Crowdfunding Gambling
As the old advertising slogan nearly had it, the reaction of most financial professionals to the rise of crowdfunding has been to shout: 'I Can't Believe It's Not a Totally Unregulated Securities Market!' In the last few months, several senior industry voices have been calling for a minimum investment size of £1,000 to protect small investors from the risks involved. But the rise of equity crowdfunding gives us an opportunity to think about what kind of regulation is actually needed, and what place we should see different kinds of capital markets having in the industrial society of the future. In particular, what do we mean by 'investment', and how does it differ from 'gambling'?
What is crowdfunding? Crowdfunding is a new type of fundraising where you can raise funds for your own personal cause, even if you're not a registered charity. The page owner is responsible for the distribution of funds raised. In fact, 3 of the largest crowdfunding projects ever are in gaming. Gaming works really well for crowdfunding because crowdfunding is itself a type of game. In rewards-based crowdfunding, donors are given really engaging incentives to donate. The more you give, the better the reward. If crowdfunding is to be considered as a substitute for gambling on racehorses, rather than replacing building society bonds, then why would we want to set a minimum investment size? The financial regulatory system has historically been set up on almost puritanical grounds, aiming to discourage risk-taking and speculation. The online gambling market is growing year on year, as more platforms provide easier access to a vast number of games available from laptops and smartphones. According to Statista, the global online gambling market was worth 58.9 billion US dollars in 2019, and is predicted to reach 66.7 billion dollars in 2020 and 92.9 billion dollars in 2023.
These crowdfunding platforms make asking for that money much easier, and even let you give your donors and supporters a little something in return. Note: All rates and fees were current at the time of writing, but are subject to change. Check each crowdfunding platform for the most up-to-date information. Image by: Olga DeLawrence on Unsplash.
The concept of equity crowdfunding is pretty simple. Rather than going through the process of getting listed on a stock exchange, startup companies can sell shares directly to the public – either by marketing them directly to their existing customers, like Brewdog, or by advertising them on platform websites like Crowdcube or Seedrs. It is by no means entirely unregulated – many platforms are regulated by the FCA and carry out at least a degree of due diligence to weed out frauds. So far, in fact, there has only been one major fraud selling shares to the public via crowdfunding (Ascenergy, in America), and none so far in the UK. But what we have seen is a large number of business failures of crowdfunded companies, including several cases which failed so quickly they raised the question of whether there was really a viable business there at all.
Crowdfunding Gambling Advice
