Success Factors in Reward based and Equity based Crowdfunding in Finland

 

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Master’s Thesis 
35 
6. Legal Regulation 
The legal regulation on crowdfunding is still evolving. Currently, there is no uniform 
policy for crowdfunding in Europe (
De Buysere et al., 2012) and the US has just re-
cently made changes that make crowdfunding a viable option for entrepreneurs and 
funders (
Sigar, 2012)
. 
6.1. Donation and Reward-based Crowdfunding 
In the US, solicitation of funds as gifts or donation is a highly unregulated practice. 
This means that donation crowdfunding is not largely legally restricted, since funds 
are transferred as gifts. Moreover, if an entrepreneur seeks capital through crowdfund-
ing without any expressed or implied possibility of return, securities laws are not ap-
plicable. However, as protection for the funders, in instances of abuse, online solicita-
tions can be subject to wire fraud statutes. 
(
Hazen, 2012)
In Finland, donation crowdfunding is more regulated and is only allowed for non-
profit or non-governmental organizations. Also, if entrepreneurs engage in pre-
ordering, the rewards for contributing must be sold under the Finnish consumer law. 
(Lasrado and Lugmayr, 2013) 
6.2. Investment-based Crowdfunding 
Investment-based crowdfunding is much more severely constricted in comparison 
with other forms of crowdfunding (Belleflamme et al., 2014). Because investment-
based crowdfunding involves the sale of a security, it is subject to numerous regulato-
ry issues. It has been highly restricted in many countries until recently, as new poli-
cies have been introduced. The legislative environment of the country of practice still 
significantly influences investment crowdfunding. (Ahlers et al., 2015) 
According to 
De Buysere et al. (2012), efficient and transparent investment-based 
crowdfunding markets cannot form in Europe due to investor protection regimes that 
are designed for official investment settings. Having no Europe-wide policy on 
crowdfunding also makes the regulation more ambiguous. All countries have their 
own legislation concerning crowdfunding. For example, Italy passed a law in 2012 
allowing businesses to raise equity capital through dedicated crowdfunding platforms 

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