Great question! This relates to CfPA's policy platform. Here is our view on the topic.

Consistency of Terminology

The term “equity crowdfunding” is used frequently by industry participants. This term is misleading because it implies that what investors are getting is an equity investment which is often not the case. We support the requirement to use the term “Regulated Investment Crowdfunding” consistently to prevent confusion and request the SEC formalize this requirement, thereby reinforcing the integrity of the investment landscape.

Background

“Crowdfunding” is a broad-spectrum term that encompasses many unrelated activities. For example, people use the term to reference donation platforms (e.g. GoFundMe) and activities designed to raise money for charitable organizations or individuals that may be facing unexpected hospital expenses. Rewards crowdfunding platforms (e.g. Kickstarter) may allow a person to fund a project or pre-purchase a non-existent product -- even when no securities are sold. This results in massive consumer confusion - and potential headline risk – as consumers conflate other “crowdfunding” activities with those enabled by Regulation Crowdfunding. In addition to consumer confusion, industry participants are facing increased reputational risk due to scams and abuse occurring on donations or rewards platforms. The problem has gotten so bad that the United Nations Security Council Counter Terrorism Committee (CTC) has written articles and held workshops all over the globe with titles such as “Understanding the Abuse of Crowdfunding for Terrorism Financing Purposes.” To counter such problems, some industry participants have attempted to standardize around the term “equity crowdfunding” but this term has serious limitations because many of the instruments used are not equity.  

Requested Change

Investors, consumers, and issuers would all benefit from a unique term that clearly delineates the lines between the different kinds of crowdfunding. We believe that use of the term “Regulated Investment Crowdfunding” is sufficiently distinct and descriptive for industry activities that occur under the JOBS Act and would like the SEC to require industry participants (portals, SRO, the vendor community) to standardize around this language in all their public facing marketing material, PR, and legal disclosures. By doing so, it would help reduce consumer confusion and the downward slide the industry is currently facing because of “guilt by association” with non-regulated crowdfunding scammers and terrorists.  

@Brian Belley @Angela Barbash