State Crowdfunding: Comparing Oregon and Washington Law

Crowdfunding

State Crowdfunding

State crowdfunding is growing in importance. This is driven in part by the inability of the SEC to finalize the Title III crowdfunding regulations (which the JOBS Act required to be finalized long ago).

Both Washington and Oregon have passed state crowdfunding laws (and many other states have as well).

And you might be wondering how Oregon’s crowdfunding law compares to Washington’s crowdfunding law.

And you might be curious because Oregon’s law has already been used by a bunch of companies, and Washington’s has not yet been used at all.

Crowdfunding: Oregon Law vs. Washington Law

Here are the highlights of the Oregon law, and which probably explain why Oregon’s law is being actively used and Washington’s is not.

  • Oregon’s law does not require the use of an escrow agent. In Washington, you can’t proceed without first hiring an escrow agent.
  • Oregon’s law does not require the pre-approval of the state securities regulators before a company can proceed.
  • The Oregon Crowdfunding Form is substantially less complex than the Washington Crowdfunding Form.
  • Oregon’s law does not require the public disclosure of executive and director compensation. See Public Disclosure of Executive and Director Compensation.
  • Oregon’s law allows the use of debt. Despite the fact that the Washington crowdfunding statute says that it can be used to raise money through the sale of securities, and the Washington securities act defines debt as a security–final regulations from Washington prohibit the sale of debt (such as convertible debt) in a crowdfunding offering.

Here is theĀ Oregon Crowdfunding Law.

What Washington Can Do?

I think Washington should simplify its law. Let’s strike the escrow requirement. Let’s strike the pre-approval requirement. Let’s strike the public disclosure of executive compensation. If there is a concern about potential abuse–let’s reduce the overall amount that can be raised from $1M during any 12-month period to something less.

In any event, it is disappointing we have hit hitches in Washington and our law is not yet being used.

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  • This is the conversation I’ve been waiting for! Let’s tweak these laws if they don’t work for us. Not sure Oregon’s law is perfect, but we worked hard to make it make sense to people – plain English, and a way to connect to the technical service provider networks to strengthen the entire ecosystem. Anyone else have any thoughts?

  • Thanks Amy. I think the Oregon approach is a good one. I am frustrated that no one has yet to use the Washington law. I think we need to re-evaluate what the barriers are to its use. Maybe I will put together a list after talking to a bunch of folks.

    Please keep us apprised of developments in Oregon!

  • Katherine C

    Hi Joe, I have read a few of your articles on crowdfunding (they’re great- thank you!) and am very familiar with the law enacted in Maine- one which has been praised for eliminating some of the barriers to use that still exist within other states. Interestingly enough, despite the less complex nature of the law, businesses in Maine have yet to take advantage of crowdfunding as an alternative source of financing. I’m curious as to why you think that is, and if you see similarities with Washington?

  • Katherine, good question. I don’t know what is going on in Maine. I would love to hear from one of our Maine friends!