"Whether crowd-funding emerges as an innovative new way for very small companies to raise seed money or a new Internet-fueled mechanism for investment fraud depends heavily on how crowd-funding is regulated," the organization said in a

 "Allowing direct issuer to investor solicitation over the Internet, and preventing appropriate regulation of crowd-funding portals, as the House bill would do, is a recipe for disaster," it adds.

In its rush to embrace the Internet as a source for capital creation, Congress may be as shortsighted as those wild-eyed investors in the Internet bubble, suggests Columbia Law School Professor John C. Coffee Jr. at a hearing of a Senate bill that contained provisions similar to the JOBS Act.

"Although we all want to be Internet-friendly, [the Senate bill], in its present form, seems likely to invite a significant amount of fraud that could, over the longer run, stigmatize those attempting to market smaller offerings," .

"Still, with some adjustments that would not raise the costs of such an offering procedure, I believe that the potential for fraud and 'boiler room' marketing could be substantially curtailed," he adds.