Why can't you kick back to the backers?

May 4, 2013 2:11 PM

I just heard a radio interview with Zach Braff about his Kickstarter film project. It was mentioned that it is illegal for him to share the film's profits with his Kickstarter backers. Why is that?
posted by donajo to Law & Government (3 answers total)

Best answer: Because then he would be offering an investment vehicle, and there are huge amounts of regulations for investment vehicles to make sure that investors know what they're getting into. You have to jump through dozens of regulatory hoops, including certifying that the investors have to money to invest with you; or, if you're making a public offering, you have to go through all kinds of audits.

With a Kickstarter, it's simple. You give us money, we give you perks. It's like a sale, or a donation with schwag; there's no upside beyond the perks.
posted by musofire at 2:14 PM on May 4, 2013 [3 favorites]

Best answer: Note also that the JOBS Act contains a provision that would allow investments through "crowdfunding," but the SEC has yet to come up with the rules to put the provision into effect.
posted by payoto at 2:27 PM on May 4, 2013 [4 favorites]

Best answer: Back in the 70's, there were all kinds of tax shelters in investing in independent film. This is why so many of those silly low-budget B movies got made (all the Roger Corman stuff, I think most Russ Meyer flicks, early Troma productions, blaxploitation, cheapo action/martial arts, women's prison movies, stuff like that).

Closing all those loopholes drastically reduced the number of people who were interested in funding independent films as an investment.
posted by Sara C. at 4:54 PM on May 4, 2013 [4 favorites]