Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

An equity and debt based crowdfunding portal built on Blockchain technology is set to begin offering crowd-sourced financing opportunities to non-accredited investors under Minnesota’s MNvest crowdfunding legislation. Silicon Prairie Online is the second platform available for interstate crowdfunding under MNvest, following the approval of Venture Near’s crowd-funding portal by the Minnesota Department of Commerce in early November (as highlighted in this recent post).

Crowdfunding in Minnesota became legal as of June 2016 and provides a means for Minnesota-based companies to crowdfund up to $2 million in proceeds in exchange for equity and/or debt. Entities must also be organized under the laws of Minnesota, have principal offices in Minnesota, maintain at least 80% of assets in Minnesota, and ensure at least 80% of gross revenues are derived from business operations in Minnesota to meet the eligibility requirements under the MNvest regulation.

While the occurrence and frequency of actual crowdfunding offerings using approved MNvest platforms remains unknown (and we are not aware of any equity crowdfunding campaign launched to date), reports that Silicon Prairie Online will rely on Blockchain technology to facilitate payment and transfer of shares suggests a broadening embrace of the novel technology and may portend a broader move for future securities offerings in the crowdfunding space.

Blockchain, also known as distributed ledger technology and typically associated with the use of Bitcoin currency, relies on an algorithm to track the exchange of stocks, bonds and other financial securities without a centralized ledger. Blockchain technology is based on a distributed “open ledger” using consensus-based authentication methods that depart from the current methods of securities settlement process.  The technology works by storing information in blocks that record all transactions ever done through the network and allows for independent validation of both the existence of assets to be traded and ownership – eliminating the need to rely on an outside third-party institution to conduct this necessary step.