The Big Story: Proposed SEC plan raises crowdfunding cap to $5 million. The Securities and Exchange Commission voted to propose a set of amendments to “promote capital formation and expand investment opportunities” for small businesses, including a rule change that would allow startups and other small firms to raise as much as $5 million from crowdfunding.
Entrepreneurs, investors, and tech industry groups have all criticized the choice to cap crowdfunding at $1 million in the 2012 Jumpstart Our Business Startups Act, saying the decision limited the effectiveness of crowdfunding investments for seed stage startups. The SEC’s proposed amendments would not only raise this cap, but would also allow individual investors to give as much as 10 percent of their annual income or net worth to crowdfunding deals, and would allow startups to raise as much as $75 million from mini-public offerings.
Raising capital is one of the most difficult tasks for a fledgling startup, and providing access to more crowdfunded investments will give early-stage companies the financial support they need to grow and expand. The SEC’s current crowdfunding cap is an arbitrary limit that does not reflect the fundraising potential—or funding needs—of most early-stage startups. As we noted in our crowdfunding white paper, market data shows that “the current statutory cap of $1 million is too low and will exclude a large swath of potential issuers.” By allowing for greater investments in startups, the SEC’s proposed rules could give more startups and entrepreneurs the financial backing and support they need to launch the next generation of innovative companies, products, and services.
Policy Roundup:
Senators introduce bill challenging Section 230 protections. Sens. Lindsey Graham (R-S.C.) and Richard Blumenthal (D-Conn.) introduced legislation this week—the Eliminating Abusive and Rampant Neglect of Interactive Technologies (or EARN IT) Act—that calls for Internet platforms to take more active steps to remove online child exploitation or risk losing their liability protections. As Evan Engstrom—Engine’s executive director—said in a statement, “without guardrails on what the bill’s best practices can include, the EARN IT Act opens the door to much broader threats to the Internet ecosystem.” The Senate Judiciary Committee has already scheduled a hearing at 10 a.m. next Wednesday to discuss the bill.
DOJ, Five Eyes promote principles for combating child exploitation. Attorney General William Barr, along with representatives from the ‘Five Eyes’ intelligence alliance, introduced a set of 11 voluntary principles “to provide a framework to combat online child sexual exploitation and abuse.” The principles—which were developed in conjunction with tech firms such as Twitter, Google, and Facebook—include strategies currently being used by online platforms to identify, report, and remove child exploitation materials.
Congress targets tech platforms over online counterfeits. House lawmakers on the Energy & Commerce consumer protection subcommittee grilled representatives from several online retailers—including Amazon, eBay, and Apple—during a hearing this week on the sale of “fake and unsafe products,” claiming that e-commerce firms are using their liability protections to avoid cracking down on the sale of counterfeit and harmful goods. Tech representatives rebutted the claims by highlighting the variety of tools and financial resources they are using to police sellers and products on their sites. Earlier this week, House Judiciary Committee leaders introduced legislation that would target the sale of counterfeit online products by holding e-commerce platforms responsible for trademark infringement if they fail to prevent the sale of knock-off products by third-party sellers.
Blockchain, crypto advocates call for tax clarity. Lawmakers on the House Small Business Committee discussed blockchain’s potential during a hearing this week, even as some of the witnesses expressed concerns about the impact of the government’s current tax and regulatory regime on cryptocurrencies and related technologies. The hearing came after the Internal Revenue Service held a summit with cryptocurrency startups and advocates, during which industry leaders reportedly pressed the agency to provide greater clarity around its tax treatment of virtual currencies.
H-4 visa holders suing USCIS for slow-walking their applications. Over the last year, hundreds of H-4 visa holders—the spouses of highly-skilled immigrants who are in the U.S. on H-1B visas—have sued U.S. Citizenship and Immigration Services for slow-walking their work authorization approvals, but the lawsuits have garnered little notice because USCIS would approve the applications before the cases went before a judge. Despite the eventual approval, however, the majority of plaintiffs in the cases had already lost their legal status, jobs, and thousands of dollars in legal assistance.
Startup Roundup:
#StartupsEverywhere: DeKalb, Illinois. Located in the greater Chicago area, MoreWithUs – Everyday Jobs is an online platform working to empower job seekers to market themselves to employers. We recently spoke with Amadu Bah, the startup’s vice president of IT, to learn more about the platform’s work, concerns about liability protections related to user-generated content, and MoreWithUs’ goals moving forward.
