How to Sell Tokens to Non-Accredited Investors in Your Token Offering (STO or ICO)

If you want non-accredited investors to participate in your ICO or token offering, you are not limited to offering utility tokens that are not securities. You can offer and sell securities or security tokens to non-accredited investors.

Here are three exemptions under the federal securities laws, which allow you to sell security tokens to non-accredited investors. This is a very general overview, which is not by any means comprehensive:

Regulation A+

Under Regulation A+, you can raise up to $50 million from accredited and non-accredited investors. There are two tiers under Regulation A+:

  • Tier 1 allows you to raise up to $20 million; and

  • Tier 2 allows you to raise up to $50 million.

If you are thinking about doing a Regulation A+ offering, you can advertise before filing with the SEC. This is called “testing the waters.” However, keep in mind that if you advertise your offering before filing with the SEC, you might be limited to using the Tier 2 exemption because Tier 1 requires you to comply with state securities laws. That means, you have to comply with the state laws of every state where you sell your tokens. Most states do not allow you to advertise your securities without registering your offering.

Regulation Crowdfunding

Regulation Crowdfunding or Reg CF allows you to raise up to $1.07 million from accredited and non-accredited investors. You have to file a Form C with the SEC before you do a Reg CF offering and you can only offer and sell your securities through a registered funding portal.

In addition, subject to very limited exceptions, you can only advertise and communicate about your offering on a single funding portal. Communications outside the portal generally should only direct people to the funding portal to learn more about your offering.

Regulation D

Regulation D is one of the most commonly used exemptions to raise money. It provides a "safe harbor” under the private placement exemption of the Securities Act. That means, if you don’t meet all the requirements under the private placement exemption, you do not lose the exemption as long as you meet the requirements under Regulation D.

Under Rule 506 of Regulation D, you can raise an unlimited amount of money. In addition, you do not have any mandatory disclosure requirements if you are only raising money from accredited investors.

Rule 506(b)

Under Rule 506(b), you can raise money from up to 35 non-accredited, but sophisticated investors. The catch is, if you sell to a single non-accredited investor, you are subject to extensive mandatory disclosures, similar to the disclosures required in a registered offering.

Rule 504

Rule 504 allows you to raise up to $5 million from accredited and non-accredited investors. Unlike the other exemptions discussed so far--with the exception of Tier 1 of Regulation A--Rule 504 requires you to comply with state securities laws.

However, unlike the other rules, you are not required to comply with mandatory disclosure requirements for selling to non-accredited investors. Thus, Rule 504 is a rule that may be helpful if you only plan to sell your tokens to

These are three federal rules you can use to sell securities tokens to non-accredited investors. There are state exemptions that allow you to sell to non-accredited investors as well.


A version of this article is also published on LinkedIn.


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This article is provided for informational purposes only and should not be construed as legal advice. Read our disclaimer here.

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