ABSTRACT
In May 2016, a U.S. federal registration exemption for crowdfunded securities offerings came into existence (under the earlier adopted CROWDFUND Act) as a means of helping startups and small businesses obtain funding. In theory, this exemptive regime was an attempt to fill gaps in U.S. securities law that handicapped entrepreneurs and their promoters from obtaining equity, debt, and other financing through the sale of financial investment instruments using digital offering platforms. The use of the internet for business finance is particularly important to U.S. entrepreneurs who may not have access to traditional, institutionalized sources of funding because of their own limited financial and economic positions.
As the fifth year of effectiveness of the CROWDFUND Act progresses, observations can be made about the role securities crowdfunding has played and may play in sustaining and improving prospects for those limited means entrepreneurs. A preliminary examination indicates that, under current legal rules, securities crowdfunding is a promising, yet less-than-optimal, financing vehicle for these entrepreneurs. Nevertheless, there are ways in which U.S. securities crowdfunding may be used or modified to play a more positive role in promoting economic inclusion through capital raising for the innovative ventures of financially disadvantaged entrepreneurs.
