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The Deal: States Greet Crowdfunding With Hostility

Such projections "are made by every startup that looks for funding," Sidman said. "We all know it's speculation. These are all visions. And we ask: 'Why do you say that and what are the comparables?' Nobody was misled."

Sidman said if the division can prove Klein did something wrong, or misled someone and caused them harm, then its efforts will have been justified.

"But I've yet to meet a person who was injured," he added.

Klein "has done what thousands of people have done before and after her, which is discuss her ideas publicly," he said. "She didn't pass out prospectuses. She did what Title II of the JOBS Act allows. She was never talking about selling securities.

"If this ever becomes definitive, it obviously will scare off further economic development" in Ohio, Sidman said. "If they are trying to attract business to their state, they could not have done anything worse."

While Ohio is thought to be the first state to bring an enforcement action against a crowdfunding portal, it is hardly the only state to express concern about crowdfunding over the past two years.

Under the JOBS Act, crowdfunding portals like SoMoLend may eventually be used by private companies to sell limited amounts of stock to small investors. That provision will not take effect, however, until the SEC makes rules to regulate crowdfunding. In the meantime, crowdfunding portals are facilitating securities sales to accredited investors.

Officials in Arkansas, California, Nevada and Washington have issued public warnings about the potential for fraud in crowdfunding. So has the National Association of State Securities Administrators.

Most recently, Massachusetts Secretary of State William Galvin formed a unit under the commonwealth's securities division to monitor crowdfunding websites and general solicitation of private placement financings.

Brian McNiff, a spokesman for Galvin, has said that the unit is an outgrowth of the SEC's recently proposed rule that would require private placement issuers to file solicitation and advertising documents with the SEC.

The commission announced the proposed rules on July 10 at the same meeting where it also voted to end the general solicitation ban.

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