[andrewfong]

> I've already "invested" money in Pebble, Reading Rainbow, and a few other business ventures I've seen potential in, but I'm not allowed to benefit from those investments in certain ways because, why, exactly? For my own protection?

Yes. The rationale is that when you "invest" in crowdfunded projects, you're really just purchasing a product in advance or making a donation. The law trusts that you can rationally decide what a product is really worth or how much money you should donate.

What the law doesn't trust you (as an unsophisticated investor) to decide is what the expected return on a speculative venture will be. The concern is that as soon as someone promises you a high rate of return, you're not going to think about this rationally -- i.e. you're going to think of this more as gambling than an investment. In the specific case of crowdfunding, there's not too much worry that someone is going to blow large amounts of money on a Kickstarter if all they're getting out of it is a couple of Oculus Rift headsets. But if that Kickstarter could promise 1000x returns, that might be bad news for someone's college fund.

[nickff]

You are avoiding the essence of the parent's question, which is that both the 'crowdfunding' and the (currently illegal) unaccredited investment have similar risk profiles in many cases, with the same lack of reporting requirements, possibility of not returning anything, and likelihood of scams.

[andrewfong]

I thought I made clear what the distinction is: "In the specific case of crowdfunding, there's not too much worry that someone is going to blow large amounts of money on a Kickstarter if all they're getting out of it is a couple of Oculus Rift headsets. But if that Kickstarter could promise 1000x returns, that might be bad news for someone's college fund."

Put another way, although the risk profiles for crowdfunding and equity may be similar for any given amount of investment, the limited return on crowdfunding keeps any one investor from taking on too much risk.