It was probably nonqual or ISO employee grant. Those get tied all the time to performance.

Why would this violate? They are giving a reward, no value implied or stated.

In general, the unregistered "general solicitation" for the purchase of securities is prohibited. You can't go on TV and ask people to buy your stock in exchange for money unless you have registered to do so--an IPO or subsequent S1.

Stock is certainly a security. Stock options are just call options of a security, and also a security. Obviously there is some (future, conditional) value implied since it's a reward.

It doesn't really matter whether you are trading stock for dollars, or work, or fb likes, or whatever--it's still a general solicitation because they are being traded for something.

Caveat: I'm not a lawyer but I have been involved in startups in the space for many years.

Well he was just referring people to sign up for the website. The money was money he spent advertising the website(?), so the money only went to getting new members. The stocks were given as the reward for the most sign ups, not in exchange for money.

The point is that the stock was exchanged for something (referrals, marketing, etc), and that the contest was announced (ie, general solicitation). That no cash traded hands doesn't matter.

There is precedent of an almost identical enforcement action by the SEC, but my google fu is failing me.

Can a startup publicly recruit with the promise of stock as compensation?

Would be Jet.com's issue, not the guy.

That is correct.

You can sell securities to non-accredited investors if you have audited financials (basically conforming to public IPO requirements) and the number of people you do so is greatly limited. This stuff is more complicated than I'm making it seem, but small quantities, again with audited financials (minimum audit costs ~$10K) and this can be possible/legal. Definitely consult securities lawyers if you're considering doing anything like this.

I think the traded for something angle is key here. And, of course, SEC is generally happy when consumers benefit, and fines when they don't.

But, I would think a line of defense would be that participants knew they wouldn't necessarily get anything for participating and presumably agreed to that in contest terms. At that point, the contest is just a giveaway -- and you can, in fact, give away stock.