The Residual Role of the Law: A Normative Approach to Crowdfunding Regulation

This chapter examines the residual role of the law in light of the promises and limitations of market-based mechanisms for addressing information asymmetries. It outlines four regulatory approaches adopted globally: no regulation, the extension of rules for traditional intermediaries, regulatory experimentation, and bespoke regimes. Given the diversity of these rules, the chapter explores whether different crowdfunding models warrant distinct regulatory treatment. Key risk-related factors include the type of financial contracts brokered (e.g., loans vs. securities), the nature of fundraisers (consumers vs. businesses), and the reintermediation services offered by platforms. While advocating an encompassing regulatory framework, the chapter proposes a risk-based approach to reflect the growing complexity of platform roles—particularly as the source of information asymmetry shifts from fundraisers to the platforms themselves.