Can I Sue When Kickstarter Fails to Deliver?
How the Consumer Protection Act covers crowdfunding in WashingtonBy S.M. Oliva | Last updated on January 12, 2023
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Washington AG Obtains Settlement, FineFor example, in July 2015, Washington Attorney General Bob Ferguson obtained a settlement with a man accused of “crowdfunding theft.” Ed Nash and his company, Altius Management, raised more than $25,000 through a Kickstarter campaign to finance a playing card game. Nash initially promised delivery of the finished game and other backer rewards to more than 800 donors by the end of 2012. But when nearly two years elapsed without delivery, the Attorney General’s office took action. Under the settlement, Nash and Altius Management paid restitution to 31 of the Kickstarter backers who lived in Washington, plus another $31,000 in civil penalties and more than $23,000 in legal costs. The Attorney General based his lawsuit on the Washington Consumer Protection Act. This is a broad-based statute that prohibits “unfair or deceptive acts or practices in the conduct of any trade or commerce.” It mirrors language used in the Federal Trade Commission Act. The FTC itself has also adopted the “Mail, Internet, or Telephone Order Merchandise” rule, which among other things requires all seller—including crowdfunding campaigns—to obtain the buyer’s consent if it “solicits” payment for goods that will not be delivered within 30 days. The FTC also requires internet sellers to promptly provide refunds and refund notices for any undelivered final products.
Are Crowdfunding Platforms Liable to Consumers?Crowdfunding platforms have also cracked down on campaigns that fail to deliver on their promises to donors. Kickstarter amended its terms of service to explicitly state that any Kickstarter creator who posts a product with its service is “inviting other people to form a contract with them.” This means that if the project reaches its fundraising goal, it must “complete the project and fulfill each reward.” Yet Kickstarter itself continues to disclaim any personal liability for failed campaigns. Like many crowdfunding platforms, Kickstarter views itself as a neutral third-party platform that is not a party to any contract formed between a campaign and donor. And, at least up to this point, Washington State and federal regulators have not moved to hold crowdfunding platforms directly liable for campaigns that fail to deliver promised goods. If you have donated to a crowdfunding campaign and failed to receive any promised “rewards” or products, you should speak with a qualified Washington State consumer protection attorney to learn more about your legal options. For more information on this area of law, see our overview of consumer law.
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