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Crowdfunding Awaits Key Rules From SEC

Publication Date: 
February 08, 2013
Source: 
San Francisco Chronicle
Author: 
Kathleen Pender

Professor Joseph Grundfest spoke with the San Francisco Chronicle's Kathleen Pender on why he believes that while there may be "a tremendous future for using the Internet to facilitate investments" it doesn't necessarily mean "there is a tremendous opportunity for crowdfunding."

Congress created equity crowdfunding, but the Securities and Exchange Commission holds the infant industry's life in its hands.

The Jumpstart Our Business Startups Act, passed almost a year ago, will let privately held companies sell up to $1 million a year in unregistered stock to mom-and-pop investors using the Internet and social media. But they can't start until the SEC completes the regulations.

...

Joe Grundfest, a Stanford law professor, pointed out that Kickstarter has started requiring people raising money to disclose their project's risks and challenges. "This is not an SEC-regulated market. They are doing it because there is enough stuff on Kickstarter that fails," he says.

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Grundfest could see limited uses for crowdfunding, such as opening a Scotch bar in Palo Alto. "There is a tremendous future for using the Internet to facilitate investments," he said. "That does not mean there is a tremendous opportunity for crowdfunding."