Hi, I am in the process of establishing my own crowdfunding platform and a friend sent me this from wikipedia -

Another disadvantage to crowd funding is the possibility of getting ensnared in various securities laws, since soliciting investments from the general public is most often illegal unless the opportunity has been filed with an appropriate securities regulatory authority, such as the Securities and Exchange Commission in the U.S or the Financial Services Authority in the U.K. These regulators can have different ways of determining what is and what is not a security but a general rule one can rely on (at least in the U.S.) is the Howey Test. The Howey Test says that a transaction constitutes an investment contract (therefore a security) if there is (1) an exchange of money (2) with an expectation of profits arising (3) from a common enterprise (4) which depends solely on the efforts of a promoter or third party. Clearly, under this standard, any crowd sourcing arrangement in which people are asked to contribute money in exchange for potential profits based on the work of others would be considered a security. As such, the applicable investment contract would have to be registered with a regulatory agency (such as the S.E.C.) unless it qualified for one of several rule-laden exemptions (e.g., Regulation A or Rule 506 of Regulation D of the Securities Act of 1933, or the California Limited Offering Exemption - Rule 1001 (also known as S.E.C. Rule 1001)). The penalties for a securities violation can vary greatly and depend in large part on the amount of profit obtained by the "promoter," the damage done to the investors, and whether a violation is a first time offense. However, a violation may result in both civil and criminal penalties,