Regulating Crowd Equity Funding – the Why and the How

Crowd equity funding is a form of sharing economy that allows companies to obtain seed or other capital through small equity investments from a large range of investors via an online portal. Investors receive shares in the company in return for their investment. This form of finance has been viewed as a way to remedy the shortfall of capital for small and medium enterprises. However, in certain jurisdictions the regulation of this form of sharing economy is akin to that used for the traditional economy. This has created hurdles to the growth of this alternate form of finance. Accordingly, this article provides a snapshot of the regulation that applies to crowd equity funding in different jurisdictions to highlight the flaws of such regulatory approaches. The article concludes by advocating that an ‘outside‐the‐box’ solution may be needed to regulate this emerging industry.