As witnessed in Canada in the past two weeks, crowdfunding can raise significant amounts of money very quickly. A recent GoFundMe campaign in support of the “Freedom Convoy” in Ottawa raised nearly $8 million in a short period of time. Shortly after, GoFundMe, a for-profit corporation based in California, shut down the campaign after learning the campaign violated their policies (after some initial confusion, they’ve since announced they will refund all the donations). After this, another platform, GiveSendGo, stepped in and promised to deliver newly raised funds to the convoy organizers, and successfully raised $4.5M USD in 24 hours.
There is much more that happened in between, of course, but one result of the fundraising and ongoing protest measures was the invocation of the Emergencies Act in Canada, and sweeping measures to halt funding for the convoy.
As this crisis continues to unfold, I wanted to take the opportunity to provide clarity on how crowdfunding through the for-profit crowdfunding platforms the Emergencies Act is targeting is vastly different from collective fundraising for registered charities. I also want to offer reassurance to Canadians that giving through CanadaHelps, and directly to charities, is still a safe and important activity, in part because of the strict regulations to which charities are required to adhere.
What is Crowdfunding?
“Crowdfunding” commonly refers to the practice of raising money from a large number of people online. Most of the time it is used to mean funding a project or venture, an individual in need, or even an activist initiative, through a for-profit platform like Kickstarter, Indiegogo, or GoFundMe. But because of this broad definition, the term is sometimes used for fundraisers benefiting—or even run by—a charity, which can get confusing when situations like this arise.
So how is it different when a registered charity raises funds online, or “crowdfunds,” compared to crowdfunding that benefits an individual or group?
Registered Charities are Highly Regulated
As a public foundation with a mission to connect charities and donors and democratize access to effective fundraising tools, CanadaHelps prioritizes easy online giving and fundraising. However, we only accept donations designated for active registered Canadian charities that are already vetted by Canada Revenue Agency. In other words, we are very different from for-profit crowdfunding platforms.
Canadian charities, of which we are one, operate in a highly regulated environment which ensures funds are properly used. CRA requires that charities provide transparency to the public in their filings, and charities are required to comply with many regulatory requirements. For example, Canadian charities can only do charitable activities within their charitable objects (their defined purposes) and must avoid any illegal activities. CRA’s Charities Directorate is responsible for oversight of the registered charities to which we provide funds.
Crowdfunding by for-profit companies is a relatively recent phenomenon and does not have the same regulation. Fast-moving and well-financed tech companies often operate in their own version of the wild west until regulations catch up to them (if ever). The money raised through these platforms can go towards individuals, organizations, businesses, and various others, for various activities and causes, which are typically not charitable.
One thing I expect will come out of this situation with the convoy — which raised many questions about foreign involvement in domestic political matters, and the actual and expected privacy of donating to crowdfunding campaigns — is that more people will pause before contributing to unregulated crowdfunding campaigns in the future. Beyond any individual donation, many people are likely now thinking hard about the current crowdfunding model that, until now, has continued to thrive with so little oversight.
We hear more and more that Canadians want to actively support ethical businesses, and when they give money, they want to know it is being used well. By giving directly to charities through a platform like CanadaHelps, they can be confident the money reaches trusted organizations quickly.