More States Offering Alternatives for Crowdfunding

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Over a dozen states offer crowdfunding and general solicitation opportunities based on an SEC exemption limiting sales to residents of specific states. California, Kentucky, Georgia and Kansas are among those that have opted for a state-based alternative, and Tennessee joined the club as of Jan. 1. Two weeks later, Massachusetts released emergency state crowdfunding regulations. Massachusetts Secretary of State and securities regulator William Galvin was behind the move – he has been a harsh critic of federal crowdfunding laws that pre-empt state regulation.

Many of these regions are “fly-over” states far from capital meccas like Silicon Valley and New York – a fact that has driven the growth of state alternatives. Capital is scarce in many locales distant from areas where venture capital investors proliferate.

Depending on how the regulations are structured, some investments may not have to be offered through a funding portal. Investors often need not be accredited, while minimum investments may be as low as $100. Here the dollar limits are at the maximum end of the range, in order to protect unsophisticated investors from taking too much risk. Still, investors often have the opportunity to invest more than they will when if and when Title III crowdfunding becomes legal – as much as $10,000 for unaccredited investors in Tennessee. In some states, income thresholds well below accredited levels entitle individuals to invest up to $100,000.

 
Editor's Note: Changing Accredited Investor Definitions is an excerpt from Dealflow.com's whitepaper, ONLINE DEAL MARKETING OUTLOOK FOR Q1 2015 Investors and Issuers Chafe as Regulators Dally; States Offer New Alternatives; General Solicitation under Surveillance. For more information, visit Dealflow.com.

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