When you open this post on Monday the 16th of May, you are doing so on the first day of truly general crowdfunding ability under Federal Law.  Until now, crowdfunding either did not allow the issuance of securities, or was limited to securities transactions that were otherwise exempt under Federal law (for example, offerings under State laws for deals within that State).

As of Monday, pursuant to the SEC’s “Regulation Crowdfunding, ” companies can offer securities anywhere, without Federal registration, to the ordinary citizen.  Almost….

Like all SEC regulations, this is complex but generally you should know: there are limits on the kinds of companies which can use this mechanism; there are limits on how much a company can raise in this manner in any year ($1 Million);   there are limits to the amount anyone or any entity is allowed to invest in any one company or in any one year; all transactions must be done through a broker dealer or SEC-approved portal; there are certain mandatory informational filings to be made by an offering company, and at least one year of follow-up filings.

There is more; but it is true that as of Monday someone with zero experience or knowledge in investing can invest thousands of dollars, anywhere in the US, in a company which may be shaky, may have no track record, and may be, well, a lousy bet.  Although it is assumed in the capital markets that companies of real commercial promise will avoid raising this “dumb money,” and the sophisticated finance and angel communities view this as a non-event, for struggling entrepreneurs with few options we are going to see this “democratization” of investment opportunity utilized in ways we cannot imagine — and with results we likely are unable at this point to foresee.  Whether this new device energizes innovation and employment, as Congress intended, or just lends itself to unfortunate fraud, remains to be seen.