While the Securities and Exchange Commission delays, states are rushing to adopt their own crowdfunding rules, and it may just be the thing that rescues crowdfunding from a regulatory death grip, according to a commentary in yesterday’s New York Times DealBook blog. In 2012, President Obama signed the Jumpstart Our Business Start-ups Act (JOBS Act), which was purported to open up the capital markets and create jobs by loosening regulations on initial public offerings and allowing for crowdfunding. Yet there was little evidence to support that watering down of any of these regulations would create jobs. Crowdfunding was the most controversial part of the bill. The SEC, led by Mary Schapiro at the time, submitted a letter in opposition as it feared that crowdfunding would instead serve as an easy vehicle to defraud people. More important perhaps was the idea that these investments would create zombie companies — companies that weren’t frauds but that investors simply couldn’t get profit from. Congress gave the SEC a deadline of December 2012 to enact the new rules. But the SEC has flouted that deadline, according to the commentary, and has yet to give a green light to crowdfunding. Its only action thus far was to issue proposed rules about a year ago.
