When first contacting CoinDesk, the team behind a movie called "Braid" had big news to share.
Unlike your traditional crowdfunding model, used by the likes of Kickstarter or Indiegogo, the goal of the project was to let a global pool of buyers both crowdfund and profit from the movie. Among the tools at their disposal were ethereum, a global blockchain platform, and WeiFund, a new crowdfunding platform built on top of this emerging technology.
Mitzi Peirone, the director of Braid, heralded the solution as one that would make crowdfunded movies – by the fans, for the fans – more democratic.
"A Kickstarter movie could go on to make millions of dollars and the people that gave money in the first place wouldn't see a return," she said.
Further, there were implications for the blockchain sector and its practices.
According to producer Logan Steinhardt, the token was to be unique – not only in that it represented a stake in a movie, but that it was to be the first one issued by a US company in "full legal compliance with applicable regulations".
At a time when regulations surrounding popular blockchain platforms like bitcoin and ethereum are still murky, the claim was big news. US law firm Perkins Coie, the team said, had even worked on the structure.
And then came the regulatory hurdles.
Eventually, when opportunities to participate in the crowdfunded movie finally become available on WeiFund (designed by blockchain firm ConsenSys), the offering will be a bit different than described.
Backers will still receive a tradeable token as part of a revenue sharing model, but it will only be available to non-US investors. As it stands, WeiFund still isn't a fully fledged crowdfunding platform, and current regulations mean that WeiFund has to jump through some hoops to make this work.
Part of the reason for this is uncertainty around blockchain and its use in crowdfunding.
While there are some US-based seed investors who have participated privately, they will not be issued any tokens. The token sale for Braid, which hopes to raise $1.25m, will rely on international backers alone.
Still, the campaign will adhere to Regulation S of the Securities Act, permitting sales to international investors, which was the "easiest and quickest path" to compliance, Lowell Ness, partner Perkins Coie, explained.
"We didn't have time to get WeiFund set up with the SEC as a crowdfunding portal. This is a new process and can take 4–6 months. We're working on that for future offerings by WeiFund," he said.
Another issue is how the specific funding for the movie was designed.
While some cryptographic tokens are made to function as digital commodity akin to bitcoin, others need to be structured like traditional investment offerings.
"This token is inherently designed to give people the benefit like a security would give them, this right to profit, this right to revenue, so it is a very unique structure," Matt Corva, legal counsel for ConsenSys, told CoinDesk.
The whole narrative, however, illustrates the current difficulties in unlocking token sales as a funding mechanism for startups and projects – even movies.
The campaign, put together by a team of lawyers at ConsenSys and Perkins Coie, aimed to fit the idea for Braid's offering within regulations that could serve as a guide to other companies for running compliant crowdfunding, albeit with new tools.
Crowdfunding, for example, is governed by Regulation CF and requires an intermediary to assist the issuer. Previously, this intermediary needed to be a registered broker-dealer, and while no longer the case, the new rules still require this intermediary to register with the SEC and FINRA.
Ness describes this effort as offering a sort of light version of a broker-dealer, where WeiFund is building a system for verifying accredited investors that use the service.
"You will see that forthcoming on future launches in which we do target the US market in depth," added Corva. WeiFund is tight-lipped on when these other sales will begin, but revealed there are a few in the pipeline in the coming "weeks to months".
But, why go through all this effort? Those involved believe it could usher in a new way to pay for creative works.
All revenue generated by the film, plus 15% interest, will be paid back to investors until they make their original investment back. Targeting $1.25m via the crowdsale, the first $1.43m goes straight to investors. Beyond that, 30% of revenue will go to token holders.
Once the film starts to generate this revenue, this money will be pooled into an account and deposited into a cryptocurrency exchange. These funds will be either converted into ether, the token on the ethereum platform, or a US dollar token.
A full platform
And while it didn't go off without a hitch this time, those involved see the ethereum blockchain – and WeiFund specifically – as something that could come to have an impact beyond entertainment.
"Right now, we're in a pretty critical stage where we're between our service model, servicing these independent crowdsales, not as a platform but as a crowdsale provider,” said Nick Dodson, one of the main developers behind WeiFund.
Currently Braid is in a "soft-prep period" and will begin shooting in June with the aim of having a cut ready by fall.
But those involved are optimistic about the funding.
"I think this is going to be revolutionary for independent filmmakers out there," said Peirone, adding:
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