I wish the crowdfunding platforms well but, in the end, there is an inherent tension between the core idea of crowdfunding and the idea of investor protections

I wish the crowdfunding platforms well but, in the end, there is an inherent tension between the core idea of crowdfunding and the idea of investor protections under the securities laws. U.S. securities law give two broad choices to issuers trying to raise money: take your company public or do a private placement. With the former, you can deal freely with all sorts of investors, in any number and with whatever background. With the latter, you deal with sharp restrictions on the number of investors you can deal with (if unaccredited) and on the qualifications of investors for investment in such offerings (accredited, unaccredited, etc.). Conceptually, crowdfunding tries to straddle these two worlds when it offers true equity (as opposed to promotional giveaways only) in the ventures. It seeks to broaden the number and type of investors who can invest in a startup venture while simultaneously trying to protect prospective investors from dishonest or otherwise improper offerings. Problem is: the larger the number of investors and the more latitudinarian the standards for who qualifies, the more it looks like an unregulated public offering and the more it becomes susceptible to all the problems that brought public offerings under strict regulation in the first place. So today we have a hybrid that theoretically tries to open up startup investment to all sorts of small investors but that practically attempts to keep a whole variety of restrictions in place to ensure investor protection. This hybrid is what is failing to gain popular appeal. There are too many restrictions needed to ensure investor protection to make it a fluid vehicle for small investors to invest and to make it attractive for startups to use it as a means of doing their funding. Thus, the technology is there today to facilitate a robust crowdfunding marketplace but the law is not there for traditional reasons of investor protection. And so the current efforts sputter along akin to how an otherwise intriguing startup might seem to have almost unlimited potential but never quite seems to gain traction. It took five years to get the regs in place to support the statute that put this funding mechanism in place. That is slow because the issues (in my view) are intractable. Will another five years make a substantial difference. In my view, no. But who knows? My free market side says do away with the investor protections and let it rip. But the lawyer in me says, no way - such a free-for-all will likely cause many to be duped and few to prosper. It is not an easy choice and that is why I think this will ultimately remain sputtering along with highly uncertain prospects of effecting true change in the investment landscape.