Minnesota AG Applies Charity Law to Crowdfunding Campaign and Obtains Repayment of $120,000

Minnesota Attorney General Keith Ellison announced a settlement agreement with an individual who organized an online crowdfunding campaign to honor a deceased public school worker by pay down students’ lunch debts. The campaign began as a class service project for a course that the individual, then a college professor, taught. The AG alleged that of $200,000 eventually raised, $120,000 had been accounted for. The individual, while not admitting any wrongdoing, agreed to repay this $120,000 amount to the AG, to be distributed to St. Paul Public Schools for retiring students’ lunch debts.

The most notable aspect of this matter is that as detailed in the announcement the Minnesota AG is taking the position that Minnesota law relating to charitable solicitations and charitable assets extends to crowdfunding and other campaigns that raise funds for any charitable purpose, even if neither the person raising the funds nor the intended recipient is a charity. This contrasts with some other states, such as Michigan, where state law explicitly does not reach crowdfunding to benefit specific individuals but instead only reaches crowdfunding done by or for the benefit of a charity. Of course, state (and federal) fraud laws apply to crowdfunding if the organizer lies about the use of the funds donated, regardless of the nature of the organizer or beneficiary.

Coverage: Pioneer PressN.Y. Times.

For more details about state regulation of charitable crowdfunding, see my paper on the topic (Indiana Law Journal, forthcoming 2022).

Lloyd Mayer