On 12 February and 3 April 2025, ESMA updated its Questions and Answers ("Q&As") in relation to Regulation (EU) 2020/1503 of 7 October 2020 on European crowdfunding service providers for business (the “Crowdfunding Regulation”), adding four new Q&As. Earlier this year, in 8 January 2025, ESMA published its first annual market report on crowdfunding in the EU (the “ESMA Report”). This article explores the updated Q&As and provides a summary of the key aspects of the ESMA Report.
Q&A: Scope of the Crowdfunding Regulation – Multiple offers and suitability
Under the Crowdfunding Regulation, project owners can raise up to EUR 5,000,000 through crowdfunding platforms within a 12-month period. ESMA explained that in order to calculate this threshold, the following amounts should be aggregated and summed up:
- the amount raised by a project owner in offers of transferable securities, admitted instruments or loans, conducted through crowdfunding platforms across the EU over the previous 12 months; and
- the amount in transferable securities that the same project owner offered in other offers to the public, when exempted from the obligation to publish a prospectus in accordance with of Article 1(3) or Article 3(2) of Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the “Prospectus Regulation”).
If the sum of the items above exceeds EUR 5,000,000, the offer shall be considered as not covered by the Crowdfunding Regulation.
Even though the Crowdfunding Regulation does not prevent a project owner from seeking funds through both a crowdfunding offer and an offer to the public of transferable securities which is not a crowdfunding offer, ESMA clarified that the following offers of transferable securities to the public shall not be taken into consideration when calculating the EUR 5 million threshold (as outlined above):
- offers not made under the exemptions of Article 1(3) or Article 3(2) of the Prospectus Regulation;
- offers closed more than 12 months prior to the launch of the crowdfunding offer; and
- offers conducted after the launch of the crowdfunding offer.
In these cases, the public offer will not count toward the threshold calculation, giving project owners more flexibility in how they raise funds while staying within the Crowdfunding Regulation limits.
Q&A: Operating a bulletin board under the Crowdfunding Regulation
Under the Crowdfunding Regulation, crowdfunding service providers can operate bulletin boards where they allow their clients to advertise interest in buying or selling loans, transferable securities, or admitted instruments for crowdfunding purposes that were originally offered on their crowdfunding platform. Such clients are required to provide a Key Investment Information Sheet (the “KIIS”). The KIIS is prepared under the responsibility of the project owner when a crowdfunding offer is presented on a crowdfunding platform, and its contents are updated until the relevant crowdfunding offer is closed. Since this information may become outdated by the time the advertisement is made on the bulletin board, ESMA advises that these clients disclose the date when the KIIS was provided to them.
In addition, ESMA stresses that the bulletin board shall not consist of an internal matching system that executes client orders on a multilateral basis in a way that results in a contract, unless a crowdfunding service provider is also authorised as an investment firm under the Directive 2014/65/EU of 15 May 2014 on markets in financial instruments (the “MiFID II”).
Q&A: Assessment of the entity to be considered as the project owner
ESMA acknowledges that the identification of the project owner can sometimes become complicated, notably in those situations in which several entities or several layers of entities are involved. In order to avoid practices consisting in designating as project owner an entity having insufficient or artificial link with the crowdfunding project, ESMA gives examples of concrete elements to be taken into consideration when assessing whether a legal or natural person shall be considered as the project owner:
- the entity launched and/or contributed to developing the crowdfunding project in its early stage,
- the entity has sufficient legal and economic ties to the crowdfunding project;
- for investment-based crowdfunding, the entity is issuing the transferable securities and the admitted instruments for crowdfunding purposes directly or through a special purpose vehicle;
- for loan-based crowdfunding, the entity is the one to which investors make available the amount they lend, and it is the entity that assumes an unconditional obligation to repay that amount to investors, together with the accrued interest, in accordance with the instalment payment schedule.
ESMA Market Report: key insights from the 2024 ESMA Market Overview Report
The ESMA Report provides an overview of the EU crowdfunding market, marking the first of its annual reports under the Crowdfunding Regulation. By the end of 2023, 159 crowdfunding service providers (the “CSPs”) had been authorised, with 98 CSPs included in the report. Of these, 53 offered loan-based crowdfunding, 30 provided debt-based crowdfunding, 25 focused on equity-based crowdfunding, and 17 used other models. Loan-based crowdfunding was the most popular, accounting for 65% of the total funding raised.
The report revealed that the majority of crowdfunding investors were retail (87%), with the average investment per retail investor amounting to EUR 590. The professional services sector raised the most funds (EUR 390,000,000), followed by construction (EUR 240,000,000). France and the Netherlands were the leading countries for crowdfunding, hosting the most providers and raising the most funds. Lithuania, however, had the highest number of investors (500,000), reflecting the strength of its national crowdfunding framework.
Cross-border investments accounted for 17% of total funding, with platforms in Austria and Estonia seeing significant foreign participation.
As the crowdfunding market continues to mature, ESMA will keep monitoring trends, risks, and developments across the EU, with further reports to follow.
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