US regulator votes to lift regulated crowdfunding limit to $5 million

The U.S. Securities and Exchange Commission (SEC) has approved new measures raising the limits on regulated crowdfunding offerings, in a bid to support entrepreneurs and startups in raising money through crowdfunding campaigns.

Following a vote on the rules on Monday, the SEC agreed to lift the limits to $5 million, from $1.07 million. The new higher limit is expected to allow businesses to raise more money with a lower compliance burden through issuing securities.

It comes as the SEC pledged to take steps to simplify the complex regulations on businesses raising capital from securities offerings.

Chairman Jay Clayton said the new higher crowdfunding limit would allow businesses to raise capital within a “more rational framework.”

“For many small and medium-sized businesses, our exempt offering framework is the only viable channel for raising capital. These businesses and their prospective investors must navigate a system of multiple exemptions and safe harbors, each with different requirements,” Clayton said.

“While each component in this patchwork system makes some sense in isolation, collectively, there is substantial room for improvement. The staff has identified various costly and unnecessary frictions and uncertainties and crafted amendments that address those inefficiencies in the context of a more rational framework that will facilitate capital formation for small and medium-sized businesses and benefit investors for years to come.”

The SEC decision means startups, including those in the Bitcoin ecosystem, will now be more effectively able to raise money from the public through crowdfunding, as opposed to relying on venture capitals. The SEC said the previous rules have proved too confusing and burdensome for startups looking to raise capital in this way.

The amendments are expected to streamline the process of raising money from crowdfunding offerings, which the regulator hopes will encourage entrepreneurship while helping smaller businesses raise capital. 

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