[pja]

Something to do with the regulations for credit card payments? IIRC you can't 'pre-pay' for goods on a credit card: the merchant agreement says that you can only be charged when you actually ship the goods.

This makes crowdfunding projects like this a little tricky, since they doesn't map well to the legal agreements that make up the existing payment systems.

[gav]

You can charge the customer as long as you give them the ability to cancel for a full refund if you can't ship within the promised timeframe. The FTC enforces this rule, see "Mail or Telephone Order Merchandise Rule"[1].

I think the legal gray area comes from customers believing that they are buying a product from the crowdfunders. This is covered by an advisory by the FTC; to be covered by dry-testing exception, the following conditions need to be met:

* In promoting the merchandise, the merchant can make no suggestion that the merchandise will be shipped or that customers expressing an interest in it will receive it.

* In all promotional materials, the merchant must disclose all material aspects of the promotion, including the fact that the merchandise is only planned and may not be shipped.

* If any part of the promotion is later dropped, the merchant must notify subscribers of the fact within a reasonable time after soliciting their subscriptions.

* If, within a reasonable time after soliciting their subscriptions, the merchant has made no decision to ship the merchandise, it must notify subscribers of this fact and give them the opportunity to cancel and, where payment has been made, make a prompt refund.

* The merchant can make no substitutions of any merchandise for that ordered.

It seems obvious that crowdfunding efforts don't meet these criteria.

[1] http://business.ftc.gov/documents/bus02-business-guide-mail-...

[TylerE]

Much more likely SEC/investment regulations.

[ScottBurson]

No. You're thinking of equity crowdfunding. No equity is changing hands here.

[olefoo]

The purchase of publication rights is an equity transaction, in that a valuable piece of (intellectual) property is changing hands. And the law as written is murky enough that it's not simple to say that crowdfunding of public benefits wouldn't be covered. Not to say that Amazon couldn't be a bit more transparent about what their concerns are. By running a crowdfunding site under the new rules; is Amazon taking on unacceptable liabilities? Could Amazon be held liable by funders if unglue.it failed to secure rights to a book they had nominated to publish?

Those are serious questions that only a lawyer can answer.

[ScottBurson]

The purchase of publication rights is an equity transaction, in that a valuable piece of (intellectual) property is changing hands.

Uh, no. By that definition, every transaction would be an equity transaction.

Equity specifically refers to an ownership interest in a business.