A $20 Million Cap Won't Fix the Crowdfunding Crisis. Better Information Might.

· Policy

The US Regulation Crowdfunding market is under pressure. Raising the funding ceiling may help some companies, but the deeper challenge is investor confidence, transparency and the infrastructure needed to make informed investment decisions.

*The US Regulation Crowdfunding market is under pressure. Raising the funding ceiling may help some companies, but the deeper challenge is investor confidence, transparency and the infrastructure needed to make informed investment decisions.*

A market in trouble - but what is actually broken?

On November 4, 2026, Devin Thorpe published an article titled [*The Regulation Crowdfunding Marketplace Is in Crisis - We Need All Hands on Deck!*](https://www.superpowers4good.com/p/the-regulation-crowdfunding-marketplace).

Thorpe argues that the US Regulation Crowdfunding (Reg CF) market faces a serious decline and calls for urgent regulatory reform.

His proposals include raising the annual fundraising limit from $5 million to $20 million, simplifying financial reporting for smaller offerings, and fundamentally changing how companies disclose their annual financial information after raising capital.

There are good reasons to take his concerns seriously.

But there is also a risk that the crowdfunding industry is once again confusing the removal of regulatory barriers with the creation of a functioning investment market.

**A higher fundraising ceiling does not create investor demand. Lower disclosure requirements do not automatically create investor confidence. And easier access to capital does not necessarily lead to better investment outcomes.**

These distinctions matter - particularly when the market is under pressure.

The numbers tell a more complicated story

The US crowdfunding market has undoubtedly weakened during 2026.

According to KingsCrowd, Reg CF raised approximately $194.8 million during the first nine months of 2026, down 33.4% from the corresponding period in 2025.

Third-quarter funding declined 44.6% year over year.

Those figures are concerning.

But the broader trend deserves some nuance.

Reg CF actually grew by approximately 11% in 2025, reaching $378.3 million in capital raised, even as the number of newly launched offerings declined by 29%.

The market is therefore experiencing a substantial contraction in 2026, but the evidence does not support treating every measure of market activity as having followed the same uninterrupted downward trajectory.

More importantly, identifying a market decline is not the same as identifying its causes.

Is the problem excessive compliance costs? Weak investor demand? Unrealistic valuations? Limited liquidity? Poor investment performance? Insufficient information about issuers?

Probably some combination of these factors.

Yet the current regulatory discussion appears heavily concentrated on what companies are allowed to raise and how much information they must disclose.

That may be addressing only part of the problem.

Why $20 million is unlikely to be the answer

The argument for increasing the Reg CF fundraising ceiling is straightforward.

Companies that need more than $5 million should be able to raise capital from retail investors without having to switch to another regulatory framework.

That is a reasonable position.

There are certainly growth companies for which the existing limit is restrictive. Crowdfund Capital Advisors has also highlighted cases where companies have had to split financing rounds or turn away investors.

But how much of the market does this actually represent?

According to KingsCrowd's 2025 Annual Report, only nine Reg CF offerings reached, or came within approximately $50,000 of, the existing $5 million ceiling during 2025.

That is less than 1% of the 1,006 new offerings launched that year, although the two figures use different measures and should not be interpreted as a precise conversion rate.

There is an important counterargument: companies seeking substantially more than $5 million may avoid Reg CF altogether. The number of offerings reaching the ceiling therefore understates the potential demand for a higher limit.

Nevertheless, the evidence suggests that the existing ceiling is not the immediate constraint for the overwhelming majority of companies currently using Reg CF.

Increasing the ceiling could attract larger issuers and help a particular segment of the market. It does not follow that it would solve the broader decline in fundraising activity.

We made essentially the same argument in our August 2026 analysis of the European crowdfunding market:

[Only 8% of European Crowdfunding Is Cross-Border. That's a Market Problem, Not a Rules Problem.](/blog/only-8-percent-european-crowdfunding-cross-border)

In Europe, policymakers have discussed increasing the ECSPR fundraising threshold from €5 million to €12 million.

Our conclusion was that a higher ceiling might benefit a limited number of larger offerings, but it would do little to address weak cross-border participation, fragmented investor demand and insufficient independent investment information.

The US debate is remarkably similar.

**Both markets risk treating a regulatory ceiling as the main constraint when the deeper problem may be the market's ability to attract, inform and retain investors.**

Reducing compliance costs makes sense. Reducing transparency is another matter.

Thorpe's proposal to simplify financial reporting for smaller offerings deserves serious consideration.

Accounting, legal and compliance costs can be disproportionately burdensome for companies seeking relatively modest amounts of capital.

A more proportionate framework could lower entry barriers while preserving meaningful investor protection.

Allowing smaller issuers to provide clearly labelled, management-certified financial statements using simplified accounting methods may be worth exploring.

But proportionality must not become an excuse for financial information that investors cannot understand or compare.

The distinction becomes particularly important when considering Thorpe's third proposal.

He suggests changing Form C-AR so that issuers could provide annual financial information directly to investors without necessarily publishing their financial statements through the SEC's EDGAR system. Public EDGAR filing would remain an option, and his proposal includes a public-disclosure requirement for issuers above a very high shareholder threshold.

The rationale is understandable.

Some companies may be reluctant to publish financial information that is accessible to competitors, customers and the wider public.

However, the proposed solution creates another problem.

**Information available only to existing shareholders is not equivalent to information available to the market.**

Public financial disclosures allow prospective investors, researchers, independent analysts and other market participants to evaluate issuers and compare their statements over time.

They also make it possible to identify inconsistencies between successive fundraising rounds, assess financial developments and challenge information presented by issuers.

Moving financial reporting away from a central public repository could make these activities significantly more difficult.

There is also an important distinction in the existing rules. Reg CF issuers must generally file annual reports on Form C-AR within 120 days of their fiscal year-end, but reporting obligations can lawfully terminate under specified conditions. For example, an issuer may qualify after filing at least one annual report if it has fewer than 300 holders of record.

Not every absence of subsequent annual filings therefore indicates non-compliance.

The question should be how to make required disclosures proportionate, reliable and accessible - not simply how to make them less visible.

The reporting problem is real. Research points towards a different response.

The weaknesses in Reg CF reporting compliance are well documented.

A June 2026 working paper by Gregory Burke and Riley League examines ongoing financial reporting obligations in the US equity crowdfunding market.

The researchers find that more than half of the issuers in their sample fail to file the required annual report, with only 28% filing on time.

Their research also identifies investor demand for the information contained in those reports.

Perhaps most importantly, their field experiment finds that messages emphasising the regulatory consequences of non-compliance increased reporting compliance, while messages emphasising potential economic benefits had no detectable effect.

The findings suggest that weak reporting compliance cannot simply be explained away as an unavoidable consequence of expensive regulation.

Compliance incentives, awareness, monitoring and accountability also matter.

This creates an uncomfortable question for the industry.

If companies are already failing to meet relatively limited reporting obligations, is the appropriate response to weaken public disclosure further?

Or should the industry improve the reporting framework and make compliance easier, more predictable and more enforceable?

We favour the second approach.

Standardised reporting templates, simplified submission processes, proportionate accounting requirements and better monitoring could reduce administrative costs without sacrificing public access to essential information.

Digital technology and AI may significantly reduce the practical cost of preparing and analysing disclosures.

The opportunity is to make transparency cheaper - not to abandon it.

Crowdfunding needs better investment decisions, not just more offerings

There is a fundamental difference between making investment opportunities available and enabling investors to evaluate them.

Regulation Crowdfunding opened a market that had previously been largely inaccessible to ordinary investors.

That achievement should not be underestimated.

But democratising access to early-stage investments does not automatically democratise access to investment knowledge.

Retail investors may encounter sophisticated financial projections, complex securities, optimistic valuations and ambitious growth assumptions without access to the analytical resources routinely available to professional investors.

The problem is not necessarily that information is entirely absent.

It is that information may be fragmented, difficult to verify, inconsistent across offerings or presented primarily by the company seeking investment.

A regulatory disclosure document is a starting point for due diligence. It is not due diligence itself.

Investors need ways to challenge assumptions, examine downside scenarios, compare valuations, identify conflicts of interest and verify claims against independent sources.

They also need greater visibility into what happens after the fundraising campaign has ended.

Did the company achieve its objectives? How has its financial position changed? Were subsequent funding rounds conducted at higher or lower valuations? What happened to shareholders through dilution, restructuring or exit?

Without more systematic information about these outcomes, the industry will struggle to distinguish successful capital formation from successful long-term investment.

That distinction should be central to the discussion about the future of crowdfunding.

A better reform agenda

The industry does not need to choose between investor protection and access to capital.

Both objectives can be advanced together.

A more balanced reform agenda would include:

  1. **Proportionate regulation.** Simplify accounting and compliance obligations for smaller offerings while strengthening disclosure requirements as fundraising amounts, complexity and investor exposure increase.
  1. **Accessible and standardised information.** Preserve meaningful public access to core financial disclosures and make them easier to prepare, retrieve and compare.
  1. **Independent due diligence.** Encourage an ecosystem where investors can examine offerings beyond the information and marketing material supplied by issuers and platforms.
  1. **Better post-investment transparency.** Improve the availability of information about issuer performance, subsequent financing, dilution, business failures and exits, with reporting obligations proportionate to issuer size and circumstances.
  1. **Evidence-based market development.** Evaluate crowdfunding not only through capital raised and campaigns launched, but also through investor participation, repeat investment, issuer survival and realised investment outcomes.

None of these measures requires abandoning the objective of making capital more accessible to entrepreneurs.

On the contrary, they may be essential to making that accessibility sustainable.

The next phase of crowdfunding must be built on trust

At CrowdDiligence, we believe that the next stage of equity crowdfunding requires more than additional platforms, larger fundraising limits and lighter regulatory processes.

It requires better decision infrastructure.

Our approach is to support independent, collaborative due diligence, combining structured investment analysis, source-based evidence, AI-assisted research and human verification.

The objective is not to predict which startups will succeed.

It is to help investors understand what they are investing in, what can be verified, where uncertainty remains and which risks may have been overlooked.

This is relevant in both Europe and the United States.

The regulatory frameworks are different. The underlying information problems are remarkably similar.

Devin Thorpe is right to call attention to the pressure facing Regulation Crowdfunding. A market that loses issuers, investors and service providers will eventually struggle to sustain itself.

But a market cannot solve its confidence problem simply by allowing companies to raise more money while making financial information less accessible.

If the goal is a sustainable crowdfunding ecosystem, reform should make it easier for good companies to raise capital **and easier for investors to distinguish credible opportunities from weak ones.**

Raising the ceiling may help some companies.

Reducing unnecessary compliance costs may help many more.

But the long-term credibility of crowdfunding will depend on whether investors can make informed decisions, verify the information they receive and understand what happens to their investments.

**The next phase of crowdfunding should not just be about making it easier to raise capital. It should be about making it easier to invest intelligently.**

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Sources and further reading

*This article provides general market analysis and policy commentary. It does not constitute investment advice.*

Tags: Reg CF, SEC, Crowdfunding Regulation, Investor Protection, Due Diligence, Transparency, United States