Prior to Regulation CF, crowdfunding was limited to either “intrastate offerings ” or offerings only to “accredited investors.”  An accredited investor is defined under Regulation D to be, for individuals, an individual with at least $200,000 in annual income ($300,000 jointly with one’s spouse) or net worth, exclusive of personal residence, of at least $1 million. The accredited investor crowdfunding route is still viable, but has been overshadowed by Regulation CF. Intrastate crowdfunding has virtually disappeared, as it is not exempt from state regulation. Although  29 states and the District of Columbia have enacted state crowdfunding provisions, generally, these provisions require that the offering be made only to residents of that state. This is a severe restriction on capital raising. The Internet does not recognize state borders. The benefits of the Internet, as they accrue to crowdfunding, go counter to the philosophy of an intrastate exemption.

Because Regulation CF offerings are exempt from state regulation (other than notice filing requirements) under Section 18 of the Securities Act, they have much more utility for issuers.

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