If the SEC follows through on the vision in this speech, it could have major knock-on effects for Regulation Crowdfunding (Reg CF) in several ways—particularly if crypto assets and tokenization become integrated into mainstream U.S. securities markets.

Here’s the likely impact broken down:

1. Tokenized Securities Could Become Reg CF Norm
Current situation: Reg CF offerings are mostly traditional equity, debt, or SAFE instruments. Tokenized securities are rare due to unclear SEC guidance, high compliance costs, and custody/trading constraints.
Speech effect: If “Project Crypto” delivers clear, purpose-fit disclosure rules and exemptions for tokenized securities—and allows them to trade on-chain—issuers could easily offer tokenized shares or revenue-sharing tokens under Reg CF.

Impact:

- Faster, cheaper secondary trading of Reg CF securities.
- Greater retail investor appeal due to liquidity potential.
- Easier fractionalization of ownership, making micro-investments practical.
 
2. Clear Rules for Crypto Asset Securities Could Expand Issuer Types
Current situation: Blockchain startups often avoid Reg CF because of uncertainty over whether their token is a security and fear of future enforcement.
Speech effect: Bright-line rules for classifying crypto assets (security vs. commodity vs. collectible) could let Web3 and DeFi projects confidently raise capital under Reg CF without complex offshore structures.

Impact:

- Surge in crypto-native Reg CF campaigns.
- Potential for hybrid offerings (token + equity).
- More investor protections built in through token standards like ERC-3643.
 
3. Custody Rule Changes Could Enable Crypto Asset Holding in Reg CF
Current situation: Custody of digital securities for Reg CF investors is cumbersome—few broker-dealers or funding portals can handle them directly.
Speech effect: If custody rules are modernized to allow self-custody or broader custodian choice, Reg CF investors could hold their securities in personal wallets or use a wide range of regulated custodians.

Impact:

- Lower custodial friction.
- Reduced reliance on illiquid, portal-controlled transfer agents.
- Investor empowerment and portability.
 
4. Secondary Market Liquidity Could Dramatically Improve
Current situation: Reg CF securities can be sold after 12 months (with exceptions), but active markets are minimal due to low adoption of ATSs and high compliance burdens.
Speech effect:

“Super-app” licensing could allow a single platform to handle both primary Reg CF offerings and secondary trading (tokenized and traditional).
On-chain trading systems could operate without traditional intermediaries.

Impact:

- More vibrant secondary markets for Reg CF securities.
- Potential for real-time settlement and 24/7 trading.
 
5. Innovation Exemption Could Lower Barriers for New Reg CF Models
Current situation: New funding portal business models must fit into rigid, pre-defined rules or go through lengthy exemptive relief processes.
Speech effect: An “innovation exemption” could allow experimental Reg CF structures—like DAO-managed investment clubs or community-governed funding pools—to launch quickly with lighter, principles-based oversight.

Impact:

- Faster rollout of creative crowdfunding models.
- More niche, community-driven funding portals.
- Potential for cross-border investment flows into U.S. Reg CF deals.
 
6. Competition With Offshore Platforms Could Shift
Current situation: Offshore token-based capital raises often bypass U.S. retail investors.
Speech effect: By giving crypto and token issuers a clear, efficient domestic path—including under Reg CF—those offerings could shift onshore.

Impact:

- U.S. Reg CF platforms could win back issuers who previously went abroad.
- Stronger global competitiveness of U.S.-based portals.
 
Bottom Line
If implemented, “Project Crypto” could transform Reg CF from a mostly equity/debt crowdfunding market into a fast, on-chain, liquid ecosystem—blurring lines between private and public markets.

The biggest winners would be:

- Issuers seeking low-cost, retail-friendly capital with built-in liquidity.
- Funding portals that adapt quickly to on-chain custody, tokenization, and integrated trading.
- Retail investors who gain faster exit opportunities and broader asset choice.

The key dependencies will be:

- How quickly the SEC finalizes “purpose-fit” Reg CF tokenization rules.
- Whether secondary trading exemptions are expanded.
- How the “innovation exemption” is scoped for funding portals.
 
 

SEC Commissioner Hester Peirce’s sketch of a potential exemption from registration to allow firms to use distributed ledger technology (DLT) to issue, trade, and settle securities could have significant implications—both positive and disruptive—for regulated investment crowdfunding (Reg CF). Here's a breakdown of the potential impacts:

 
🔍 How the DLT Exemption Could Affect Reg CF

1. Creates a Competing Capital Formation Pathway
If the exemption enables issuers to raise capital and trade tokenized securities more flexibly than under Reg CF, it could:

- Draw issuers away from Reg CF, especially those seeking lower compliance burdens or faster execution

- Undermine the utility of funding portals that have invested in compliance infrastructure under Reg CF/Reg A

2. Erodes Investor Protections If Not Carefully Calibrated

Reg CF includes robust investor caps, disclosures, and portal oversight:

- If DLT-based exempt offerings don't include equivalent protections, retail investors may be exposed to higher risks without adequate guardrails.

- This could weaken confidence in retail-facing investment markets broadly

3. Undermines Level Playing Field for Intermediaries

Funding portals must:

- Register with the SEC and FINRA
- Implement anti-fraud procedures
- Adhere to strict communication guidelines

If a DLT-based venue is exempt from similar obligations, it may function like a funding portal or ATS without having to comply with equivalent rules—creating an unfair regulatory asymmetry

4. Tokenization Could Be a Tool—Not a Threat—If Integrated

If the exemption framework evolves to support tokenized Reg CF securities, it could:

- Enable faster settlement and secondary liquidity for crowdfunding investors
- Enhance investor engagement through programmable assets, wallet integration, and smart contracts
- Lower custody costs and improve capital stack transparency

🧭 Strategic Implications for the Regulated Crowdfunding Industry

If Not Integrated:

- Funding portals may lose deal flow to lightly regulated DLT venues

- Investor confusion could rise as new platforms emerge without clear SEC/FINRA alignment

- Reg CF infrastructure could be marginalized, despite years of ecosystem-building

If Proactively Integrated:

- Portals that embrace DLT for post-issuance management or settlement could lead innovation

- Reg CF rules could evolve to explicitly allow for tokenized securities, with safe harbor language

- SEC could require exempt DLT platforms that target retail to meet Reg CF-like protections
 
✅ Recommendations for Industry Stakeholders and Policymakers

1. Advocate for Harmonization:

Ensure any DLT exemption includes equivalent investor protection standards as Reg CF.

2. Push for Tokenized Reg CF Pathways:

Encourage the SEC to issue guidance or no-action relief for DLT use within Reg CF, especially around custodial tokens, secondary transfers, and smart contract-based compliance.

3. Monitor Market Fragmentation Risk:

Prevent two-tier markets—one regulated (Reg CF), one not—by ensuring oversight parity.

4. Participate in Public Comment:

As the SEC considers exemptive relief, funding portals, investor advocates, and Reg CF issuers should engage directly with the Crypto Task Force’s process.
 
🔗 In Summary

Peirce’s DLT exemption sketch is forward-looking and pro-innovation—but it may unintentionally disrupt the fragile progress of regulated crowdfunding unless protections and standards are aligned. The future could be synergistic, but only with clear boundaries and deliberate coordination.

Note: Commissioner Peirce's thoughts are outlined here: https://www.sec.gov/newsroom/speeches-statements/peirce-iismgd-050825 

From the perspective of the regulated investment crowdfunding (Reg CF and Reg A) industry, the appointment of Paul S. Atkins as SEC Chairman raises both opportunities and questions.

🔎 Perspective from the Crowdfunding Industry:

1. Pro-Market, Pro-Business Philosophy Could Mean Support for Capital Formation. Chairman Atkins has long championed capital formation and reduced regulatory burden, particularly through cost-benefit analysis. This mindset aligns well with the goals of the crowdfunding sector, which seeks to democratize capital access for startups and small businesses. His background suggests he may be open to expanding access to capital for both issuers and investors through mechanisms like Reg CF and Reg A+.

2. Track Record of Favoring Innovation—Positive for Fintech and Digital Asset Integration

Atkins’ role in developing best practices for the digital asset sector suggests he’s not afraid to engage with new technologies.

This could bode well for:

- Tokenized securities
- Blockchain-based cap tables
- Smart contract-based compliance —all areas that the crowdfunding industry is beginning to explore.

3. Potential for Regulatory Rollbacks or Modernization

Atkins has previously pushed for greater consistency and simplification in regulation. That could open the door to:

- Raising Reg CF investment and offering limits
- Reducing duplicative state filing burdens
- Streamlining ongoing disclosure requirements
- Allowing more flexible use of SPVs and follow-on offerings

4. Investor Protection vs. Market Access

However, Atkins' emphasis on cost-benefit analysis and industry flexibility may worry some investor advocates who want stronger safeguards in crowdfunding. There is a delicate balance here. The crowdfunding industry—especially responsible funding portals and associations like CfPA—will need to proactively demonstrate that investor protection and market growth can co-exist.

5. A Chance for Dialogue

Given his extensive experience across SEC leadership roles and international regulatory forums, Atkins is likely to be receptive to policy engagement. This is a valuable opening for the crowdfunding industry to:

- Push for rule modernization
- Advocate for new exemptions or refinements
- Collaborate on digital compliance infrastructure
 
📣 Final Thought:

The appointment of Paul S. Atkins could signal a more business-friendly, innovation-minded SEC. The crowdfunding industry should engage early and often, presenting data, success stories, and constructive proposals to shape a regulatory environment that protects investors without stifling innovation. If navigated well, this could be a turning point for scaling regulated crowdfunding in the U.S. capital markets.

#regulatedinvestmentcrowdfunding

The phrase "regulation by enforcement" is a critique often used in the crypto industry (and other sectors) to describe a regulatory approach where the SEC (or another agency) enforces laws and rules through lawsuits and penalties rather than through clear, proactive rulemaking. This differs from "enforcement of regulations" in significant ways:

1. Regulation by Enforcement

No Clear Rules in Advance: Critics argue that the SEC does not provide explicit guidelines on how crypto firms should comply with securities laws.

Legal Actions Instead of Rulemaking: Rather than issuing tailored regulations or engaging in formal rulemaking processes (such as public comment periods), the SEC takes action by suing companies or imposing fines.

Uncertainty for Businesses: Companies may not know they are violating the law until they face enforcement actions, creating uncertainty and chilling innovation.

Retroactive Punishment: This approach may penalize companies for actions they took before clear guidance existed.

2. Enforcement of Regulations

Based on Established Rules: In a traditional regulatory framework, enforcement follows well-defined rules that were developed through legislation or a formal rulemaking process.

Predictability & Compliance Pathways: Businesses know the compliance requirements in advance, allowing them to operate within a clear legal framework.

Preventative Rather Than Punitive: Regulation aims to guide compliance before violations occur rather than relying on enforcement as the primary mechanism.

Why Is This a Big Deal in Crypto?
The crypto industry argues that securities laws were not designed for digital assets, yet the SEC applies decades-old rules without providing specific new regulations tailored to crypto.

Major cases, such as those against Ripple, Coinbase, and Binance, highlight how the SEC is shaping crypto regulation through litigation rather than clear rulemaking.

The SEC contends that it is simply enforcing existing securities laws, but critics say this approach forces compliance through the courts instead of creating transparent, predictable rules.

Bottom Line
Regulation by enforcement means creating de facto policy through lawsuits and penalties rather than formal rules, whereas enforcement of regulations implies applying already established and clearly defined legal standards. The debate is whether the SEC should issue clearer guidance or continue its current strategy of enforcement actions.

Under Regulation Crowdfunding, the Securities and Exchange Commission (SEC) has established specific criteria that a self-regulatory organization (SRO) must meet to oversee funding portals. These criteria ensure that the SRO can effectively regulate the activities of funding portals to protect investors and maintain market integrity. The key criteria include:

1. Registration with the SEC: An SRO must be registered with the SEC. This ensures that the SRO is recognized by the SEC and subject to its oversight.

2. Rulemaking Authority: The SRO must have the authority to create and enforce rules governing the conduct of funding portals. These rules should be designed to:
   - Prevent fraudulent and manipulative acts and practices.
   - Promote just and equitable principles of trade.
   - Protect investors and the public interest.
   - Facilitate capital formation.

3. Compliance and Enforcement: The SRO must have the capacity to enforce compliance with its rules. This includes having procedures for monitoring the activities of funding portals, conducting investigations, and taking disciplinary actions when necessary.

4. Governance and Independence: The SRO must have a governance structure that ensures its independence from the funding portals it regulates. This includes having a board of directors or a similar governing body with a significant representation of non-industry members.

5. Transparency: The SRO must operate in a transparent manner. This includes making its rules, disciplinary actions, and other regulatory information publicly available.

6. Resources: The SRO must have adequate resources, including financial, technological, and human resources, to carry out its regulatory responsibilities effectively.

7. Conflict of Interest Policies: The SRO must have policies and procedures in place to manage conflicts of interest. This includes ensuring that the regulatory activities are not influenced by the business interests of the funding portals.

8. Record-Keeping: The SRO must maintain comprehensive records of its regulatory activities, including rulemaking, enforcement actions, and communications with funding portals and the SEC.

These criteria are designed to ensure that the SRO can provide effective oversight and maintain the integrity of the crowdfunding market, thereby protecting investors and facilitating capital formation through crowdfunding platforms.

You bring up an important point about terminology in the crowdfunding industry. The term "equity crowdfunding" can indeed be misleading if it implies that all offerings provide equity stakes, when in fact, many do not. The Crowdfunding Professional Association's recommendation to use "regulated investment crowdfunding" is a more accurate and inclusive term.

Here’s an expanded discussion on this topic:

Equity Crowdfunding vs. Regulated Investment Crowdfunding

Equity Crowdfunding
- Traditional Definition: In its original sense, equity crowdfunding refers to a method of raising capital where investors receive shares or equity in the company in exchange for their investment.
- Misleading Aspects: The term can be misleading because not all investment crowdfunding campaigns offer equity. Some might offer other types of securities, such as debt instruments, revenue shares, or convertible notes.

Regulated Investment Crowdfunding
- Broader Definition: This term encompasses all types of crowdfunding that involve regulated securities offerings, not just equity.
- Types of Securities: This can include equity, debt, revenue shares, and other forms of investment contracts.
- Regulatory Frameworks: These offerings are typically conducted under specific regulatory frameworks, such as Regulation Crowdfunding (Reg CF), Regulation A+, and Regulation D in the United States, which provide different levels of oversight and investor protection.

Benefits of Using "Regulated Investment Crowdfunding"

1. Clarity and Accuracy:
   - The term "regulated investment crowdfunding" accurately reflects the range of financial instruments available and the regulatory environment governing these offerings.
   - It helps avoid confusion for investors who might otherwise expect equity stakes in all crowdfunding opportunities.

2. Investor Education and Protection:
   - Using precise terminology is crucial for investor education. It ensures that potential investors understand the nature of the securities being offered and the associated risks and returns.
   - It underscores the fact that these offerings are subject to regulatory scrutiny.

3. Inclusiveness:
   - The broader term encompasses a wider array of investment opportunities, making it more inclusive of different types of fundraising campaigns.
   - It reflects the diversity in the crowdfunding space, acknowledging that companies might choose different financial instruments based on their specific needs and strategies.

Examples of Regulated Investment Crowdfunding

1. Regulation Crowdfunding (Reg CF):
   - Purpose: Allows smaller companies to raise up to $5 million per year from a large number of investors through an online platform.
   - Securities Offered: Can include equity, debt, and other types of securities.

2. Regulation A+:
   - Purpose: Enables companies to raise up to $75 million per year from the public with fewer disclosure requirements than a full public offering.
   - Securities Offered: Primarily equity, but can also include debt and other securities.

3. Regulation D (Rule 506(c)):
   - Purpose: Allows companies to raise an unlimited amount of money from accredited investors with general solicitation and advertising.
   - Securities Offered: Can include equity, debt, and other types of investment contracts.

Conclusion

The shift from using "equity crowdfunding" to "regulated investment crowdfunding" is a positive development that enhances clarity, accuracy, and inclusiveness in the crowdfunding industry. This terminology better reflects the variety of financial instruments available to investors and underscores the regulatory framework that governs these offerings. By adopting this term, industry stakeholders can help ensure that investors have a clear understanding of what they are investing in, ultimately fostering a more transparent and trustworthy investment environment.

There is a federal exemption for Demo Days but it is useless because it doesn't preempt state law. To legally do a demo day where the public is invited, even if the event fits under the Demo Day exemption, it will still be illegal to do public solicitation under state law (unless the offering is being done under Reg CF or Rule 506(c) in which case there is federal preemption).

Yes, both the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) play roles in regulating investment crowdfunding. 

The SEC oversees securities markets in the United States, ensuring that investors are protected, markets are fair, orderly, and efficient, and capital formation is facilitated. The SEC has established regulations for crowdfunding, which are designed to help smaller companies raise money while still providing protections for investors. These rules are part of Regulation Crowdfunding (Reg CF), which allows companies to offer and sell securities through crowdfunding.

FINRA, on the other hand, is a non-governmental organization that acts as a self-regulatory organization (SRO) for brokerage firms and exchange markets. FINRA is authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly. Within the context of crowdfunding, FINRA is responsible for regulating crowdfunding portals, which are online platforms that facilitate the offering and selling of securities through crowdfunding. Crowdfunding portals must register with the SEC and become a member of FINRA to operate legally.

Both organizations ensure that platforms adhere to the regulations set forth to protect investors and maintain the integrity of the securities market. This includes rules about who can invest, how much they can invest, and how companies can raise funds through crowdfunding.

Since the passage of the JOBS Act and the subsequent rulemaking, there has been massive confusion by the general and investing public who often conflate the activities of the regulated investment crowdfunding industry and those of rewards-based or donations-based crowdfunding platforms. Aside from marketplace confusion, there is considerable reputational risk that regulated entities, and the regulated industry as a whole, face by being mistaken for the activities happening in a less regulated environment and by unlicensed actors (e.g. GoFundMe, Kickstarter, IndieGoGo).

Furthermore, while admirable, the efforts by some industry participants to provide clarity through use of other terms (e.g. “online capital raising,” “investment crowdfunding,” or “equity crowdfunding”) are insufficient or, in some cases, potentially misleading.   

By embracing ‘Regulated Investment Crowdfunding,’ we not only clarify our industry's scope but also underline the legal and regulatory frameworks that govern our operations.