Will the Jobs Act Jumpstart the Video Game Industry? Crowdfunding and Rule 506 Regulation D Offerings

Abstract

Crowdfunding is a new trend in fundraising whereby start-up companies raise small amounts of money from large networks of people gathered online at the Web sites of intermediaries that facilitate such transactions. In the midst of America’s recovery from a colossal economic crisis, the Jumpstart Our Business Startups Act (JOBS Act) was enacted on April 5, 2012, with bipartisan support. The JOBS Act was designed with certain small business owners in mind and made twofundamental changes, among others, to federal securities laws regarding crowdfunding.Title III of the JOBS Act created section 4(6) (crowdfunding exemption) of the Securities Act of 1933 (Securities Act), which permits the offer for sale, or sale, of unregistered securities exclusively through a new type of intermediary called a “funding portal” (equity-based crowdfunding). Title II of the JOBS Act eliminated the restrictions on general solicitation and advertising in connection with offerings made to accredited investors pursuant to Rule 506(c) of Regulation D under the Securities Act (new Rule 506(c) exemption) and created section 4(b) of the Securities Act; this provides an exemption from registration as a broker-dealer for certain intermediaries that facilitate private offerings made under the new exemption. The crowdfunding exemption and new Rule 506(c) exemption are noteworthy and impact investors, intermediaries, and entrepreneurs involved in the capital markets. This Article narrows its focus and gives an overview of how Titles II and III of the JOBS Act impact the capital markets of the video game industry, specifically.