It’s worth noting that absolutely nobody is confused about there being demand for highly speculative investment in small sketchy seed stage companies.
That demand has been around, literally, for hundreds of years. The entire point of this category of securities laws is to prevent people from meeting that demand, since doing so tends to have disastrous outcomes.
My main gripe with the whole "accredited investor" thing is that its literally legalized classism (and I'd argue a violation of the equal protection doctrine, but that's another theory), as the income requirements eliminate a huge swathe of investing for anyone but the 1%.
Nothing is stopping an uninformed investor from loading their net worth into a single reuglar stock (you know, those perfectly safe instruments that never ever lose their value and leave you with nothing), so I really, truly don't see what these requirements are protecting anyone from, or why that protection is necessary.
If it's really about protection, then education and nondiscriminatory licensing based on testable knowledge would fill that goal, but instead we have income minimums.
These laws came about from very real and serious experiences that were, in fact, catastrophic for many communities. It's a real live problem, and it goes back a long way.
If you want to argue about the details that's great, but any discussion has to start with the reality that an unregulated market leads to really unwanted outcomes here.
You can also do the "who cares if people want to get swindled let them" approach, but recognize that you've been outvoted on this topic, we've decided to protect people like we try to protect people from unsafe food, consumer products scams, and many other situations.
I think it is understood that the regulations are in place to mitigate risk for the most vulnerable. Whether this has been the right implementation (income vs some other means) is what I think OP was getting at.
>>If you want to argue about the details that's great, but any discussion has to start with the reality that an unregulated market leads to really unwanted outcomes here.
Are you saying that the discussion has to start from the premise that on the balance, the outcome of unregulated markets is less desirable than that of a regulated market? Because I would strongly contest that premise.
Then it's a good thing nobody here, least of all me, asked for "unregulated markets". Literally your entire post is either responding to points I didn't make, or makes arguments I already addressed, making this exchange a complete waste of time for both of us.
Diligencing private securities is expensive. Getting information is expensive, the legal work is expensive, the negotiations are expensive. This is fundamental to the lack of reporting requirements and standardisation. Small checks simply don’t make sense in these markets.
Here's hoping some version of the Jobs Act 3.0 passes the Senate (before getting stuffed with a bunch of bs)...
No one, absolutely no one should sit on their thumbs waiting around for regulatory clarity from a slow moving ship unless they have too much to lose. It's time to up the ante and move out of the US. If they keep adding laws instead of deleting them the exodus of seed stage companies is a near-term likelihood.
The problem currently with crowd-funded securities offerings is the overall cost of capital (legal and regulatory), lack of liquidity post-raise, and that most of the good opportunities are scooped up by hungry VC's chasing returns in a fast money, low-interest environment. When the world is awash in easy capital, crowdfunding is simply too much of a hassle for solid companies.
In comes ICO's. It fixed a lot of the issues with crowdfunding. Low cost to start (just deploy a smart contract), instant liquidity, and global capital raising. Obviously there are tons of issues (breaking securities laws, sketchy companies, bubble mentality, and why actually do any work when you already have the money, among many others). But this shows that demand for small seed-stage companies is there.
The recent JOBS 3.0 act[0] will make 2 important changes to merge crowdfunding and ICO's. One is the change to accredited investor laws to allow people to prove investor competence without meeting arbitrary income / asset requirements. This was to solve the paradox of twenty-something MBA's on Wall Street giving professional advice on investments to wealthy people without they themselves being able to invest.
The second important change is to create "venture exchanges", which have been theoretically possible before, but have never been created. This will provide liquidity to early-stage startups at new regulated crypto exchanges like Coinbase, Poloniex, etc. I believe that blockchain, at a bare minimum, enforces standard protocols. Whether security trading needed blockchain or not to have protocol standardization accomplished is a separate argument, but either way the technology encouraged and allowed it to happen organically. Strict protocol enforcement of assets (ERC20, etc.) allows crypto exchanges all over the world to inter-operate, and allows securities to be traded much more freely all over the world as each country's crypto exchanges match their rules with local security laws. This will allow offerings based in the US to be bought and traded legally in Japan, South Africa, the EU, etc. It will also allow smaller companies to raise capital more cheaply by tapping into a global pool of investors.
[0] https://www.dandodiary.com/2018/07/articles/securities-laws/...