The European Crowdfunding Service Providers Regulation (ECSPR) was meant to be a milestone in the EU’s push for a truly integrated capital market, creating direct investment opportunities for retail investors, by offering a unified licence, harmonised disclosure, and a level playing field for platforms and investors alike.
ECSPR has been spearheading a new wave of EU policymaking, early policy engegement, market-driven and supported by data. And while the ECSPR market is still young, the regulation has succeeded in creating a basic harmonized framework for crowdfunding across the EU, with regulatory convergence slowly but surely seeking to streamline the application across the EU.
Yet, as we have recently explored, the reality is more complex. In our recent article on Germany’s crowdfunding market post-boom reckoning, we highlighted how ongoing litigation and market fragmentation are undermining the promise of ECSPR in Europe’s largest economy and beyond, indicating issues with pre-ECSPR investment structures. Meanwhile, our look at the €5m threshold revealed how market interests, rather than market evidence, is driving calls for change. This is raising questions about the Regulation’s core objectives.
These issues are not isolated. They point to a deeper paradox at the heart of European harmonisation: even as the EC lawmakers sought to replace a patchwork of national rules with a single, coherent framework, national legal traditions and political pressures continue to carve out exceptions. Nowhere is this tension more acute than in Germany, where the persistence of the legacy Vermögensanlagengesetz (VermAnlG) alongside ECSPR is not just a regulatory quirk, but a structural challenge to the very idea of a harmonised European crowdfunding market.
ECSPR as a paradigm shift in EU policy making
The European Crowdfunding Service Providers Regulation (ECSPR) was conceived as a cornerstone of the EU’s effort to overcome the fragmentation of crowdfunding markets, aligning investor protection, market integrity, and cross-border access to capital under a single regulatory regime. By introducing a unified licence, harmonised disclosure requirements, and a common supervisory framework, ECSPR aimed to replace a patchwork of national rules with a genuinely European market infrastructure, a first of its kind.
Beyond its immediate subject matter, ECSPR also marked a shift in the Union’s approach to financial market regulation. It was among the first EU initiatives to combine early market engagement, iterative rule-design, and close cooperation between supervisors and practitioners, anticipating later frameworks such as the FinTech Action Plan, the Capital Markets Union, and the Savings and Investments Union. Direct similarities can be found in more recent policy files such as the Markets in Crypto-Assets Regulation (MiCA) and the proposed EU-Inc. In this sense, ECSPR was not only a sectoral regulation but a test case for how the EU can build harmonised markets for SMEs and retail investors in practice, and a testbed for new policy developments aimed at creating a harmonised EU legislative framework.
The effectiveness of such a harmonisation model ultimately depends on its consistent application across Member States. National implementation becomes the actual benchmark of success. Where national legal frameworks continue to offer structurally lighter or parallel alternatives for economically comparable activities, the risk is not merely regulatory complexity, but a gradual erosion of the level playing field ECSPR was designed to create. It is in this broader context that the German case becomes instructive.
Germany’s VermAnlG’s Persistence Subverts the European Crowdfunding Regulation
In Germany, the EU’s largest economy, the promise of a harmonised crowdfunding market remains at best partially realised. The continued reliance on the Vermögensanlagengesetz (VermAnlG) to structure crowdfunding investments via Nachrangdarlehen (subordinated loans) has created a parallel regulatory channel that operates alongside, and often instead of ECSPR. This is not a marginal legal curiosity, but a structural divergence that undermines both the Regulation’s harmonisation objectives and its core investor-protection logic.
From the perspective of retail investors, this distinction is often invisible. VermAnlG-based offers are marketed, branded, and distributed as “crowdfunding” or “crowdinvesting” in exactly the same way as ECSPR-compliant offerings. While disclosure exists and the ultimate responsibility lies with the investor, if the regime difference requires a lawyer to be understood, it is unlikely to provide meaningful protection for retail investors. The result is a market in which investors reasonably assume a common level of regulatory protection where, in fact, materially different legal regimes apply.
One may argue that ECSPR’s scope is clear and limited to transferable securities and certain loan-based crowdfunding, and that VermAnlG is a legitimate national regime. However, the Regulation’s recitals and policy objectives explicitly aim to prevent regulatory arbitrage and ensure a level playing field. The economic substance of Nachrangdarlehen (public, high-risk, illiquid investments marketed to retail investors) aligns with the risks ECSPR was designed to address. The Commission and ESMA have the authority to clarify that instruments with equivalent economic risk profiles should fall under ECSPR, regardless of their legal form.
This legal anomaly in Germany should be understood against the backdrop of recent structural shifts in the European crowdfunding market. The sector is undergoing a period of rationalisation, with mergers, exits, and licence returns reflecting pressure on scale economics, compliance costs, and uneven cross-border activity as we wrote last month. Germany’s divergence stands out in that context: while consolidation in other Member States has taken place within the ECSPR framework, Germany’s use of VermAnlG has contributed to a fragmented market that sits at odds with the discipline and harmonisation emerging elsewhere.
When Legal Form Overrides Economic Reality
The divergence rests on a narrowly formal legal interpretation. Under German law, Nachrangdarlehen are classified as Vermögensanlagen rather than securities or transferable instruments, placing them outside the traditional scope of MiFID II and, by extension, outside ECSPR as interpreted domestically. To be clear, the prevailing supervisory interpretation in Germany hinges on a narrowly construed reading of a specific provision within the EU legal text. This reflects a formal reading of said legal text that prioritises classification over economic substance and, as a result, risks undermining the Regulation’s harmonisation objectives.
This interpretation, while legally defensible in isolation, sits uneasily with the economics of these products. Nachrangdarlehen are public investment instruments offered to retail investors, typically without collateral, with repayment contingent on issuer solvency, and with risk profiles comparable to ,and often inferior to equity. In economic terms, they function as high-risk investment capital without the benefits of equity ownership, and although they are called loans (Darlehen), they are not consumer loans.
ECSPR was designed to balance investor protection with cross-border scalability. Its requirements were and remain proportionate. The low uptake in Germany, only three of the six platforms initially licensed under ECSPR remain active as of early 2026 ,suggests that the issue is not ECSPR’s burden, but the availability of a lighter and cheaper alternative. In France, by contrast, some 50 platforms operate under ECSPR, demonstrating that the regime is workable for a range of business models.
ECSPR was explicitly designed to capture the provision of crowdfunding services, irrespective of the legal form of the underlying instrument. Its recitals emphasise the elimination of regulatory arbitrage and the creation of a level playing field precisely to prevent such national carve-outs from persisting under different labelsb. While lawyers may say that the recitals of ECSPR do not override operative provisions, the question remains whether a European regulation of services can be simply neutralised by changing legal wrappers. If so, then ECSPR is not a harmonisation regulation, nor is MiCA, and neither will be EU-Inc.
Allowing VermAnlG-based crowdfunding to flourish alongside ECSPR therefore creates a de facto two-tier system: one regime built on harmonised investor safeguards and cross-border scalability, and another that remains national, lightly supervised at best, and significantly cheaper to operate.
The StoFöG and the Deepening of Regulatory Divergence
The recent adoption of the Stärkung des Finanzmarktintegritätsgesetzes (StoFöG) in Germany has further entrenched the divergence between national and EU crowdfunding regulation. Far from aligning with ECSPR’s harmonisation objectives, StoFöG mirrors a policy discourse in which strong stakeholder positions, including from non-regulated platform operators and cooperative banking actors, were clearly reflected. The result strengthens the position of Nachrangdarlehen under VermAnlG, while leaving key aspects of ECSPR implementation, such as liability rules, unaddressed. While ECSPR liability implementation is a national competence by design, Germany’s choice to diverge is political and certainly not legally unavoidable.
Germany has a historically strong liability regime, largely in line with many of its EU counterparts, but in the case of ECSPR, liability does not align with traditional German approaches either. It could be argued that higher liability could stifle innovation or that proportionality for SMEs is needed, but it is unclear whether the German approach actually reduces liability for SMEs. This creates confusion, especially in cross-border scenarios, where SMEs now have to deal with variations in liability regimes; plus, it sets ECSPR apart from other capital market liability regimes within Germany.
We now have a troublesome two-tier system within Germany itself:
- National rules for certain crowdfunding activities (notably those outside ECSPR’s scope), which may appear robust but often apply only to a shrinking segment of the market.
- Less stringent or ambiguous liability rules for ECSPR-regulated platforms, as Germany has not aligned its ECSPR liability framework with those of other EU Member States.
The result is regulatory arbitrage in practice: platforms can choose between regimes based on liability exposure, compliance costs, and supervisory intensity, rather than on the basis of investor protection or market integrity. This undermines not only the harmonisation goals of ECSPR but also the very notion of a level playing field within the single market.
Arbitrage, Distortion, and Eroded Trust
The economic incentives created by this dual system are clear. A quick look at market data show that only three of the six platforms initially licensed under ECSPR in Germany remain active today. Most have never joined the regime, but focused on VermAnlG-based structures or, in rare cases, tied agent structures under MiFID not fully aligned with ESMA’s Level 2 texts. This is not a failure of ECSPR’s design, but a rational response to regulatory asymmetry: as long as a lighter national alternative exists, platforms face strong incentives to exploit regulatory arbitrage.
While it is true that VermAnlG offers some investor protections, these are materially weaker than ECSPR’s, particularly in terms of risk disclosure, investment limits, and contingency planning. A 2022 analysis by Verbraucherzentrale Bundesverband (vzbv) shows that retail investors often underestimate the risks of grey capital market instruments, here Nachrangdarlehen, which are complex and illiquide. ECSPR’s safeguards are essential for investor confidence and market integrity.
The implications for competition are significant. Platforms operating under VermAnlG avoid the compliance costs and liability exposure borne under ECSPR, distorting market competition and discouraging investment in robust governance structures. Over time, this dynamic selects against precisely the type of professional, well-capitalised platforms ECSPR was intended to foster. One could argue that ECSPR costs are objectively high and that small platforms cannot comply with the compliance burden, while VermAnlG provides opportunities for smaller players. And indeed, if ECSPR was initially designed to select for professional, well-capitalised, scalable platforms, the final forms of ECSPR paid respect to the needs of smaller platforms. The proof is in the number of ECSPR licenses in other EU markets such as France, as already shown.
For investors, the consequences are direct. Nachrangdarlehen are complex, illiquid, and structurally high-risk instruments. The 2022 analysis by the Verbraucherzentrale Bundesverband (vzbv) documented how retail investors frequently underestimate these risks, particularly when products are marketed as part of familiar crowdfunding narratives. Under ECSPR, such instruments would be subject to standardised risk disclosures, investment limits, appropriateness testing, and contingency planning for platform failure. Under VermAnlG, these safeguards are materially weaker.
This is not merely a consumer-protection issue in the narrow sense. When risk is systematically under-disclosed or misunderstood, capital is misallocated, loss expectations are distorted, and confidence in the broader crowdfunding market deteriorates. The reputational damage does not remain confined to national borders; it affects the credibility of ECSPR itself.
A European Problem Disguised as a German One?
The German exception carries broader systemic implications. If left unaddressed, it establishes a precedent for other Member States to preserve national exemptions under alternative legal classifications. The result would be a gradual renationalisation of crowdfunding regulation, the very outcome ECSPR was meant to prevent.
ECSPR is a test case for the EU’s ability to harmonise financial regulation for SMEs and retail investors. If its application can be diluted through national reinterpretation, it sets a troubling precedent. This matters beyond crowdfunding. ECSPR was one of the EU’s first genuinely horizontal financial market regulations aimed at SMEs and retail investors alike. Its development process, characterised by early market engagement, iterative rulemaking, and close cooperation between regulators and practitioners, has since informed other initiatives, notably MiCA and the Commission’s current work on EU-Inc. If ECSPR’s application can be diluted through national reinterpretation, the credibility of this regulatory approach is weakened more broadly.
Recent EU-level initiatives further highlight the importance of policy coherence in the application of ECSPR. The EU Listing Act aligns the prospectus exemption threshold for public offers with the EUR 5 million ceiling under ECSPR, implicitly recognising crowdfunding as a structural element of the Union’s capital markets framework. At the same time, the Listing Act does not modify ECSPR’s scope or the allocation of supervisory competences, nor does it address the continued existence of national regimes that permit economically comparable public investment offers outside the Regulation.
While this reflects the Listing Act’s distinct legislative objectives, it results in numerical alignment without resolving underlying regulatory asymmetries. From a policy consistency perspective, this suggests that further interpretative clarity on ECSPR’s scope could be beneficial, in order to ensure that parallel national frameworks do not, in practice, dilute the effectiveness of harmonised EU rules through differences in legal form rather than economic substance.
Reasserting the Role of Harmonisation
The path forward may not require abolishing VermAnlG, which in parts continues to serve legitimate purposes outside the retail investor and crowdfunding context. What is needed is clarity that its use as a substitute framework for public, platform-based investment crowdfunding is incompatible with ECSPR’s objectives.
The European Commission could escalate the issue directly, or, working with ESMA, could issue interpretative guidance clarifying that all public offers conducted via crowdfunding platforms, regardless of instrument form, fall within ECSPR when they constitute investment-based crowdfunding services. This would close the interpretative gap without legislative change. Regulatory convergence is, after all, a key goal of ensuring harmonisation and ESMA is frequently issuing clarifying Q&A, such as on the question of nominee structures under ECSPR.
At the national level, structured dialogue with BaFin is essential to align supervisory practice with EU objectives, ideally through a phased transition that allows platforms to adapt without abrupt market disruption.
To address the latest developments under StoFöG, Germany could:
- Align ECSPR liability rules with those of leading EU Member States, ensuring consistent investor protection across all crowdfunding activities.
- Encourage greater transparency around stakeholder positions and representation in national policy debates on crowdfunding regulation, particularly where these positions diverge from EU harmonisation objectives.
- Increase transparency around the influence of lobbying on crowdfunding regulation, ensuring that future reforms prioritise public interest and investor protection over narrow industry concerns.
Over the longer term, the Commission should monitor market outcomes closely. If ambiguity persists, a targeted amendment to ECSPR clarifying its scope with respect to pseudo-loan instruments may be necessary.
In the meantime, EU capital markets policy is moving decisively towards greater harmonisation, while ECSPR remains structurally constrained in ways that continue to incentivise regulatory arbitrage.
The stakes are high. If left unaddressed, the German exception will not only undermine ECSPR’s effectiveness but also erode trust in the EU’s ability to deliver on its harmonisation agenda. The credibility of the single market, and the trust of investors, depends on decisive action now.
