The KIIS is Sweet, But EU Investment Crowdfunding Rules Still Need Work

Before the EU’s new crowdfunding framework took effect, I wondered whether mandatory disclosure could ever work for tiny issuers raising modest sums. Two years on, the European Digital Finance Association’s (EDFA) first serious industry assessment suggests that it can. When my book Investment Crowdfunding was published in 2023, the European Crowdfunding Service Provider Regulation (ECSPR) had just been adopted but not yet in effect; now the EDFA’s September 2025 position paper offers the first real look at how the system has worked in practice—and where it has not.

In my book and elsewhere, I was skeptical that mandatory disclosure could ever be a good fit for investment crowdfunding. My concern was that disclosure obligations—originally designed for large public companies—would inhibit the growth of a market built around very small issuers raising modest sums. If crowdfunding issuers were required to produce disclosure documents resembling mini-prospectuses, the costs would swamp the benefits.

Yet I also allowed for the possibility that a well-designed set of mandatory disclosures might line up with what investors wanted anyway. If disclosure rules were carefully scaled to the realities of crowdfunding—short, standardized, and focused—they might supply investors with useful information without drowning issuers in compliance costs.

The EDFA report suggests that, in Europe at least, this is what has happened. Articles 19, 23, and 24 of the ECSPR—which require platforms to provide information, ensure that issuers produce a Key Investment Information Sheet (KIIS), and test investors’ knowledge—are said to be ‘functioning well’ and in need of no amendment. The KIIS is limited to six pages, and platforms seem satisfied with its design. Disclosure, far from being the stumbling block, appears to be working.

This is striking. Mandatory disclosure, which I feared might inhibit crowdfunding, turns out to have landed in the ‘Goldilocks zone’. The KIIS gives investors the basics they need in a form they can digest, and it does so at a manageable cost. In this respect, the ECSPR may offer a template for scaled, modular disclosure that other areas of securities law could learn from.

The problems, however, lie elsewhere. EDFA identifies three major obstacles to growth:

• Fragmented implementation of rules that restrict cross-border growth.
• Limited access to public funding programs.
• Insufficient recognition in policy and regulation.

Of these, I find the first most compelling. The ECSPR was supposed to create a uniform single market, with one authorization enabling platforms to operate throughout the EU. In practice, however, divergent national approaches to admitted instruments, marketing, and translation have created barriers.

Most notably, each national authority (eg the AMF in France or the CONSOB in Italy) decides which languages it will accept, forcing issuers to translate the KIIS into multiple languages at great cost. EDFA recommends a uniform rule requiring all Member States to accept an English-language KIIS, which would sharply reduce friction and help fulfill the Regulation’s cross-border promise.

Other EDFA recommendations point in the same direction: allowing platforms to hold multiple licenses, harmonizing definitions, and revising Article 25 to permit functioning secondary markets rather than mere bulletin boards. These changes would facilitate liquidity, consistency, and growth. EDFA also opposes fixed investor caps—a stance that aligns with my advocacy of a liberal model of investment crowdfunding.

By contrast, I am less persuaded by calls for new tax incentives or public funding schemes. Those proposals may have merit, but they are not central to building a sound regulatory foundation—and they may introduce complexities of their own. The central task, in my view, is to ensure that the ECSPR works as intended: simple, uniform, and cross-border.

In Investment Crowdfunding, I emphasized that the success of this market depends on a carefully calibrated legal regime—one that keeps compliance light because the amounts raised are modest, avoids unnecessary fragmentation, and empowers investors without infantilizing them. The EDFA report shows that the KIIS disclosure system has delivered on this vision, but that complexity and inconsistency have not.

The lesson, then, is that disclosure is not the enemy of crowdfunding. When scaled correctly, as with the KIIS, it can meet investor needs at acceptable cost. The real obstacles are the fragmented implementation of rules and the persistence of national barriers. If policymakers are serious about building a European crowdfunding market, they should take EDFA’s advice: streamline language rules, facilitate cross-border uniformity, and unlock secondary markets. If they do, the ECSPR could yet fulfill its promise of creating a true pan-European channel for entrepreneurial finance.

Andrew A Schwartz is a Professor of Law at the University of Colorado, holding the DeMuth Chair of Business Law.