#Blog – Why Crowdfunding Court Ruling is Bad for Everyone

frankenstein-angry-mob_10

News comes via Polygon that a court has ruled that late or failed Kickstarters are liable to their backers.

“Washington state will not tolerate crowdfunding theft,” said Washington’s attorney general Bob Ferguson in a press release issued July 27. “If you accept money from consumers, and don’t follow through on your obligations, my office will hold you accountable.”

I’ve been trying, hopelessly, for some time to get this point across to people, but crowdfunders are not customers. They’re investors. When you back a project via a crowdfunding site you are not making a preorder, you are risking money to back a maker of a project to try (operative word try…) to create something. There are no guarantees that you’ll get anything at all, let alone everything that’s promised.

On the flip side, too many companies – especially established companies – HAVE been using crowdfunding as a preordering system. This abuses the system and sucks money away from small companies and innovators who should (in my opinion) be the major beneficiaries of the crowdfunding revolution.

Are there rip-off artists? Yes.

Should they be punished?

Yes.

Are there clueless people who don’t know what they’re getting into? Yes.

Are there people whose projects fail or get delayed through no fault of their own? Yes.

Should they be punished?

No.

This ruling is going to likely lead to more rulings in a similar vein and this is going to severely curtail risky and creative ventures, it’s going to severely truncate the scope, scale and ambition of projects. It’s going to disproportionately impact on the small businesses and innovators while impacting less on the larger companies who have more slack and more existing capacity to reliably deliver.

This concerns me, and not only because my own project is currently delayed. It’s going to end up hurting people whose projects have failed through no fault of their own and who have thrown their entire lives into their projects and will have nothing left to compensate angry and litigious blowhards. It’s also going to mean less interesting, innovative and meaningful projects for people to fund as more will play it safe or scale back what they’re attempting. This will mean more bland, less interesting projects.

Fingers crossed this precedent is overturned or at least not followed in other territories, but things are looking grim for what was a revolutionary and essential tool for small publishers and technical innovators to disrupt the existing system.

One response to “#Blog – Why Crowdfunding Court Ruling is Bad for Everyone

  1. Kickstarter isn’t really investing. If someone invested in a product, they should get equity, their return should be based on the success of the product.

    Even with the risks, Kickstarters are closer to customers than investors. They pay money and probably get a product.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s