Home > Journals > WMBLR > Vol. 4 (2013) > Iss. 2 (2013)
William & Mary Business Law Review
This Article argues for the socially optimal regulation of online peer-to- peer (P2P) lending and crowdfunding to advance economic justice in the United States. Peer-to-peer lending websites, such as Prosper.com or Kiva.org, facilitate lending transactions between individuals online without the involvement of a traditional bank or microfinance institution. Crowdfunding websites, such as Kickstarter.com, enable individuals to obtain financing from large numbers of contributors at once through an open online request for funds. These web-based transactions, and the intermediary organizations that facilitate them, constitute emerging cyberfinancing markets. These markets connect many individuals at once, across class, race, ethnicity, nationality, space, and time in an interactive and dynamic way. During a time of significant economic distress in the United States, these markets also represent an unprecedented economic development opportunity for historically marginalized economic actors. Yet, no legal scholar has addressed the implications of these developments for economic justice in the United States. Drawing from the fields of law and geography, social networking theory, and comparative institutional analysis, this Article conceptualizes these new markets as “cyberspaces,” similar to geographic spaces, whose laws, norms, and rules will partially determine who will benefit from the economic opportunities that arise in these spaces. The recently enacted Jumpstart Our Business Startups (JOBS) Act does not facilitate substantial distributive justice in crowdfunding markets. The U.S. Government Accountability Office (GAO), which produced a report in response to the 2010 Dodd-Frank Wall Street Reform Act’s mandate that it study the P2P lending industry, has also failed to recommend a regulatory structure that will facilitate economic justice. This Article recommends that a range of federal regulators such as the U.S. Securities and Exchange Commission (SEC), the new Consumer Financial Protection Bureau (CFPB), and the U.S. Treasury Department (Treasury), should collaborate to implement a revised Community Reinvestment Act (CRA) that would promote economic justice in these markets.