Musician Fundraising - From Busking to Internet Crowdfunding

Musician Maria Schneider had a band and a creative vision, but she needed capital to bring her vision to life. Busking wouldn’t produce the money she needed. So, rather than turning to record labels for financing, in 2003, Schneider became the first artist to launch a project on ArtistShare, the first crowdfunding site.

Schneider’s pitch didn’t offer monetary rewards to those funding her efforts. Instead, she offered participation in her vision for her album Concert in the Garden. The entry-level offers read like a patronage package: a downloadable, CD-quality recording, plus photos from the recording session, a one-hour lecture she created in response to participant questions, and interviews with members of the orchestra.

As the participation levels climbed, the rewards became even more revealing about what she was actually selling. Some offers provided downloadable PDFs of solo parts for the album’s pieces in multiple transpositions. Other benefits included downloadable MP3s of the compositions mixed “without” the improvised solos (perhaps a modern version of music minus one), plus streamed interviews with orchestra members about how they approached those solos.

Not only did Schneider revolutionize music financing, but Concert in the Garden became the first Grammy-winning album to be crowdfunded and to have internet-only sales. ArtistShare describes Schneider’s project as its flagship origin story. More importantly, Concert in the Garden’s success proved that musicians could raise needed funding through an internet-funded, direct-to-fan model.

While Schneider’s fundraising wasn’t subject to securities laws, in some cases, securities laws apply to artist fundraising. This article discusses when musician fundraising crosses the line into securities law and what musicians can do to avoid violations.

Why the SEC Can Regulate Sales of Orange Groves, ATMs, Fine Art, and Music

Musicians often believe their work has nothing in common with stocks and bonds. However, musicians need to carefully navigate their fundraising to avoid running afoul of securities laws. That’s because of something the Securities Act of 1933 calls “investment contracts.”

The Securities Act doesn’t define “investment contract,” and for a number of years, no one was sure what that term meant. However, in 1946, in SEC v. W.J. Howey Co., the Supreme Court provided a definition of “investment contract,” which still applies today.

Like musician fundraising, Howey involved something most people wouldn’t think was a cousin to stocks and bonds: the sale of orange groves with an optional management agreement. The Supreme Court disagreed.

In Howey, the Supreme Court held that a transaction is an investment contract if:

1. There is an investment of money (or other assets).

2. The investment is in a common enterprise (generally, this means a pooling of assets).

3. There is an expectation of a profit.

4. The profit comes from the efforts of a promoter or a third party.

Over time, a number of equally unlikely investments have been characterized as investment contracts. Examples include whiskey warehouse receipts, commercial real estate funds, pay phones and ATMs with placement contracts, interests in a lumber mill, fine art collections, and music royalty funds.

The reality is that any time a music fundraising campaign involves offering backers the potential for financial return, such as a share of royalties or business equity, it is an investment contract. So, music fundraising with a potential financial return is likely to be subject to securities laws.

Revenue-Sharing and Royalty Financing

Royalty financing platforms like Royalty Exchange and SongVest have emerged, typically working with legacy catalog holders or established acts. These types of fundraising, and any other structure in which investors are promised a share in future artist income, are investment contracts.

Whenever investors are promised a share of streaming royalties, ticket sales, publishing, or any other future musician revenue in exchange for upfront capital, it will be an investment contract. That’s because those business models involve an investment of money in a common enterprise (the music project) with the hope of a profit from the efforts of a third party (the musician).

Regulation Crowdfunding (Reg CF)

Crowdfunding is a popular term – and it’s used in many contexts, most of which are securities (and a few of which aren’t). Equity crowdfunding under Regulation CF, adopted in 2016, allows small businesses, including musicians or music-centric startups, to raise up to $5 million annually from the general public, provided the sales are through SEC-regulated online portals.

Many investments require that investors be accredited (which generally means they have an income of $200,000 per year or a net worth of $1 Million, not counting their home equity). Limiting fundraising to wealthier individuals, however, runs counter to a common secondary goal in musician fundraising: developing fans and enhancing fan loyalty. Frequently, an early-career musician’s audience doesn’t have the means necessary to be accredited.

Reg CF allows non-accredited investors to participate, although limits apply based on income and net worth. For musicians with a solid fanbase (or those seeking to build one) and a defined business model, Reg CF can offer not just financing but also a strong sense of community ownership. Details about Regulation CF are beyond the scope of this article (but are covered in other articles in my blog at www.whitmanlegalsolutions.com/blog). Suffice it to say that the benefits of Regulation CF offerings come with additional cost and ongoing administrative burdens, including filings with the SEC, with which musicians may require outside assistance.

What’s Not a Security

The most traditional type of donor fundraising, busking, where a musician performs in a public place hoping for donations, isn’t a security. Those who choose to drop a few coins or bills in the musician’s open case except nothing in return for their donation. While busking usually doesn’t offer the musician the additional benefit of building a fan base, there are musicians who build a small following by performing for years at the same location.

Schneider’s fundraising was a more effective way of building a fan base while also fundraising. Unlike with busking, her donors might have expected something in return for their contribution, but they didn’t expect a profit from their contributions. Rather, donors received a fixed product or reward, which was paid regardless of the endeavor’s success. Similar to ArtistShare, Kickstarter, and IndieGoGo operate “rewards-based” crowdfunding, where backers support projects in exchange for products, advanced releases, or tickets.

Most Kickstarter and IndieGoGo campaigns look like the sale of products, rather than an investment, since campaigns usually are set up so backers receive a specific product in exchange for payment of a stated amount. Importantly, backers do not receive any share of profits or ownership, nor do they have any expectation of a gain or profit from their investment. Therefore, they usually aren’t investment contracts under securities laws.

However, musicians must still meet investor expectations and deliver the expected reward regardless of the endeavor's success. The cost of rewards can be burdensome and lead to losses if a project isn’t successful.

GoFundMe is another popular platform used by musicians, especially during crises such as medical emergencies, instrument theft, or canceled tours. Unlike Kickstarter, GoFundMe donors don’t expect anything in return for their donations (other than gratitude).

The GoFundMe model is even further removed from securities regulation than Kickstarter. Since there's no quid pro quo—no product, no access, and certainly no revenue-sharing—these campaigns are clearly outside the definition of a security.

Although donation-based platforms might not sell securities, they still present risks for musicians. Transparency about how funds will be used is still vital. If a musician claims funds will be used to produce an album and instead uses them for unrelated personal expenses, they may face backlash or even fraud allegations.

Best Practices for Musicians Navigating Securities Laws

Although these models offer exciting funding options and can turn fans into investors (and vice versa), they carry legal and logistical burdens. Therefore, artists must carefully track income, distribute payments, and maintain investor communications—all tasks that require robust infrastructure.

For musicians exploring any investment-based fundraising, several best practices can minimize risk and maximize success:

1.     Promises of variable returns or rewards that are contingent on a project’s success are usually securities. So, don’t use those models unless you’re willing to engage an attorney to help with securities law compliance. Instead, offer specific rewards, which donors will receive regardless of the project’s success.

2.     Consult with an attorney: Since both rewards programs and securities frequently are characterized as crowdfunding, it is easy for the uninitiated to cross the line. An experienced securities attorney can help musicians navigate the crowdfunding minefield.

3.     Choose the right platform: Kickstarter and GoFundMe are great for non-investment contract models. Reg CF portals sell securities. However, without legal advice, it’s possible to inadvertently turn a Kickstarter or IndieGoGo fundraising project into a security.

4.     Disclose risks to investors if you're offering a share of income or business equity. Securities laws require that investors be informed of material risks involved in their investment.

5.     Maintain fan or investor relations post-fundraising. Fan development and loyalty often are secondary goals with musician fundraising, but musicians must commit to long-term fan interaction to maintain those relationships. Plus, transparency builds trust, making donors or investors more likely to support future fundraising efforts.

© 2026 by Elizabeth A. Whitman

Any references to clients and their legal situations have been modified to protect client confidentiality.

DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it unless a written contract is signed by all parties.