) had a significant opportunity to advocate for crucial regulatory improvements at the SEC’s 44th Annual Small Business Forum in Washington, D.C. Representing the CfPA on the “Out of the Blocks: Strategies and Trends in Early-Stage Capital Raising” panel, I presented key insights and policy recommendations aimed at enhancing Regulation Crowdfunding (Reg CF) for the entire ecosystem – issuers, investors, intermediaries, and service providers alike.

The State of Reg CF and the Need for Evolution

Since its 2016 launch, Regulation Crowdfunding has undeniably opened doors, enabling over 8,700 campaigns to raise more than $2.2 billion from millions of investors. It's a testament to the power of democratizing capital formation. However, as the industry matures, it's clear the current framework requires refinement to unlock its full potential.

As the leading association representing professionals in this space, the CfPA has been actively monitoring the market and developing data-driven policy recommendations. Our goal is to ensure Reg CF remains a vibrant, effective, and accessible tool for capital raising across a diverse range of businesses.

The Core Challenge: A "One-Size-Fits-All" Framework

A central theme presented at the forum is that Reg CF's current "one-size-fits-all" structure struggles to adequately serve two distinct types of issuers:

1. Main Street Small Businesses: Often seeking modest capital ($50K-$350K) for local growth or sustainability. Think community cafes, local service providers, or small manufacturers.

2. High-Growth Startups: Typically aiming for larger raises (often $1M+) to scale rapidly, potentially attracting venture capital down the line.

Treating these vastly different needs under a single regulatory umbrella creates friction. Traditional venture capital sometimes dismisses Reg CF offerings, while Main Street advocates find the compliance costs – legal, accounting, platform fees – disproportionately high for smaller raises, making the exemption impractical despite its initial promise. The median Reg CF raise in 2024 being just $114,000 (Source: Kingscrowd) highlights how fixed costs can significantly erode the capital intended for growth.

CfPA's Proposed Solutions: Tailoring for Success

The CfPA believes a more nuanced approach is necessary. We advocate for targeted adjustments that acknowledge this dual nature, making Reg CF more effective for everyone. Key recommendations presented at the SEC, derived from the CfPA's comprehensive Detailed Policy Recommendations document, include:

1. Exemptive Relief for Small Offerings (A "Micro-Tier"): We propose creating a new regulatory tier for smaller raises (e.g., up to $350,000). This tier would feature significantly simplified disclosure (like allowing non-GAAP financials for cash-basis businesses), reduced ongoing reporting, and lower overall compliance burdens, ensuring more capital goes directly to the business. (See CfPA Policy Position #1 & #2)

2. Increase the Reg CF Annual Limit to $20 Million: For high-growth companies, the current $5M cap is restrictive. Raising the limit (potentially to $20M, and the Reg A+ Tier 2 limit to $150M),  would attract higher-quality, later-stage companies, offering retail investors better opportunities to participate alongside institutional capital, and providing issuers with more meaningful growth funding. (See CfPA Policy Position #16)

3. Simplify Complex Rules: Current regulations around individual investor limits and advertising ("terms" vs. "non-terms") are overly complex, causing confusion and potential inadvertent non-compliance. We support streamlining these rules, perhaps aligning investor limits with the simpler Reg A+ standard and modernizing advertising restrictions to reflect practical communication realities. (See CfPA Policy Position #4)

Why These Reforms Matter to the Industry

Implementing these (and other CfPA-recommended) changes would strengthen the entire regulated investment crowdfunding ecosystem by:

• Improving Capital Formation: Making Reg CF truly viable for a wider range of businesses.

• Enhancing Market Efficiency: Reducing unnecessary friction and compliance costs.

• Expanding Investor Opportunity: Attracting more diverse and higher-quality deals.

• Boosting Confidence: Clearer, more practical rules increase confidence for issuers, investors, and intermediaries.

• Fostering Growth: A healthier ecosystem supports job creation and economic development.

The Path Forward: Embracing Nuance

The CfPA advocates for evolving Reg CF from a single compromise framework into a dual-track approach:

• For Main Street: Streamlined, cost-effective regulations focused on essential disclosures for smaller raises.

• For High-Growth: Robust disclosure standards coupled with higher funding limits to support significant scaling.

Presenting at the SEC Small Business Forum underscores the CfPA's commitment to data-driven advocacy and constructive dialogue with regulators. We believe that by working collaboratively, we can refine Regulation Crowdfunding into an even more powerful engine for entrepreneurship and investment.

The CfPA encourages all industry stakeholders to review our full policy recommendations and engage in this vital conversation. We are dedicated to shaping a regulatory landscape that fosters innovation, protects investors, and allows regulated investment crowdfunding to reach its full potential.