Demmer Bill Could Make Equity Crowdfunding A Reality In Illinois

Current technology allows small businesses to solicit investments and raise capital from friends and acquaintances over the Internet, but Illinois law does not currently allow this activity.  Cumbersome laws and regulations require the seller of equity in a firm to follow complex Wall Street-style safety requirements intended to prevent large-scale investment swindles.  These regulations are not closely matched to the needs of a small community that hopes to raise money for a neighborhood-oriented commercial enterprise such as a coffee shop, craft store, or small movie theater. 

Ironically, it is easier under current law in Illinois to get people to donate charity funds online through a social-media aggregator, such as Kickstarter, than it is to raise equity funds through crowdfunding.  This is true even though a typical investor in an equity crowdfunding network is often not looking to “strike it rich” or earn a substantial return on his or her “investment.”  Typical crowdfunded enterprises tend to be small-scale enterprises that thicken the social bonds of a community.  They tend to be startups and small businesses.

Representative Tom Demmer has introduced HB 3091 to legalize some crowdfunding in Illinois.  To be eligible to solicit an investment through HB 3091-style crowdfunding, a small enterprise will have to do substantially all of its business here in Illinois; firms that do transactions that cross state lines will continue to have to follow federal law.  HB 3091 was filed on Wednesday, February 25, and was referred to the House Rules Committee.