Prosper Marketplace may need to borrow $1 million.

That’s the amount that the popular peer-to-peer lending service has agreed in principle to pay to 20 states, including Maryland, to settle complaints that it was selling unregistered securities. The settlement was announced today.

The lending site matches people in need of a loan with regular folks willing to bid on the opportunity to lend them $50, $100 or so.

According to the North American Securities Administrators Association, a group made up of state securities regulators:

“Prosper conducts an electronic auction to fund unsecured promissory notes. The Web site features a list of potential loans and investors bid against each other to finance the loans. Funds from the lowest bidders are pooled together to fund the loans. Prosper issues notes to those lenders funding the loans and services that note.”

Those notes are securities, regulators say, and haven’t been registered with the states.

The states still need to sign off on the settlement. If they do, they also will be agreeing to ending their investigation of Prosper’s securities sales prior to Nov. 24th.

This settlement comes a week after the SEC filed a cease and desist order against Prosper for selling unregistered securities.

Prosper spokeswoman Tiffany Fox said, "We have agreed to settle this matter with the NASAA members, and we are moving ahead with our registration."

Prosper recently announced it would stop making new loans and accepting new investors while it sought to register with the Securities and Exchange Commission.

On its Web site, Prosper said:

“If you're an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you'll be able to track and monitor your loans; and you'll be able to withdraw funds from your Prosper account.

"If you're a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you're a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources....A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible.