Below is an article by TheStreet.com entitled "The Deal: States Greet Crowdfunding With Hostility"
The Deal: States Greet Crowdfunding With Hostility
By The Deal, TheStreet.com
August 24, 2013
The problem with Ohio's enforcement action against SoMoLend is that it cites behavior that's been going on for years, she said.
"There's been rampant general solicitation going on for 10 years at pitch events," Helman said. "What's not smart is a state going after things that have been happening for a long time, especially when the rules are going to change in a month.
"To use taxpayer money to go after people who have been trying to follow the rules doesn't seem like a good use of time," she said. "What would be better would be to establish a working relationship with the portals to make sure they get crowdfunding right, like the SEC did with peer-to-peer lending players like Lending Club and Prosper Marketplace."
Ultimately, Helman said that state regulators are probably not in the best position to efficiently regulate crowdfunding.
"I'm 100% for watchdogs, but I'd rather see it at the federal level," she said. "I think it's bad for portals to have individual state oversight."
Having to meet each state's filing requirements can be expensive, Helman said. States' filing requirements can cost as little as $50 per investor and as much as $1,300 per investor.
A $1 million capital raise through a portal may cost $4,000 to $5,000 in filing fees, she said.
"The U.K. has a much wiser approach," Helman said. There, a single agency, the Financial Conduct Authority, oversees crowdfunding.
That assessment was shared by Judd Hollas, the founder and CEO of EquityNet LLC, a Fayetteville, Ark.-based portal.
So far, Hollas said EquityNet's interaction with the state of Arkansas has been fairly benign.
"We had an engagement with Arkansas regulators and we went through a review and no action was taken," he said.
Hollas described the Arkansas regulators as "very objective" and "not adversarial." He said the regulators asked a lot of questions and requested a lot of information.
"I didn't think it was problematic," Hollas said. "It was just part of doing business."
Other states have been a "mixed bag" for crowdfunding portals, he said.
"My hope is that it doesn't create an overwhelming amount of red tape for us," Hollas said. "I would not want to see a situation where I have to deal with federal and state regulators."
He characterized some state regulators' hostility to crowdfunding and the industry's concerns about state regulation as "growing pains" for the crowdfunding market. Given the dramatic shift in the ability of private companies to raise capital that crowdfunding represents, Hollas said "these kinds of growing pains are to be expected."