Legal Implications of
Fundraising via
Social Media
Bob Carlson
Missouri Attorney General’s Office
Jeremy Sher
President, Grassroots Giving Group, Inc.
We ♥
Questions
Attorney General’s Powers
 Attorney General oversees charitable
solicitations
1. As Guardian of Charitable Assets, and
2. Under State consumer fraud laws.
 Aggressively pursue fraudulent solicitations and
other deceptive practices.
 Maintain registration of nonprofits and
professional fundraisers who solicit donations.
Attorneys General are active
 States are more active than most realize
 Cases go unreported
 AGO’s exercise discretion so to preserve nonprofits
fundraising ability
 Ex: Missouri is a mid-sized state with mid-sized staff.
 80 to 100 cases or investigations per year.
 Everything under nonprofit authority
 Follow up on more complaints too
 Interested and active in online solicitations, too
 Remember: we can see these from our desks
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About
Grassroots Giving Group
 Consulting on Internet fundraising issues
 Focus on ethics/transparency, public policy
 Potential new fundraising websites in beta testing
 Informed by political fundraising experience
-- Tightly regulated sector (nonprofit space
does not need regulations that tight)
-- A system that basically works; can inform
nonprofit “conduit” policy
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Where we’re going today
1. Attorney General and/or Secretary of
State powers for registration and fraud
laws
2. Legal bounds of our jurisdiction over
online solicitations
3. Who needs to register?
4. Who is a professional fundraiser?
5. Other, new considerations
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Overview of fundraising laws
1. Failure to register
If you solicit donations, you may need to register in the
states in which you solicit


Consequences may be severe. On September 2, 2008
Pennsylvania obtained a judgment of over $1,290,000 for
failure to register
2. Misrepresentations or fraud


Obviously, fraud and misrepresentations in soliciting
donations are forbidden
But….
Overview of fundraising laws
Registration with states
In General,
1. If a nonprofit solicits donations, it
must register with the AGO or SOS
o
Some exceptions
2. All Professional Fundraisers must
register with the AGO or SOS

Few exceptions here
3. Fundraising Counsel/Consultant
may have to register
Overview of fundraising laws
Who Must Register?
1. Charitable organization, any person or entity who solicits
funds for any charitable purpose.§ 407.453(2), RSMo
2. Professional fund-raiser,any person or entity who is
retained under contract or otherwise compensated
by a charitable organization primarily for the purpose
of soliciting funds.§ 407.453(4), RSMo
 “Professional fund-raiser” doesn’t include bona fide

employees of charitable organizations who receive regular
compensation.
Salaried development directors are usually exempt
3. Fundraising Counsel/Consultant
 Definitions do vary by state but concepts are similar
Overview of fundraising laws
Common registration exceptions
• Who Doesn’t have to Register? (Missouri list)
• Religious organizations (breadth of definition varies)
• Educational institutions and their related foundations;

An institution with a defined curriculum, student body and faculty,
and which conducts classes on a regular basis;
 Bob’s Fantasy Football Institute does not count
• Fraternal, benevolent, social, educational, alumni, and
historical organizations, when solicitation is confined to
the membership of such organizations or auxiliaries;
• Hospitals and auxiliaries of hospitals,
 Exceptions vary by state, these are the most common
Overview of fundraising laws
Misrepresentations in Solicitations
 Missouri example:
The use by any person of any
deception, fraud, false pretense, false promise,
misrepresentation…. in connection with the solicitation of
any funds for any charitable purpose, is declared to be
an unlawful practice.
 Penalties can be severe
 In Missouri: $1,000 per action
 In Arkansas: $10,000 per violation
 Expectation of aggressive enforcement
 Obviously, misrepresentations in soliciting donations are
forbidden.
 But social media and online soliciting have created more
opportunities for inadvertent (or intentional) violations
The Questions
we get about online fundraising
1. How do I know what states I need to register in?
2. How do I assure that I don’t violate laws
forbidding misrepresentations and other
malarkey in online solicitations?
And if my nonprofit does mess up, who is going to
take action?


Please don’t mess up. We have a whole sector to protect
and don’t need good organizations doing stupid things
while we’re trying to protect them.
3. What else has changed?
Going to try to provide the tools to find the answers
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New Issues for Conduit Fundraisers
Reasonable User Expectations
 No current vendor is in trouble. These are just
questions and potential complications to watch
out for as the market evolves.
 Regulators can help the sector grow in a healthy way.
 Disbursement of Donated Funds
 Regardless of fine print, the donor expects their designated
organization to receive their funds.
 Donor expects their funds to be forwarded timely.
 Donor expects to be credited for the full amount of their gift,
even if a transaction fee is deducted.
 Donor will be shocked if their funds are commingled with
somebody else’s operating budget. They did not consent to
make a zero-interest loan to a portal operator. (e.g. PipeVine)
 Ownership of Data
 Regardless of conduit ownership, nonprofits need their data.
What the courts say
about jurisdiction
 A state (and its AG) have jurisdiction if the
organization has “minimum contacts” with state, and
“purposefully avails itself of the privilege of
conducting activities within that forum state, thus
invoking the benefits and protections of its laws.”
 The Zippo test (952 F. Supp. 1119 (W.D. Pa. 1997)).
 If a Web site is passive andmerely posts information,
there is no jurisdiction.
 If a Web site is interactive, there may be jurisdiction
 If “clearly doing business” online, there is jurisdiction.
 Accepting donations could be “doing business.”
15 years after Zippo, very few websites are “passive.”
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What the courts say, part 2
 Calder v. Jones 465 U.S. 783, 789 (1984)
 Intend to direct activities into a certain state
 A/k/a “purposeful availment”
 Intent has two interpretations
1. Grokster/Kazaa purposefully availed themselves of
doings business in California because they knew
significant number of users were from California.
 Actual intent to go to CA was not necessary
 MGM Studios, Inc. v. Grokster 243 F.Supp.2d 1073, 1087
(C.D. Cal. 2003).
2. Other jurisdictions require actual intent.

Tamburo v. Dworkin, 601 F.3d 693, 704 (7th Cir. 2010).
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What that means
1. Misrepresentations and deceptive acts
 If a donor in a state is the victim of a deceptive act, there is
jurisdiction. Transaction = “Doing business”
 Courts will allow AG’s and SOS’s to protect their citizens
2. Registration
Jurisdiction to require registration is based on “purposeful
availment” and “intent to direct”
 Means: One Big Grey Area
 Charleston Principles
 Recommended guidelines from NASCO
 Adopted 2001 – technologically rather behind the times
 In general, not enacted into law; just ethical guidelines

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The Charleston Principles
 Written in 2001, i.e. well before Mark Zuckerberg got
shot down
on a date, went back to his dorm, and created Facebook while
drinking away his sorrows
 Thus, language only addresses websites but based
on same law as outlined above
 Principles are still good, need to register if:
1. In State where the nonprofit is domiciled (HQ, etc.)
2. In other states if:
A. Specifically targets persons physically located in the
state for solicitation, or
B. Receives contributions from the state on a repeated
and ongoing basis or a substantial basis
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The Charleston Principles
in 2011
 Registration examples: What is “specifically target”?
 Posts on Twitter, Facebook, etc.
 Software platform, i.e. First Giving, Crowdrise, changethepresent.org
 Platform (aka conduit)
 Those who use platform
 Matching services
 Note actions of all involved matter, but not all may
need to register.
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Part II, Who & What
1. Who is making the solicitation?

And thus needs to register
2. Who is considered a pro fundraiser?

And thus needs to register
3. Who is considered responsible when deceptive
acts happen?

And what you should do to protect yourself
4. What could be considered deceptive in 2011?

The issues we’re seeing and are concerned about
5. What is Charitable?
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Part II, Who & What
1. Who is making the solicitation?
 Need a solicitation before any of these laws kick in
 Missouri defines solicitation as: any request, either oral or
written,….for funds, property, financial assistance or
other thing of value
 But who is soliciting?
 Example 1: doGoodr.com, probably not
 Example 2: changethepresent, it could be
Note: all examples are good sites (if they were in
trouble, they would NOT be listed).
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Part II, Who & What
2. Who is making the solicitation?
 If you are making a solicitation, you must register
 Missouri defines solicitation as: any request, either oral or written,….for
funds, property, financial assistance or other thing of value
 But who is soliciting?
 Example 1: doGoodr.com, probably not
 Not compensated by the nonprofits who are listed
 Content is supplied by nonprofits, not doGoodr.com
 Donation button goes to nonprofit’s website
 Example 2: changethepresent, it could be
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Part II, Who & What
Who is making the solicitation?
 If you are making a solicitation, you must register
 Missouri defines solicitation as: any request, either oral or written,….for
funds, property, financial assistance or other thing of value
 But who is soliciting?
 Example 2: changethepresent, it could be
1. Has cart for donations
2. Fees are based on amount donated

Above and beyond the credit card fees
3. Creates its own content
4. Advisors give impression of vetting and recommendations
 Taken together, could be a “request for funds”
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Part II, Who & What
2. Who is considered a pro fundraiser?
 If you’re a pro fundraiser, you need to register
 Missouri definition: anyone who is retained under
contract or otherwise compensated by or on behalf
of a charitable organization primarily for the purpose
of soliciting funds.
 Example1: The platform that somehow endorses
 Many sites provide online platform for charities to
build online presence. My fave: First Giving
 When could they be considered a pro fundraiser:
 Place nonprofit into an issue portfolio, higher search
rank, “featured” nonprofit – all for higher fee (or a fee)
 All original content that requests funds, for a fee
 see definition
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Who is considered a pro
fundraiser?
 Examples 2 and 3: Crowdrise
 Example 2: A pro fundraiser is someone is
compensated by or on behalf of a charitable
organization
 If create online presence to ask for funds and are
not compensated, not a pro fundraiser
 Like Will Ferrell in example
 Example 3: Many entities in one place
 Although Will does not have to register, that does
not necessarily mean Crowdrise and the recipient
nonprofit are off the hook.
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3. Who is responsible
when deceptive acts happen?
 I assume none of you intend to defraud folks
 Example: Mr. Scam and Ripoff Foundation create a page on
an otherwise legit online platform and collect $50,000 by
claiming to help lemurs, but use funds for Mr. Scam’s Corvette
 When is the platform responsible?
 Actual knowledge of fraudulent misuse = in trouble
 FTC v. Neovi , Defendant engaged in an unfair practice
thru its online services when it "engaged in a practice that
facilitated and provided substantial assistance to a
multitude of deceptive schemes.“ 604 F. 3d 1150
 Means you must take some action to prevent being
used as a facilitator for deceptive schemes.
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Who is considered responsible when
deceptive acts happen
And what you should do to protect yourself
 Need to do something
 The specific actions depend on the services you
offer, but would suggest these four guideposts, you
need a system that:
1. Stops basic misuse automatically

Common examples
2. Detects more sophisticated attempts at fraud
3. Requires some active effort by you

no head in the sand
4. Fixes flaws as they become known
 Please cooperate with law enforcement
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4. What could be considered
deceptive in 2011
 Reasonable consumer standard
 Not a jaded, cynical nonprofit expert standard
 Issues regulators have seen that cause concern:
1. Failure to adequately disclose ALL fees
 As stated: Disclose. All. Fees. Upfront.
 Stating 100% goes to nonprofit when PayPal gets 3% is not 100% honest
2. Holding money meant for another organization or cause
for longer than reasonable.
3. Profile hi-jacking on platforms and other forms of ID theft

Platforms should aggressively watch for this
4. Charging unnecessary fees

Saw one website that listed nonprofits then demanded joining
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fee to tweak address information.
Remember:
We ♥
Questions
5. What is charitable?
 (c)(3) v. L3C v. LLC
 For now, only actual nonprofits are…
 Check back next week though
 But…
 Can you have a charitable solicitation for a for-profit
or low-profit entity?
 Many of our definitions only say “charitable purpose”
 No distinction on recipient entity classification
 Where does Social Enterprise fall
 See example
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Part III,
Wait, there’s more
1.The Communications
Decency Act
2.Older statutes that are still
good law
3.Privacy issues (the sleeping
giant)
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The Communications
Decency Act
 Section 230 of the Communications Decency Act (CDA), 47 U.S.C.
§ 230(e)(3) Gives providers of interactive computer services
immunity from some state law claims.
 The immunity is provided to service providers but not content
providers.
 A service provider is completely passive and displays content that is
wholly provided by third-parties while a content provider displays
content for which it is wholly or partly responsible.
 A website can be both
 Can be immune for some content on its website and not immune for
other content.
 Could have immunity as long as the website isn’t encouraging or
facilitating unlawful conduct.
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Communications Decency Act
Case examples
1. Roommates.com ran a website designed to match people
renting out spare rooms with people looking for a place to live.
Then it asked about gender, sexual orientation, and children.
 Sued for Fair Housing Act violations, 521 F.3d 1157 (9th Cir. 2008).
 Not immune because CDA provides immunity only if the interactive
computer service does not ‘create or develop the information in
whole or in part. By mandating information in violation of the FHA,
Roommates.com was ‘developing’ that information rather than just
passively allowing it to be posted.
2. Carafano v. Metrosplash.com, Inc., 339 F.3d 1119 (9th Cir. 2003).
 Anonymous person created a profile for Carafano, an actress, on an
internet dating site.
 Website was immune because the libelous content was created
“entirely by the user without prompting or help from the website”
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Older statutes that are still
good law
 Laws created for good purposes years ago
 Obviously not in every state
 But, as I’ve been saying, you need to be aware of
these issues and respond to them.
1. Some states require that if you are going to
solicit for a nonprofit, you need its written
permission
2. Some states require that funds solicited be
placed into a bank account controlled by the
nonprofit.
3. Others?
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Privacy issues
 Well beyond the scope of this presentation
 Will be important in the coming years
 Some general concepts:
1. Must protect data against theft
2. Also, must disclose when will use or sell data
Data is an asset


Donor lists, etc.
3. Remember what your donors and constituents
expectations are.


If they believe you violated their privacy they won’t
give and will tell their friends
Even if you violated no laws.
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Contact Information
Bob Carlson
Missouri Attorney General’s Office
815 Olive St., St. Louis, MO 63101
314-340-6816 / 314-340-7957 (fax)
bob.carlson@ago.mo.gov
Jeremy Sher
Grassroots Giving Group, Inc.
16 Union Park St., #7, Boston, MA 02118
617-477-5825 / 617-249-0335 (fax)
jeremy@grassrootsgivinggroup.com