Crowdfunding Issues

Ruth Simon reported in yesterday’s Wall Street Journal that, “Crowdfunding websites, such as and, are for-profit businesses that make it easy for people to raise money for a variety of causes, such as funeral expenses and medical bills. The sites are gaining in popularity, raising $1.9 billion last year through campaigns, with giving expected to grow at a 25% annual clip for the next several years, according to Blackbaud Inc., a technology provider for nonprofits.

But the sites have come under fire for not having enough controls to protect users. ‘There is no accountability after the fact,’ said Ethan Mollick, an assistant professor at the University of Pennsylvania’s Wharton School who studies crowdfunding.”

The Journal article explained that, “The platforms earn money from fees paid by donors or campaign organizers. For example, GoFundMe, the largest peer-to-peer fundraising site by revenue, levies a 5% platform fee, plus a processing fee of 2.9% plus 30 cents per donation in the U.S. and Canada. On a campaign that raises $110,000 from 760 donors, GoFundMe would collect a platform fee of $5,500; an additional $3,418 would go to WePay, the payment processor.

“Some competitors don’t charge a platform fee, but automatically indicate a recommended contribution to cover platform costs when a donation is made.”

Ms. Simon indicated in the Journal article that, “As more complaints land at local and federal law-enforcement agencies, some officials see the need for better laws aimed at online giving to help manage the problem.

“Most states have laws that govern the formation and operation of nonprofits and many also regulate charitable solicitations by, for instance, barring fraudulent or deceptive campaigns. But it’s not clear whether those laws cover the online platforms and those using them to raise money.”

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