No, but plenty of people (stupidly) gamble at a casino and hope for returns to fund their retirement, and no one is clamoring to outlaw gambling.
To expand on this analogy - gambling is legal because, as a society, we've decided that the upside of "entertainment value" outweighs the downside of "unsophisticated 'investors' (gamblers) may lose more money than they can afford to." If this is the case, it seems obvious to me that we should also accept crowdfunding, which has exactly the same downside, but infinitely more valuable upsides: normal investors get more opportunities for investment and businesses get access to more capital.
Securities regulations should protect investors from shady businesses doing illegal things, not from themselves.
Many, many, many people are clamoring to outlaw gambling in the very, very few places it is currently legal, myself included. Right now Draftkings and whatever that other one is are in the process of getting worked over by multiple state AGs for violating anti-gambling prohibitions.
Gambling is legal in only a tiny handful of places and in the few places where more casinos have recently been authorized, NY state (my state) included, it has been a hugely controversial decision. In NY State, the rationale was certainly not that gamblers benefitted, but that the added tourist attraction of creating casinos in depressed communities will boost the local economy. I think this was a patently bad decision and I'm certain that history will bear me out, that the local economies will not suddenly prosperous and quite to the contrary, all of the low grade crime associated with risk seekers, substance abusers and the profligate will now infect these communities as well.
The whole reason we have the SEC in the first place is to protect the credulous from the sharks.
I don't anticipate this type of crowdfunding taking off, quite honestly, and I don't know that this is a problem. We want the middle classes putting their assets in places safer than just betting them on papa's mustache in the third - which is what unsophisticated startup investing basically is. Except there is a much greater chance that a random horse picked with a dartboard is going to have a return than a random startup will.
I really don't think we need to concede the equivalence between restricting equity crowdfunding and outlawing gambling. Gambling is legal because, as marketed, it's an entertainment product. Equity crowdfunding is restricted because it's an investment product.
Similarly, GNC can sell all sorts of useless nutritional supplements, but the FDA is all up in the business of anyone trying to sell a new medication.
Reminder: you can take money from non-accredited investors; it's just so complicated that it's not practical to do so at scale and with strangers.
So, let's say I market the crowdfunding shares as an entertainment product. Then it could become a legal model?
Relatedly, I had the idea to sell small shares of (legit, regulated) far-out-of-the-money options as lottery tickets. As investment products, they're legal, but work like lottery tickets in that you have a tiny chance of winning big (e.g. if the underlying security has a sudden, sharp shift in price).
> Reminder: you can take money from non-accredited investors
My understanding is that it's only legal if investors approach you, or if you solicit individual investors on a one-by-one basis. It's illegal to simply announce that you're publicly accepting investment. I wholeheartedly agree that the marketing of these types of offerings need to be tightly regulated, but as it stands today, it's effectively impossible to participate (as an investor) without having a personal connection to the business.
That's correct, and what I mean about it being difficult to accept non-accredited money at scale. Which is the difference between being able to invest, and being able to market an investment.
To expand on this analogy - gambling is legal because, as a society, we've decided that the upside of "entertainment value" outweighs the downside of "unsophisticated 'investors' (gamblers) may lose more money than they can afford to." If this is the case, it seems obvious to me that we should also accept crowdfunding, which has exactly the same downside, but infinitely more valuable upsides: normal investors get more opportunities for investment and businesses get access to more capital.
Securities regulations should protect investors from shady businesses doing illegal things, not from themselves.