The ethics of crowdfunding

The ethics of crowdfunding

  • AuthorRodrigo Davies
  • Published Tuesday, December 17th, 2013
  • Comments1

Crowdfunding, the raising of funds from a large pool of donors in a time-limited campaign on an online platform, has grown exponentially since today’s biggest brands — Kickstarter and Indiegogo — emerged in the last six years. The earliest popular experiments in crowdfunding were in the music industry, often by artists who had struggled to find funding from record labels or disliked the terms they were being offered. But as crowdfunding has expanded into a very wide range of sectors, from electronic hardware to film-making, it has largely shed its image as a way to fund the unfundable, and has become an attractive alternative funding strategy in its own right. In 2013, the industry is expected to raise $3 billion, driven both by the proliferation of the number of platforms and the emergence of multimillion dollar campaigns, some of which have been organized by celebrities such as Spike Lee and Zach Braff.

This simultaneous expansion of the ideas being considered, the participants involved and the speed and scale at which ideas can be realized magnifies many of the ethical questions that presently exist around who is entitled to fundraise, and for what purpose. None of these questions are unique to crowdfunding, but by calling on individuals to contribute to the fundraising process and making it transparent suggests that crowdfunding is in some ways a quasi-public activity and therefore should be held to different standards than an entirely private one.

A small number of crowdfunding campaigns have raised explicitly legal-ethical questions. The founders of the online magazine Gawker started an Indiegogo campaign in May to finance the acquisition of video footage purporting to show the Toronto mayor smoking crack cocaine that had previously been reported on by the Toronto Star newspaper. At the time the campaign was criticized for two reasons: its implications for the judicial or disciplinary process Rob Ford was likely to face, and the fact that the funds raised were expected to be donated to a gang widely reported to be involved in organized crime. Six days into the campaign the organizers warned visitors to the campaign Web page that they had lost contact with the gang and that “our confidence that we can consummate this transaction has diminished.” Less than two weeks later, Gawker reported that a source had told them the video had disappeared. Neither outcome seemed to affect the campaign: it raised $201,204, exceeding its $200,000 target. Gawker has since donated the proceeds to four Toronto-based nonprofit organizations that work on substance abuse issues. Although the video has not been found, Ford has publicly admitted smoking crack cocaine. The campaign was by no means the first example of a media outlet paying for information from a dubious source, but Gawker’s use of crowdfunding gave the practice an unprecedented publicness and involved the audience directly.

Beyond instances that have obvious legal implications — such as funds being directed to criminal activity — there are many cases in which crowdfunding raises broader ethical issues. These typically fall into two categories: cases that pose potential harm to individuals and cases that pose potential harm to existing institutions or processes. Our reading in either case may be politically oriented and is likely heavily contested.

Two of the most strongly criticized crowdfunding campaigns on ethical grounds raised the question of harm and offense to individuals. The American Freedom Defense Initiative, a radical anti-Islamic group, raised $41,500 on Indiegogo (of a $50,000 target) in May for an advertisement campaign warning against what it calls “the threat of jihad and Islamic supremacism.” The organization, which is classified by the Southern Poverty Law Center as a hate group, had previously attracted controversy for its posting of anti-Muslim advertisements at subway stops and on buses. Indiegogo representatives responded to several public calls for it to remove the campaign by saying that the views of campaign creators did not reflect those of the platform. It’s not clear why the campaign was deemed to be within the platform’s terms of service, which prohibit campaigns from “promoting terrorism, abuse, libel, hate, personal injury, property damage, violence, racial intolerance or financial exploitation.”

Kickstarter plays a much more active role in moderating projects that appear on the site, and says that one of its staff members reviews every campaign proposed. But the platform faced somewhat similar moral questions after it approved “Above The Game,” a guide claiming to help men seduce women. The controversy began after Somerville, Mass.-based comedian Casey Malone blogged about the campaign and posts by the project’s author Ken Hoinsky on the website Reddit that appeared to encourage men to make unwanted sexual advances toward women. The material was not posted on the Kickstarter page, but critics suggested the platform should take into account the tone of the proposed book and the likelihood it would promote misogyny. Kickstarter’s terms of service prohibits campaigns that are “threatening, abusive, harassing … or invasive of another’s privacy.” Kickstarter declined to stop the campaign during its funding period, later citing a lack of time to investigate and an inherent “bias … towards creators” that caused staff to be cautious about canceling the project. Hoinsky raised and received $16,369, eight times his original funding goal. Kickstarter later said it had made a mistake in allowing the campaign to continue, banned seduction guides from the platform and donated $25,000 to an anti-sexual violence organization, the Rape, Abuse & Incest National Network (RAINN). “We take our role as Kickstarter’s stewards very seriously. Kickstarter is one of the friendliest, most supportive places on the web and we’re committed to keeping it that way,” the platform’s representatives wrote in a blog post.

The extent of the responsibility that crowdfunding platforms feel toward donors and project creators varies greatly. Even more variable are platforms’ perceptions of their ethical and moral responsibility toward existing institutions and broader social impacts. One of the most common criticisms of crowdfunding is the notion that its expansion will “crowd out” other forms of investment, particularly from the public sector. Daren Brabham, an assistant professor at USC Annenberg who studies crowdsourcing, suggests that the success of crowdfunding will undercut and disincentivize public funding for the arts: Kickstarter’s published figures showed that the platform raised more in 2012 for the arts than the National Endowment for the Arts. The rise in the number of crowdfunding projects that supply public goods or overlap with services governments might be expected to provide has added weight to this critique. Last month three campaigns appeared on the Crowdtilt platform to fund private security forces in three neighborhoods in Oakland, Calif. Two of the campaigns reached or exceeded their target, and the trio collectively raised $60,101. While private security forces are common in the city, the campaigns were criticized for encouraging their growth and, due to the ease of creating and “cloning” crowdfunding campaigns, causing a contagion effect that could undermine the role of policing. For the libertarian, this may be an encouraging development that supports the reduction of government spending. For the progressive, it is a threat to the nation state that risks widening existing social inequalities.

The publicness and transparency of crowdfunding suggests that its regulatory and ethical framework needs to mirror that publicness. Platforms will increasingly be called on to account for their actions as the volume of campaigns increases. How platforms respond to ethical questions raised both at the level of individuals and at a broader level will likely depend on their business models. Platforms that are seeking to boost volume may prefer to adopt a legally-driven approach to content, excluding only those projects that pose the threat of litigation. Platforms that aim to cultivate particular user communities may decide to impose guidelines that provide ethical frameworks salient to them. As the cases mentioned suggest, the ethical contours of crowd funding are often determined by users of a platform just as much as they are by the platform’s organizers. Most platforms encourage users to assist in regulation by reporting campaigns that may violate the platform’s terms of service, although users who are dissatisfied with a campaign often turn to online mass media to press their case. Those dynamics don’t always work perfectly, either, since large organized groups of users may argue for their interests and preferences in a way that disadvantages minority groups. But when managed effectively, they can help to establish a system of ethics that is participatory and highly responsive. For the crowdfunding industry to establish and retain a sound ethical footing, it should embrace the interplay of community and platform to develop conversations and opportunities that are productive and avoid harm to individuals and institutions.

Rodrigo Davies is a researcher at MIT’s Center for Civic Media, founder of the Civic Crowdfunding Research Project and a master’s candidate in Comparative Media Studies. Contact him via or on Twitter @rodrigodavies.


One Response to “The ethics of crowdfunding”

  1. 4thwest says:

    Proposal: A crowdfunding site that allows all campaigns except those which violate the law. People who dislike a particular campaign can make nonrefundable donations to an acceptable charity that would count against the crowdfunding goal. Crowdfunded ethics.

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