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Comment by patio11 | Hacker News Reader

It doesn't even address the main risk of the bill, which is that grandma isn't going to get swindled, she's just going to get sold an investment product with hugely negative capital returns about 90% of the time when executed correctly by talented, honest individuals.

I mean, that has to be the debate, right? Do we allow small, private investors access to investments with a bimodal distribution of outcomes, and if so what amount of regulatory overhead do we impose? With the understanding that every additional quanta of regulatory overhead a) kills some would-be companies at the margin and b) makes some deals inaccessible to small private investors at the margin.

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I would accept regulation protecting naive people against bad bets if we didn't have state-sponsored lotteries. No investment is going to be riskier than the Pick-6.

How many middle-class retirees lose their life's savings to the Pick-6?

I'd bet not many, but I suspect there's a fair number of people who never amass a life's savings because of it.

A quick back-of-envelope calculation shows my mom having spent at least 100 grand on lottery tickets (and that's just 20 years of playing), and she's still basically living paycheck to paycheck.

That is easy, all we have to do is to sell collections of stock from, say, fifty, start ups.

How much would it be worth it to buy a share of YC S12?

Think about the phrase "do we allow". I ask, what right do "you" have to stop me from investing my money wherever I like?

I could go to a casino and blow $20,000 in a weekend. You're telling me that I can't put it into a startup that takes 2 years to fail? Hell, even if I know its going to fail, getting a board seat there and doing my darndest to help it not fail might be worth $20k for me. Or, say its my best friend from high school, whose always had this crazy idea, he's been plugging away for a decade at it, and he wants to make it happen... I believe in him and want to put up my $50k, $500k, $1M, $5M, whatever. We both know that its a longshot, but if it works, its worth $5B. Who are "you" to say that I can't spend my money that way?

The fundamental problem is not risk. Its this idea that government gets to decide who gets to invest.

They don't do this to protect people from risk, but to keep small investors out of these types of investment. All of this kind of regulation is not to protect people-- that's just the pitch. "won't anyone think about the children?"

Like all regulation the real purpose of this is to protect the larger entities-- the Venture Capital firms and the angels, from competition. And of course, politicians get money by threatening to change the regulations-- I'm sure this crowd funding bill has already raised a great deal of funds for the politicians who are using its passage as a threat against those who would lose the protection from competition.

Imagine if I could be an angel!

I have enough from a previous exit to have put small amounts-- YC level seed funding-- into 10-20 startups. Assuming one of them was successful, I'd have a sustainable seed fund there.

But I'm not able to be accredited given the way the law is written, and I know there are a lot of other people in my position.

Also, for what its worth, I am able to deal with extremely risky investments-- Well out of the money stock option spreads where the upside is %500 and the downside is a %100 loss. I've done this for years, and have consistently made money at it. I'm pretty sure picking startups would be easier, but even if I'm wrong....

Isn't it MY money to risk?

(not attacking you, just using your choice of phrase as a springboard-- people think this is something legitimate to regulate, but it is not. There are casinos across the country. This regulation is nonsense, and its immoral. Who is the government to tell me how I can spend my money? By what right?)

The Las Vegas example is the one I use also. I could get on a plane, go to Vegas, spend every last penny I have, borrow all I could and spend it, and what happens? Nothing. People might tell me how stupid I was. Yet if I do the same thing with startups, somehow I've been swindled and the public has an interest in protecting me.

Huh? So how about if I created a roulette game where you spin a wheel and one time out of 50 you get in on a hot startup. The other times you lose your money. Would that be acceptable?

I read the article, desperately trying to find something redemptive. I think the key statement is here:

..."The idea that a company could do this with no oversight is frightening because there are plenty of people out there who are willing to separate investors from their money," says Melanie Senter Lubin, Maryland's securities commissioner. "We are concerned about anything where investors have the potential of losing money or where they're making an investment without the information they need to make an informed investment decision."...

So you put a up big huge disclaimer that says you have an extremely small chance of ever seeing your money again.

I think that pretty much covers it, doesn't it? How much more informed do we have to be to spend our own money?

Many nonqualified investors don't understand bimodal probability distributions very well. They probably understand the risk of 'investing' their money at Las Vegas, and don't understand the similarity of this to angel investing.

Politicians have a vested interest in avoiding large blocks of unhappy voters, and vote to optimize their lives, not yours.

I am more or less in agreement with you. However, (and although IANAL) I think it worth pointing out that your "best friend from high school" investment is probably fine under rule 505 of regulation D: http://www.sec.gov/answers/rule505.htm

The rules don't generally prohibit per se certain investments from taking place. They require companies that take such investments (e.g. from unaccredited, unsophisticated investors) or that solicit investment from the general populace (i.e. not your best friend from high school), to comply with the regulations pertaining to publicly traded companies.

Look, I agree with you in terms of most of this. However, if there is anything we can learn, it is that eventually the majority will impose their will if they feel ills are being perpetrated. Right now the best thing is to work with the legislators to put in some regulation around education and transparency rather. Otherwise the potential for this type of thing to eclipse Nigerian letter scams could kill the idea altogether, which nobody wants. So it needs to be steered away from sophisticated investor type rules just towards a standard pack of the sort you have to sign off on if you're going to undertake options trading.

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