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Can I use crowdfunding to raise money without violating securities laws in Wisconsin? What are the requirements?

Yes, you can use crowdfunding to raise money without violating securities laws in Wisconsin if you meet the requirements of the crowdfunding exemption under WIST 551.202(24m) and WIST 551.205.

Securities Registration Requirement

Under WIST 551.301, it is unlawful to offer or sell a security in Wisconsin unless the security is a federal covered security, exempted from registration under this chapter, or registered under this chapter.

Exempt Transactions

WIST 551.202 provides a list of exempt transactions from the requirements of ss. 551.301 to 551.306 and 551.504. Crowdfunding is not explicitly mentioned as an exempt transaction. However, an isolated nonissuer transaction, whether effected by or through a broker-dealer or not, is exempt from registration under this chapter [2.2].

Crowdfunding Exemption for Intrastate Offerings through Internet Sites

WIST 551.205 provides additional provisions related to crowdfunding exemption for intrastate offerings through Internet sites. All of the following requirements apply to an offer or sale of securities pursuant to the exemption under WIST 551.202(26):

  • Prior to any offer or sale of securities, the issuer shall provide to the Internet site operator evidence that the issuer has a principal place of business in Wisconsin and is doing business in Wisconsin.
  • The Internet site operator shall register with the division by filing a statement that includes all of the following:
  • That the Internet site operator is a business entity organized under Wisconsin law and authorized to do business in Wisconsin.
  • That the Internet site is being utilized to offer and sell securities pursuant to the exemption under WIST 551.202(26).
  • The identity and location of, and contact information for, the Internet site operator.
  • That the Internet site operator is registered as a broker-dealer under WIST 551.401, unless certain conditions are met.
  • The issuer and the Internet site operator shall maintain records of all offers and sales of securities effected through the Internet site and shall provide ready access to the records to the division, upon request.
  • An issuer of a security, the offer and sale of which is exempt under WIST 551.202(26), shall provide, free of charge, a quarterly report to the issuer’s investors until no securities issued under WIST 551.202(26) are outstanding.

Conclusion

To use crowdfunding to raise money without violating securities laws in Wisconsin, you must meet the requirements of the crowdfunding exemption under WIST 551.202(24m) and WIST 551.205. The issuer must be a business entity organized under Wisconsin law, have its principal office in Wisconsin, and have a majority of its full-time employees working in Wisconsin. The offering must be directed to no more than 100 Wisconsin residents, excluding certain exempt persons, and no commission or other remuneration may be paid to any person for participating in the offer or sale of securities unless the person is registered as a broker-dealer or agent under this chapter. No general solicitation or general advertising is allowed unless permitted by the administrator. Additionally, the issuer and the Internet site operator must meet the requirements of WIST 551.205.

Source(s):
Jurisdiction

Wisconsin