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I haven’t seen my Republican friends so happy in a long time. My Democratic friends are almost despondent—until we talk about the Trump Administration’s impact on impact Crowdfunding. Here alone, my friends in the impact crowdfunding and regulated investment crowdfunding communities find general alignment with friends on the other side of the aisle; they see reason for optimism.
The Administration’s deregulatory and lower tax agenda could enable crowdfunding to become a genuinely mainstream part of the Economy—or it could destroy it.
Here’s some of what’s at play. Today, I’m speaking for myself but drawing on what I’ve learned as the co-chair of the Crowdfunding Professional Association and vice-chair of its tax credit policy subcommittee.
If the Republican Congress and the President go too far—and this proposal has already been floated in the Senate—securities offerings up to $500,000 could be exempted from all securities regulation. This would limit them only to broad anti-fraud provisions of the law.
While that may seem tempting, that would mean that 90 percent of the offerings completed under Regulation Crowdfunding could be conducted without a portal, legal counsel or accounting help whatsoever.
The first result would be to wipe out most of the portals. Without a roster of small offerings, the portals without big bank accounts would likely close quickly. Those with capital would likely pivot to hosting larger offerings. With 90 percent of the volume gone, I expect only two or three survivors.
The secondary impact would be that investors would be confronted by a host of offerings with inconsistent disclosure and no bad-actor screening; investors would wisely stop Investing. Those who do invest in such a world are much more likely to end up investing in schemes with lots of hype and little promise. I would not invest in such a marketplace. I would not encourage anyone else to do so.
Small Businesses would be the next victims. Without support from portals, raising capital would be more unpredictable. This would shift whatever is left of the market to larger, more venture-like offerings that have long had access to professionally managed capital.
On the other hand, there are a host of ways that Congress, the President and Regulators can reduce the burden of regulation in ways that enable capital formation for the benefit of those most disadvantaged—small businesses with little or no access to traditional capital.
The Crowdfunding Professional Association (CfPA) is building a coalition, The Coalition for Crowdfunding American Jobs and Prosperity, in support of a tax credit of up to $1,000 per person—meaningless to billionaires but deeply impactful to ordinary investors saving for Retirement or children’s college. The vast majority of funding through regulated investment crowdfunding goes to businesses the Small Business Administration qualifies as small. Those are the businesses that actually hire people when they raise capital, most positively impacting the economy and their local communities.
Tomorrow, I’ll be talking to two coalition colleagues about this proposal, so I will move on to other topics today. Suffice it to say, this tax credit could by itself be a game changer.
Regulation Crowdfunding was issued under bipartisan legislation passed in 2012 called the JOBS Act. Signed by President Obama in the Rose Garden at the White House, it was a big deal.
The rules implemented then and eased during the first Trump Administration continue to be onerous. Proposals are circulating widely in Congress and at the SEC to address the burdens.
Financial audits and reviews are a big problem for small issuers, the businesses raising capital. The rules now require an audit if a firm is raising more than $1.25 million—even if it is a startup with no history or a newly formed Real Estate limited partnership. So, even if there is nothing to audit, one is required. Only a regulator could have thought that up.
A financial review by an audit firm is required if the raise is over $124,000. Today, there are a lot of little raises capped at exactly that amount to avoid the requirement, suggesting that this rule is an impediment to capital formation. To read the word “review,” one could easily conclude it would be an affordable alternative to a full-blown audit. And it is, sort of. A review is a formal procedure that is enshrined in regulations. It costs about half as much as an audit, depending on a variety of factors. It is not cheap or affordable.
When a small business—I’m talking about mom-and-pop type businesses here—applies for a bank loan, the loan officer will typically accept tax returns as the financial statements. It makes sense. They have to be prepared thoughtfully according to a published standard and can be readily compared and understood by underwriters.
Crowdfunding issuers, however, are required to prepare and present “certified” financial statements according to Generally Accepted Accounting Principles, the same accounting rules used by public companies. For small businesses run by people who don’t happen to have a financial background, that imposes an unnecessary burden.
So, the CfPA is advocating for and the mood on Capital Hill and in the new SEC is receptive to changes that reduce these and many other burdens.
It is certain that before the end of the year, there will be changes in the laws and regulations for securities across the board. The result could be a dramatic rise in offerings under both Regulation Crowdfunding and Regulation A+, also open to everyday investors. This would accelerate capital formation and give regular investors more options for investing in great businesses—including those that change the world for good.
Let’s celebrate that together! And let’s pray folks in Washington don’t get carried away and throw the proverbial baby out with the bathwater.
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If a location is not noted, the events below are virtual.
Superpowers for Good Live Pitch – Where Innovation Meets Impact! Join us on March 12, 2025, for the Q1-25 live pitch event, Streaming on e360tv, LinkedIn, Facebook, and Instagram. Watch impact-driven startups pitch their bold ideas, connect with investors, and drive positive change. Don’t miss this chance to witness innovation in action!
Impact Cherub Club Meeting hosted by The Super Crowd, Inc., a public benefit corporation, on March 18, 2024, at 1:00 PM Eastern. Each month, the Club meets to review new offerings for investment consideration and to conduct due diligence on previously screened deals. To join the Impact Cherub Club, become an Impact Member of the SuperCrowd.
SuperCrowdHour, March 19, 2025, at 1:00 PM Eastern. Devin Thorpe will be leading a session on “How to Build a VC-Style Impact Crowdfunding Portfolio.” sharing expert insights on diversifying investments, identifying high-potential impact ventures, and leveraging crowdfunding for both financial and social returns. Whether you’re an experienced investor or just getting started, this is a must-attend! Don’t miss it!
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U.S. House of Representatives Committee on Financial Services Hearing Entitled: The Future of American Capital, Rebecca Kacaba, of DealMaker, will testify. February 26, 10:00 AM Eastern.
Successful Funding with Karl Dakin, Tuesdays at 10:00 AM ET – Click on Events
Kingscrowd Meet Up in San Francisco, CA – February 27th at 5:30 PM PT
Igniting Community Capital to Build Outdoor Recreation Communities, Crowdfund Better, Thursdays, March 20 & 27, April 3 & 10, 2025, at 1:00 PM ET.
NC3 Changing the Paradigm: Mobilizing Community Investment Funds, March 7, 2025
Asheville Neighborhood Economics, April 1-2, 2-25.
Regulated Investment Crowdfunding Summit 2025, Crowdfunding Professional Association, Washington DC, October 21-22, 2025.
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