Senator Tim Scott's Latest Legislation Could Be A Big Boost For Crowdfunding

Sen. Tim Scott (R-SC) has introduced new legislation to update and widen existing crowdfunding regulations, aiming to increase the investor pool. Scott, a member of the Senate Banking Committee, is behind the Empowering Main Street in America Act of 2024, which was announced on September 25. 

Scott was one of the original architects of the Opportunity Zone program and has long advocated for expanding capital raising for entrepreneurs. The legislation is designed to increase access to capital, especially in minority communities. Scott hosted a roundtable last year with Black community members and entrepreneurs to gather feedback. In an op-ed published by Fox Business, he wrote that 40% of Black business owners say they will never have equal access to capital. This bill seeks to shift that. 

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The bill would extend the JOBS Act emerging growth company exemption status to companies with annual gross revenues of $2 billion or less. It would also extend the runway for emerging growth from five to 10 years. It would create a micro-offering exemption, allowing a company to raise up to $500,000 in capital over 12 months without filing a full registered offering. The amount a qualified venture capital fund could raise would be increased from $10 million to $50 million, expanding the permitted number of investors from 250 to 500. 

If approved, the bill would usher in a significant shift for crowdfunding. It would ask the SEC to amend offerings under Regulation Crowdfunding to allow any issuer offering $500,000 or less to avoid a special accounting review. It would expand the definition of accredited investor to include individuals who pass a test established by the SEC, a state securities commission or FINRA. It would also permit anyone to invest up to 10% of their income in private securities. The wealth threshold for accreditation would be lowered to $500,000 and individuals could self-certify as accredited.

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At a Punchbowl News event, Scott said, “I believe that if we’re going to be the greatest economy on the planet, it requires innovation to happen in America, so we have to innovate before we regulate to make sure that those new forms of opportunities populate America and Americans first and then we spread it to the rest of the world.” 

Scott has been an outspoken critic of SEC head Gary Gensler, which puts him in company with various people, including billionaire Mark Cuban. Scott told Fox Business that the government has “a lot of work to do to have a responsible regulatory environment and not an oppressive regulatory environment.”

Every bill or act has a long journey to becoming law and Crowdfund Insider reported that this one could face a block by Sen. Sherrod Brown (D-OH) inside the Senate Banking Committee before it even makes it to the full Senate. However, it may open the conversation about accreditation and how companies raise capital.

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