Call for tighter legislation of crowdfunding platforms in Sweden

Swedish fundraising association FRII has called for donations-based crowdfunding platforms to be fully included in proposed legislation to regulate crowdfunding, in its response to a consultation on the subject.

While FRII largely welcomes the proposal that legislation is needed to control crowdfunding donations, the association is concerned that current proposals – which require such platforms to be registered with the Financial Supervisory Authority – do not go far enough. Instead, it is calling for donation-based crowdfunding platforms to require a licence, as is the proposal for loans and shares-based financing platforms.

The government’s investigation into crowdfunding was launched in 2016 to improve conditions for developing it into a source of financing for companies as well as individuals, with it proposing that the new Act should come into force on 1 May 2019. FRII chose to contribute to the investigation and submitted its views to the Ministry of Finance last month.

It believes that, as the focus of the investigation has been on share-based and loan-based forms of crowdfunding, it lacks an overall perspective on donation-based platforms in general, and on platforms that manage gifts to nonprofit organisations in particular.

In its response, FRII recognises the potential of donation-based crowdfunding to help non-profit organisations establish or increase donations, and to encourage more people to donate. However, this requires guarantees of transparency and of how donations are managed and used. FRII underlines that platform providers must ensure money is securely transferred, showing when the money reaches the organisation, and how much of the amount is deducted in transaction costs. It also believes there should be a ceiling for the level of transaction costs.

According to the recent 2018 Global Trends in Giving Report, published this month by Nonprofit Tech for Good, across Europe 47% now donate to crowdfunding campaigns that benefit individuals. The top five causes are start-up costs for a social enterprise, medical expenses, volunteer expenses, education costs, and disaster relief.