The Licensing Principle and Investment-Based Crowdfunding

Crowdfunding has been recently regarded as an important instrument of alternative finance, contributing to meeting SMEs’ financing needs. In particular, investment-based crowdfunding, although smaller in market size compared to lendingbased crowdfunding, can potentially help seed and start-up companies move from the ‘family, friends and fool’ stage to venture capital and private equity investments. The activities of crowdfunding platforms present features similar to investment firms’ services and an economic function of ‘weak intermediation’ similar to these, but also special characteristics. This paper sets out to discuss, in line with the main topic of this CIDP conference and EBI working paper series, whether investment-based crowdfunding platforms conduct activities traditionally subject to the licensing principle (the same or similar activities) and should be subject to the same or similar licensing requirements and legal framework. It also offers a critical analysis of the approach adopted by EU Regulation No. 1503/2020 on European Crowdfunding Service Providers for Businesses in this regard, drawing a number of conclusions on the gatekeeper’s role assigned to platforms by the Regulation.