We are in favor of a bill passing the Senate that legalizes crowdfunding. President Obama wants this, the House wants this, and the Senate wants this. On March 15th, Senate Democrats proposed the best version of crowdfunding yet, as an amendment to the JOBS Act. But, it might not pass the Senate. If it doesn’t, then the House version in the JOBS Act might pass as early as Tuesday the 20th. If we had to choose between no bill passing and the current JOBS Act passing, we would be in favor of the current JOBS Act as is. The JOBS Act is flawed though and deserves to be amended.
For up to date context, here is what is going on:
- As of now there are only two versions of crowdfunding under real consideration in the Senate. One version is in the House JOBS Act (Twitter #JOBSAct). The other version is in the Senate amendment to the JOBS Act.
- The version in the JOBS Act, Title 3 of H.R.3606, is exactly the same as what was in H.R.2930 from Rep. McHenry’s office from the fall of 2011.
- In crowdfunding circles (Twitter #crowdfunding) this version is referred to variously as the House version, 2930, H.R.2930, the first version, the McHenry bill, the version in the JOBS Act, or (erroneously) the JOBS Act.
- The amendment, S. Amdt. 1833, is almost a complete substitute of the provisions in the JOBS Act. As it relates to crowdfunding, the amendment contains the Merkley, Brown, Bennet, Landrieu bipartisan compromise crowdfunding bill, S.2190. This bill is a significant and improved revision of S.1970, the first “Merkley Bill”.
- The amendment is referred to in crowdfunding circles as the Senate version, the amendment, the amendment to the JOBS Act, the Merkley bill, The Compromise bill, the Senate bill, S.2190 (Twitter #S2190), SA1883.
- Senate Majority Leader Reid filed on Thursday the 15th for a cloture vote to be held on Tuesday the 20th on both versions. Thus cloture votes will be held on first the amendment and then the JOBS Act itself.
- These cloture votes require 60 votes, a “super-majority”, and are not votes on whether to pass the bills and amendments themselves, but rather votes to end debate.
- Thus, the cloture vote acts as a “test vote” of sorts to tell whether or not the bill has enough people in favor of it to get passed as is. They are important and would likely trigger up or down votes soon after either of them getting cloture.
We want there to be 60 votes for cloture on the amendment because it is better legislation, but it’s a stretch. Republicans oppose it for political reasons and because it looks like too much regulation, not less. If the amendment doesn’t pass a cloture vote, then the JOBS Act will be up for a cloture vote. It would look really bad for the Senate if they didn’t pass something on this topic, and soon. Therefore Democrats might break ranks and vote for cloture on the unamended JOBS Act. If so, this would likely be followed quickly by a vote on the bill itself which most likely pass and would send the JOBS Act straight to President Obama’s desk (the House already passed it). Obama would sign it.
Note that the topic here is financial industry reforms that apply to small and mid-size companies. The J.O.B.S. in the JOBS Act stands for Jumpstart Our Business Startups, startups that will create jobs. The lever Congress is pulling though is financial industry reforms. Thus, following on the heals of the obvious causes of the Great Recession, we don’t want to see this go wrong.
If the JOBS Act passes as is, it would be flawed and the SEC will have powers to fix it during their required rule making period. The crowdfunding industry is already planning to create our own Self Regulatory Organization (SRO), to self-police our fledgling industry. This body would form itself around the tenants of S.2190, most of which we agree with. Launcht, as always, would be on the forefront of this move to create our own SRO.
There will be a lot of positioning later today, Monday the 19th, and we will keep you up to date on our Twitter feed. We look forward to your comments.