Update #2: U.S. Intrastate Equity Crowdfunding Exemptions: 17 State Bills Adopted and 21 Pending

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This article is an update of two earlier articles:

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Creating, adopting and implementing new laws tend to proceed at a glacial pace. Elected officials and regulators are cautious as even a minor change can have a significant impact on the economy, businesses, and people’s lives.

The federal government of the United States enacted the Jumpstart Our Business Startups Act (Job’s Act) on April 5, 2012. The U.S. Securities and Exchange Commission (“SEC”) issued for comment a new equity crowdfunding rule as required under Title III of the Job’s Act on October 23, 2013. The comment period closed February 3, 2014, and silence has ensued with no clear date when the SEC will issue a revised rule for comment or a final rule.

State legislatures and securities regulators have chosen not to wait for a federal equity crowdfunding rule to emerge. Instead, they have been busy creating, adopting, and implementing their own intrastate[1] equity crowdfunding exemptions.

On March 18, 2014, five (5) states had adopted an intrastate equity crowdfunding exemption and sixteen (16) states were looking at adopting an intrastate equity crowdfunding exemption.

A year later, March 18, 2015, seventeen (17) states have adopted an intrastate crowdfunding exemption; twenty-one (21) states are looking at adopting an intrastate crowdfunding exemption.

The Governor of one of those pending states just signed its crowdfunding bill and it will become law on June 24, 2015. A second is waiting only for the approval of their state Governor before their intrastate crowdfunding exemption becomes law.

State legislatures and regulators have embraced intrastate equity crowdfunding as evidenced by their participation levels and speed at which they have adopted new legislation.

Funding portals are starting to emerge[2] and a number of intrastate equity crowdfunding campaigns have closed. Intrastate equity crowdfunding, however, has not taken off to the extent as originally anticipated due to confusion and fear that the SEC may interpret any online campaign as a federal and not intrastate offering.

Intrastate Crowdfunding Exemptions Available Now

Alabama, District of Columbia, Georgia, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi, Oregon, Pennsylvania, Tennessee, Texas, Vermont, Washington, and Wisconsin have each adopted an intrastate crowdfunding specific prospectus exemption.

The Secretary of State of Mississippi filed an Administrative Notice on February 9, 2015 regarding its intent to adopt Proposed Rule 2.04 Invest Mississippi Crowdfunding Simplified Registration Statement by Administrative Action. Under the notice the proposed rule became effective 30 days from the date of filing or March 11, 2015.

The Idaho Department of Finance issued an order on January 20, 2012, which mirrors the intrastate crowdfunding rules adopted in other states. A blanket order has not been adopted in Idaho and an intrastate equity crowdfunding bill has not been proposed in Idaho at this time. Issuers wanting to crowdfund in Idaho would need to obtain their own order from the Idaho Department of Finance before conducting an equity crowdfunding campaign.

Michigan enacted legislation effective October 21, 2014, to create a stock exchange for securities sold or offered on a web portal pursuant to their intrastate crowdfunding exemption.

An updated PDF chart summarizing each state’s intrastate crowdfunding exemption will be added in the next week or two once I have a chance to cross-check all the information.

Intrastate Crowdfunding Exemption Bills Pending

Alaska, Arizona, California, Colorado,  Florida, Hawaii, Illinois, Iowa, Kentucky, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, Nevada, New Mexico, North Carolina, South Carolina, Virginia and West Virginia are all considering intrastate crowdfunding exemption bills.

The Governor of Kentucky signed the intrastate equity crowdfunding bill on March 19, 2015. The bill becomes effective 90 days after the close of the legislative session. This spring session officially closes March 25, 2015, which means the Kentucky crowdfunding exemption is effective June 24, 2015.

The Virginia intrastate equity crowdfunding bill has been delivered to the Governor of Virginia for execution into law.

Connecticut and Rhode Island, both not on the list above, have legislation pending in their respective state, that would require the state to conduct a study and make recommendations on the legislation necessary to implement crowdfunding in their particular state.

Texas, which has adopted a crowdfunding exemption, has proposed legislation to create a stock exchange for securities sold or offered on a web portal pursuant to their intrastate crowdfunding exemption. They are also considering two proposed bills providing for further regulation of crowdfunding portals.

The chart below provides the name and status of the intrastate crowdfunding related bills that are pending as of March 19, 2015. This list may not be complete. Several states have competing intrastate crowdfunding bills pending in the house and senate, or renumber and rename the same bill depending if it is in the state house or senate.

INTRASTATE EQUITY CROWDFUNDING IN UNITED STATES
Pending

State Bill Name Status Last Action Date Next Action Required
AK HB 303 An Act establishing an  exemption for the sale and offering of certain securities Read 1st time in house. Bill referred to labor and commerce committee. 02/12/14 Bill must now go through house committee process.
AZ HB 2591 Securities Registration; Exemption; Website Operators Passed senate. Passed 2nd reading house. Referred to house appropriation committee. 04/01/15 AZ Governor signed April 1, 2015.
CA AB 722 Equity Crowdfunding Bill Introduced and read in assembly. Referred to coms. on banking & finance, and judiciary. 03/12/15 Referred to coms. on banking & finance, and judiciary.
CO HB 15-1246 Crowdfund Interstate Securities Online Passed house. Introduced in senate. 17/03/15 Bill must now go through senate committee process. With senate finance committee.
CT HB 5131 An Act Requiring the Banking Commissioner to Conduct a Study Of Crowdfunding Legislation in Other States. Introduced and referred to joint committee on banking. Public hearing held. 02/13/15 Public hearing held. This is an extension of an original request made in 2014 in HB05577.
FL HB 275 Offer or Sale of SecuritiesSB 0914 Offer or Sale of Securities Introduced in house.Introduced in senate. 03/11/15 Bills must now go through house and senate committee process.
HI HB 1482. Crowdfunding; Hawaii Invests Local Act Passed house. Passed 1st reading in senate. 3/12/2015 Bill must now go through senate committee process.
IA HF 454 Insurance Division Bill -Includes Intrastate Crowdfunding Introduced to ways and means committee. 03/16/15 Bill must now go through house committee process.
IL HB 3429 Amends the Illinois Securities Law of 1953

HB3091 Amends the Illinois Securities Law of 1953

HB3087 Amends the Illinois Securities Law of 1953

HB 3429 passed 2nd reading in house.HB3091 passed 1st reading and tabled.HB3087 passed 1st reading and referred to house general law subcommittee. 03/19/15

03/12/15

3/19/15

HB3429, HB3091 and HB3087  must all go through house and senate process.
KY HB 76 Kentucky Interstate Crowdfunding Exemption (Word Doc) Governor signed bill 03/19//15 Bill becomes law 90 days after close of session.Session closes 03/25/15. Law effective 06/24/15.
MN SB 138 Crowdfunding BillHF 328 Crowdfunding Bill Introduced in senate. Introduced in house. Judiciary committee report received and bill to pass as amended. 03/18/1503/19/15 Bill must now go through senate committee process.Bill must now go through house committee process.
MO HB 1736 Crowdfunding BillHB1151 Intrastate Exemption Bill HB1736 passed 2nd reading in house.Public hearing completed.HB1151 2nd reading in house. 03/26/1403/09/15 Bill stalled.HB1151 referred to house banking committee.
MT HB 481 Revise Security Transaction Exemption Laws to Allow Certain Transactions Passed house. Passed 1st reading in senate. Various com reports prepared. 03/19/15 Bill must go through senate process.
NE LB 226 Crowdfunding Bill Banking, Commerce and Insurance amended bill. Bill referred as a priority bill. 03/12/15 Bill must go through senate and house committee process.
NC HB 14 Start-Ups Act/New Markets Tax Credit

HB 305 Jumpstart Business Startups/ New Market Credit

SB 35 Jumpstart Business Startups/ New Market Credit

HB63 NC Intrastate Private Capital Act

HB14 passed 1st reading in house.HB305 passed 1st reading in the house.SB35 passed 1st reading in the Senate.HB63 passed 1st reading in the house. 01/29/15

03/19/15

02/05/15

02/11/15

Each bill must now go through house and senate committee process.
NH HB 327 Investment Crowdfunding Introduced in house. Referred tp cp, committees 03/03/15 Bill must now go through house committee process.
NJ SB 712 2014 Crowdfunding Bill

A 2073 2014 Provides certain issuers of securities with exemption from registration

SB712 was introduced in senate and stalled. A2073 received in senate and referred to senate commerce committee 01/14/14

03/09/15

A2073 must go through senate process.A2073 referred to senate commerce committee.
NM Proposed Intrastate Equity Crowdfunding Exemption by NM Regulation and Licensing Department, Securities Division (09/24/14) Submitted to legislature. 09/24/14 This proposal has not been introduced as a bill in the house or senate.
NV SB 365 Equity Crowdfunding Read first time in senate and referred to committee on judiciary. 03/18/15 Referred to senate judiciary committee.
RI SR S0611 An Resolution Requesting Business Banking Regulation Conduct a Study on Equity Crowdfunding Introduced, referred to senate finance committee. 03/05/15 Referred to senate finance committee.
SC HB 3038 Small Business Tax Incentive Act(Buried in this bill is proposed changes to   the SC Securities Act to   include an intrastate crowdfunding exemption.) Member requested name added as sponsor. 02/05/15 Assigned to house committee of ways and means.
TX HB 3425 Intrastate Equity Crowdfunding Stock Exchange

HB 2580 Crowdfunding Portal Regulations

HB1629 Crowdfunding Portal Regulation

HB3425 passed 1st reading in the house.HB2580 passed 1st reading in the house.HB1629 passed 1st reading in the house. 03/17/15

03/16/15

03/16/15

HB3425, HB2580 and HB1629 all referred to investment and finance services committee.
VA HB 1360 Virginia Equity Crowdfunding Exemption

SB 673 is identical to HB 1360

Passed house and senate. Awaiting Governor action. 03/10/15 Bill with Governor for final approval/veto. Action deadline March 29, 2015.
WV HB2615 West Virginia Small Business Capital Act Passed house. Introduced to senate. 02/25/15

Intrastate Crowdfunding Bills Shelved and Revived

The intrastate crowdfunding bills introduced in Florida, Mississippi, New Mexico, North Carolina, South Carolina, Utah in 2014 were abandoned.

The only state in this group that has not introduced an alternative intrastate crowdfunding exemption is Utah.[3]

The New Mexico state securities regulator proposed a new intrastate crowdfunding rule to the state legislature in September 2014. South Carolina introduced a new intrastate crowdfunding bill in December 2014. Florida and North Carolina both introduced a new intrastate crowdfunding bills in January 2015.

The Secretary of State of Mississippi filed an administrative notice on February 9, 2015 that it was proposing and adopting 30 days from filing the notice Rule 2.04 Invest Mississippi Crowdfunding Simplified Registration Statement. Rule 2.04 became law in Mississippi on March 10, 2015.


Notes:

  1. For anyone new to equity crowdfunding and securities law, an intrastate exemption provides an exemption from federal registration requirements and state registration requirements of securities, provided the issuer is a resident of and doing business within the state in which all offers and sales are made, and no part of the offering is offered or sold to non-residents.  In other words, this is not a crowdfunding exemption Canadian issuers or anyone else outside of that specific state can rely on to raise capital.
  2. These are some of the interstate equity crowdfunding portals active at this time:
    • EquityEats is a D.C. based intrastate crowdfunding exemption portal focused on the food industry.
    • Hatch Oregon is an Oregon based intrastate crowdfunding portal.
    • LocalStake is an equity crowdfunding platform that allows issuers and investors resident in the states of Indiana, Michigan and Wisconsin to rely on the intrastate equity crowdfunding exemptions in those individual states.
    • Loquidity is a Michigan based intrastate crowfunding exemption portal focused on real estate.
    • MichiganFunders is a Michigan based intrastate crowdfunding exemption portal.
    • MassFunder is a Texas based intrastate crowdfunding exemption portal focused on real estate.
    • CrudeFunders is a Texas based intrastate crowdfunding exemption portal focused on companies in oil & gas industry.
    • Texas Crowdfunding is a Texas based intrastate crowdfunding exemption portal.
    • TrueCrowd is a Texas based intrastate crowdfunding exemption portal.
    • SterlingFunder is a Georgia based intrastate crowdfunding exemption portal.
  3. Only 11 U.S. states and territories have not introduced or formally looked at an intrastate equity crowdfunding exemption. These states and territories are Arkansas, Delaware, Louisiana, New York, North Dakota, Ohio, Oklahoma, Puerto Rico, South Dakota, Vermont, and Wyoming.

Arkansas has adopted a bill providing for notice and a fee if an issuer using the federal crowdfunding exemption (when it is available) to the state if 50% or more of the sales under the exemption are to Arkansas residents. Arkansas HB 1891 to Regulate Securities and Revise Registration Requirements and Exemptions under Securities Laws was introduced March 9, 2015, but the full provisions of the proposal have yet to be posted. It may contain an intrastate crowdfunding exemption.

Alixe Cormick is the founder of Venture Law Corporation in Vancouver, British Columbia and a member of Commercialization Advisory Board of the Life Science Institute at the University of British Columbia, the Advisory Board of the National Crowdfunding Association and two private tech companies. She is also a member of the Pacific Northwest Keiretsu Forum, an association of accredited private equity angel investors, venture capitalists and corporate/institutional investors, and Vantech Angel Technology Network, a Vancouver angel group. You can reach Alixe by phone at 604-659-9188, by email at acormick@venturelawcorp.com, on twitter at @AlixeCormick or on Google+ at +AlixeCormick.

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Disclaimer

The articles on this blog are not intended to create and do not create, an attorney-client relationship. You should not act or rely on information on this website without first seeking the advice of a lawyer. This material is intended for general information purposes only and does not constitute legal advice. You are advised to contact legal counsel prior to undertaking any securities transaction. Laws change and there are subtle nuances to the rules that may apply in your particular circumstance.