Prosper lender states as of 14 Aug 2009Today Prosper announced that they are welcoming lenders from Louisiana and Missouri. This comes a little more than a week after the social lender’s announcement that they are available to investors from Connecticut, Idaho, New Hampshire, and Oregon. The progress in opening up states to new lenders has come at a reasonably good clip, adding 9 new states since Prosper’s relaunch a month ago in mid-July, for a total of 23 states.

Prosper‘s reach now encompasses about 45% of the US population. For comparison, Lending Club, which reopened ten months ago, currently allows lenders from 26 states, or 52% of the population. Prosper and Lending Club more or less mirror each other in states available, with the important exceptions of Florida (6%) and Virginia (2.5%). Population figures are based on 2008 estimates by the U.S. Census.

What is the reason for these state-by-state registrations? Although both P2P lending companies have received approval at the federal level from the SEC, they must also register with state regulators in each state for clearance to sell securities. These are the so-called Blue Sky Laws, which give states the power to regulate securities sold in their jurisdiction. Conceived in the early 20th century, these laws focused on preventing frauds and schemers from peddling anything under the “blue sky”. In the current environment, however, they seem to duplicate the role of the SEC, and are more of a hassle than a benefit to investors.

Although Prosper is making progress with state regulators post-SEC approval, there are plenty of states also claiming their take for Prosper’s $1M settlement with the NASAA last December. To date, Alabama ($5,073), Connecticut ($12,602), Maine ($1,517), Michigan ($20,461), Missouri ($9,228), Montana ($2,214), Washington ($36,025), and Oregon ($15,000) have all collected on their portion of the settlement, bringing Prosper‘s bill to a total of $102,117, way short of the $1,000,000 settlement amount. Aside from Alabama and Michigan, all of the other states have authorized Prosper to operate post-SEC approval.

Graphic from The Prosper Blog.

Update: Added Maine and corrected settlement amount on Alabama. Many thanks to Investar for the corrections.

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