Regulation CF: Investor Eligibility


Crowdfunding has revolutionized the way entrepreneurs raise capital for their ventures, providing access to funding opportunities that were once limited to a select few. In 2016, the U.S. Securities and Exchange Commission ("SEC") introduced Regulation Crowdfunding ("Reg CF") under the JOBS Act, which expanded investor eligibility and opened the doors for everyday individuals to participate in crowdfunding campaigns. In this blog post, we will explore the key aspects of investor eligibility under Reg CF and how it has transformed the crowdfunding landscape.

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Purpose: Democratizing Investment Access

Reg CF was designed to democratize investment access, allowing non-accredited investors to participate in securities offerings by startups and small businesses. Previously, investing in private companies was restricted to "accredited investors," who met specific income or net worth requirements. Reg CF levels the playing field, enabling individuals who may not meet the traditional criteria to invest in early-stage companies.   

Eligibility Requirements

The shift in investor eligibility is a fundamental aspect of Reg CF that aims to democratize investment access and provide opportunities for a broader range of individuals to participate in the entrepreneurial ecosystem. Now, individuals who may not meet the traditional criteria for accredited investor status can invest in startups and small businesses through crowdfunding platforms registered with the SEC. To be eligible to invest under Reg CF, an individual must meet certain criteria pertaining to residency, limits on investment amounts, information requirements, and online portal access,

U.S. Residency Requirement

To be eligible to invest under Reg CF, individuals must be residents of the United States. This requirement ensures compliance with U.S. securities laws and limits investment opportunities to U.S. citizens, permanent residents, and entities organized under U.S. law. Non-U.S. residents are currently not eligible to participate in Reg CF offerings.

Investment Limits

Although Reg CF allows anyone to invest in Reg CF securities offerings, it imposes investment limits based on an individual's income and net worth. The ostensible rationale for these limits is to protect investors from overextending themselves. Such limits, however, are not without their detractors as being inconsistent with the right of individuals to make their own decisions without paternalistic interference. That said, these regulations have the force of law and must be complied with. These income and net worth limits are as follows:

  • Accredited Investors. If an individual investor meets the criteria set for the definition of an "accredited investor," then there are no limits on how much she or he can invest under Reg CF.
  • Non-Accredited Investors. If an individual investor is not an accredited investor, then there are limits on how much she or he can invest, depending on the investor's annual income and net worth.
    1. If the non-accredited investor has either an annual income or a net worth that is less than $124,000, she or he can invest up to the greater of $2,500 or 5% of the greater of those two amounts during any given 12-month period.
    2. If the non-accredited investor has both an annual income and net worth equal to or exceeding $124,000, she or he can invest up to 10% of the greater of these two amounts, with a maximum investment cap of $124,000.
  • Joint Calculation for Married Investors.
    1. Accredited Investors. If an individual investor is married, then the income criteria for accredited investor status is 150% of that for an individual and counts the income of both spouses.
    2. Non-Accredited Investors. According to the SEC, individuals can calculate annual income or net worth by jointly including their  spouse's income or assets. But, the couple's respective investments, when combined, cannot exceed the limit that would apply to an individual investor at their combined annual income or net worth level. In other words, they are treated as a single investor.

Education Requirement

Reg CF requires investors to review educational materials provided by the crowdfunding platforms before making investments. These materials aim to inform individuals about the risks and benefits associated with investing in startups, the crowdfunding process, and the obligations of companies seeking funding. By ensuring investors have access to educational resources, Reg CF promotes informed decision-making and risk awareness.

Online Platform 

To participate in Reg CF investments, individual investors must use crowdfunding platforms (also known as crowdfunding portals or websites). These portals must be properly registered with the SEC as intermediaries. These platforms play a crucial role in the modern crowdfunding ecosystem, connecting businesses seeking funding with potential investors, while ensuring compliance with regulatory requirements. They provide a secure environment for investment transactions, verify the accuracy of company disclosures, and facilitate communication between investors and entrepreneurs. In these "digital marketplaces," startups and other entrepreneurs and small businesses can showcase their products, services, solutions and ideas to potential backers. They facilitate the crowdfunding process by providing tools and features that enable entrepreneurs to create compelling campaigns, set fundraising goals, and communicate their vision to potential investors. These platforms also handle the actual financial transactions, ensuring secure payments and providing transparency for both project creators and backers. Additionally, crowdfunding platforms often offer additional resources and support, such as educational materials, marketing assistance, and community-building features to help project creators maximize their chances of success. By bringing together creators and investors from around the world, crowdfunding platforms have revolutionized the way projects are funded, empowering individuals to support causes they believe in and fostering innovation across various industries.


Reg CF has transformed the crowdfunding landscape by expanding investor eligibility and opening the doors for non-accredited individuals to participate in securities offerings by startups and small businesses. The expansion of investor eligibility under Reg CF has had a profound impact on the crowdfunding landscape. It has allowed startups and small businesses to tap into a larger pool of potential backers on "Main Street," providing access to capital that was once limited to Wall Street's accredited investor class. Everyday individuals now have the opportunity (albeit limited, as discussed above) to invest in promising ventures, support innovation, and potentially benefit from their growth and success. Investor eligibility under Reg CF promotes community engagement, as investors become more than just financial backers. They become advocates, brand ambassadors, and stakeholders in the success of the companies they invest in. This active involvement fosters a sense of ownership and a closer relationship between entrepreneurs and their investors.

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