Crowdfunding

Chapter 15

Introduction to crowdfunding regulation and policy

Abstract

This chapter provides an introduction to regulation in the crowdfunding setting. It explains what crowdfunding platforms do (such as due diligence, which include background checks, site visits, credit checks, cross-checks, account monitoring, and third-party proof), and how platforms and their investors can mitigate adverse selection and agency costs. Also, it provides some evidence on crowdfunding fraud and the frequency of fraud. We explain that fraud cases are less common than what we might have otherwise expected relative to the frequency of fraud among publicly traded companies. Further, we explain that fraud is more common among campaigns with entrepreneurs who do not ...