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"Kickstarter is not a store,” the crowd-funding website’s founders infamously declared in 2012, when questions first arose about the rights of users who give money to failed projects. Even so, Kickstarter’s terms of use say that creators who cannot complete their project and deliver its rewards are supposed to offer refunds and might be subject to legal action if they don’t. 

In May 2014, Washington attorney general Bob Ferguson took them at their word and filed suit against Asylum Playing Cards. The 2012 Kickstarter campaign to fund a set of horror-themed playing cards stopped posting updates a year earlier. Asylum had taken in $25,146 (exceeding the campaign’s $15,000 goal) from 810 backers, 31 of whom were identified as Washington residents. And what Ferguson called “the first enforcement action in the nation against a crowdfunded project that didn’t follow through on its promise to backers” succeeded this July, netting restitution for the Washington-based donors and slapping Asylum with $31,000 in civil penalties. The question now is what precedent the first-of-its-kind ruling will set. 

“I wouldn’t say that every single time a Kickstarter venture fails it’s a Consumer Protection Act violation,” says Shannon Smith, the Washington attorney general’s Consumer Protection Division chief. But, she adds, “I think you will be seeing more enforcement actions against entities that are using the Kickstarter platform.”

Perhaps not coincidentally, the 2012 Kickstarter for Clang, Seattle author Neal Stephenson’s realistic sword-fighting video game that raised $500,000 before flaming out, began offering refunds to backers who requested them a few months after Washington filed its Asylum suit. 

“There’s risk inherent in creating anything new, and some projects that successfully raise their goal won’t come to life,” says Kickstarter spokesperson Justin Kazmark. “But creators who abuse our system and backers’ trust expose themselves to legal action.” In other words, government regulations could make crowdfunding more reliable, but people who support projects have to remember it’s called Kickstarter, not Kickfinisher.

“By their very presence, these projects suggest financial risk,” says Bryan Adamson, a professor of consumer protection law at Seattle University. “Don’t invest if you are risk averse.” He adds that it’s important to do the thing you never do with iTunes or Facebook: Read the terms and conditions, and also the proposal’s details. Because while taking a chance on unique projects produced outside of the traditional commercial machine is part of the appeal, it can also be part of the heartache.

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