First Consumer Protection Lawsuit Involving Crowdfunding Filed in Washington State
In an unprecedented move, Washington State’s Attorney General has filed suit against Altius Management, the company behind the Asylum Playing Cards Kickstarter campaign, which purportedly collected over $25,000 backer dollars and delivered nothing… I’ve gotta say, between the Oculus’ landmark sale to Facebook and this latest development, 2014 is shaping up to be a red letter year in the history of crowdfunding.
I’m sure that anyone who’s backed more than a handful of projects has had the experience of being underwhelmed by the returns on their backer dollars, or has backed a project that is woefully over due, frustratingly incommunicative, or is otherwise handling their business in questionable ways. It seems that whenever a project goes off the rails (and often times, well before), there is somebody in the comment thread talking about lawyering up. The threat of legal action used to be big talk from Internet tough guys. Now, there is a precedent. I hate to say things like “game changer,” but there it is.
So, what’s at stake in all of this? Well, according to the Seattle Times, “The suit seeks restitution of the cash, as well as fines up to $2,000 per backer for violations of the Consumer Protection Act, meaning the total could top $1.6 million.” Just let that sink in for a second. Up to a $1.6 million in fines, restitution, and court costs for failing to deliver on a $25,000 Kickstarter. If that isn’t the definition of a scumbag deterrent, I don’t what is. The Asylum Playing Cards does seem like a textbook case of scumbaggery: severely over-promising on elaborate add-ons and failing to deliver on the core product, offering practically no communication throughout, so a judgement against them is likely well deserved. What’s bothers me is the precedent this sets.
This development is awful for people who make mistakes, underestimate costs, suffer setbacks, or otherwise screw up in the most well meaning way possible. Crowdfunding is not without risks. At its core, crowdfunding is still about well-meaning people pursuing passion projects; however, passion and a few dollars isn’t always enough to get past the curveballs that life throws at all of us. For individuals pursuing their dreams through Kickstarter, this lawsuit turns the prospect of failure into something very scary indeed–and it was bad enough when it was “just” reputation and self-worth on the line. In a worst case scenario, this Asylum situation becomes the first case in a trend of pursuing relatively small potatoes projects that fail to deliver for big judgements or big settlements. All things are equal under the law: yeah, the Asylum crew seems like scumbags, but what if the next guys did their best and failed? Any precedent this sets will necessarily overlook the human aspect at the core of crowd funding, and reduce the whole institution to a simple transaction between buyers and sellers, and that’s basically that.
David and I are gearing up to relaunch the Wardenclyffe Horror by the end of the year, but frankly this whole situation gives me pause. The thought of exposing ourselves to litigation in the event that something terrible happens (which we’re no strangers to, thanks to our last Kickstarter), is making me question if crowdfunding is the way to go. I know that I’m interested in seeing how this plays out a bit before I jump back in.