Airbnb – the giant online marketplace for hospitality sharing services — recently submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) to allow the company to offer equity to its hosts.
Following in Uber’s footsteps — who has met several times with the SEC about offering equity to its drivers — Airbnb’s move signals an emerging trend towards community-driven progress and decentralization in the broader technology space.
Airbnb’s move mirrors the market trend of cryptocurrencies focusing on community-driven projects and ecosystems. While Airbnb remains a centralized intermediary in home-sharing, their willingness to share equity with their hosts is a positive step towards building a stronger platform. Hosts that are given equity in the company will clearly have a larger stake in the platform’s success, driving a healthier and more robust ecosystem for Airbnb overall.
The concept is much more complex than it sounds, however. For Airbnb to offer equity to its hosts, the SEC would have to change Securities Act Rule 701 as well as revise Section 12(g) of the Exchange Act.
Airbnb’s submission references adding “gig economy workers” to the list of eligible equity holders in a company outside of investors and direct employees. Further, changing the Exchange Act would allow Airbnb to have more shareholders than the current cap for a private company (2,000) without being subject to public reporting requirements. Considering that Airbnb exists in 191 countries with over 4 million listings, successfully navigating the diverse regulatory environments outside of the U.S. seems unlikely.
The U.S. Government would also have to consider the sizeable tax complications associated with private stock transfer and their long-term implications if the laws were changed. Congress, government agencies and financial regulatory bureaucracy are not known for their swift action on changing established laws as significant as the Exchange Act.
Community-Driven Progress and Data Privacy
Airbnb and Uber’s moves represent a similar ethos of community participants with a real stake in a platform’s growth. Albeit slightly different considering the centralized nature of the two companies, it is a noteworthy trend whose development is worth continually evaluating.
The size of the gig economy is surprisingly contentious. Despite this, the sharing economy is pegged to become a major component of the future global economy. Blockchain-based systems inherently remove the need for an intermediary in home-sharing contracts so Airbnb’s move may prove an effective method of solidifying its base of hosts as mitigation to losing their control over the home-sharing market to decentralized solutions.
Airbnb’s SEC submission also follows their recent lawsuit filed at New York City arguing against a law that just passed requiring Airbnb to forfeit host private data to New York City’s Office of Special Enforcement. The lawsuit represents a classic example of the leverage of government agencies over third-party data custodians to share private user data. Airbnb is arguing that the law violates their hosts’ constitutional rights and it may be a devastating blow for the company.
Airbnb’s popularity over the years has allowed it to dominate the home-sharing economy, creating problems for the hotel industry and other city governments. Their proposal to offer equity to their hosts reflects a broader sentiment emerging in cryptocurrencies and open-source technical communities. However, they still retain some critical long-term disadvantages compared to emerging platforms like CryptoCribs that remove intermediaries from the process, thus reducing transactional costs and friction.
Whether or not Airbnb can continue to excel and compete with decentralized solutions will unfold over the coming years. If they are eventually able to offer equity to their hosts, that would be a strong incentive for hosts to stick with the platform, solidifying a substantial portion of their current dominance.