A legal action filed last week by state Attorney General Bob Ferguson was described in one newspaper account as “taking consumer protection to the next frontier: crowdfunding.”
If so, it’s a frontier already crossed by the Legislature, which in the 2014 session passed House Bill 2023, a measure sponsored by Rep. Cyrus Habib that tackles the issue of crowdfunding.
The focus of Habib’s bill, called the Washington Jobs Act of 2014, was to foster legitimate equity crowdfunding by Washington businesses from Washington investors and thus to help entrepreneurs get their ventures up and running, creating jobs in the process. Equity crowdfunding is the practice of raising money, often over the Internet, by soliciting small investments from numerous investors. But Habib’s measure also set out a blueprint for regulating the practice.
The attorney general’s consumer-protection complaint is directed at a Tennessee Internet operation that, Ferguson says, left backers in the lurch by failing to deliver them products it promised.
“That’s exactly why what we need is a regulated framework for investor crowdfunding,” Habib said. In his bill, he said, “We were very careful to put in place a host of protections for consumers.”
Under the terms of the bill, which was signed into law by Gov. Inslee, the state Department of Financial Institutions is drafting rules for crowdfunding in Washington.