This guide is general legal information, not legal advice, and does not create an attorney–client relationship. Rules change and vary by state — verify current requirements with official sources or a licensed attorney.
Selling shares to the general public normally means registering an offering with the Securities and Exchange Commission — an expensive, months-long process out of reach for early-stage companies. Regulation Crowdfunding, created by Title III of the JOBS Act, carves out a narrow alternative: a private company may sell securities to anyone, including investors of modest means, if it stays inside strict limits and runs the offering through a regulated intermediary.
The trade-off is structural. In exchange for reaching retail investors without a registered offering, the issuer accepts a capped raise, prescribed disclosure, ongoing reporting, advertising restrictions, and a mandatory intermediary that is either a registered funding portal or a registered broker-dealer. Understanding those constraints before designing the raise saves companies from expensive restructuring later.
Key takeaways
- An issuer relying on Regulation Crowdfunding may raise a capped aggregate amount in a rolling 12-month period — $5,000,000 as of mid-2026, a figure subject to inflation adjustment.
- Every offering must be conducted exclusively through one intermediary that is registered with the SEC as a funding portal or is a registered broker-dealer, and is a FINRA member.
- Investors face their own annual limits based on income and net worth, with the applicable dollar thresholds adjusted for inflation.
- Issuers must file a Form C offering statement with financial statements at a level of assurance that scales with the size of the raise, and must file annual reports afterwards.
- Advertising is tightly limited: an issuer may publish notices directing investors to the intermediary's platform, but general solicitation outside that channel is not permitted.
The shape of the exemption
Regulation Crowdfunding implements an exemption in the Securities Act for offerings made through a single intermediary to a broad investor base. It is not a way to avoid securities law; it is a way to comply with a lighter version of it. The issuer remains liable for material misstatements and omissions, the anti-fraud provisions apply in full, and the exemption is lost if conditions are broken.
The exemption is also limited by who may use it. Foreign issuers, companies already subject to Exchange Act reporting, certain investment companies, blank-check companies, and issuers that have failed to file required annual reports are excluded. Bad-actor disqualification provisions bar offerings where the issuer or specified associated persons have particular disciplinary histories, so the diligence has to reach founders and significant holders, not just the entity.
The numbers that define the raise
| Limit | How it works |
|---|---|
| Issuer offering cap | $5,000,000 aggregate in any rolling 12-month period across all Regulation Crowdfunding offerings by the issuer and certain related entities |
| Investor limit — lower band | Where either annual income or net worth is below the published threshold, the investor may invest up to the greater of $2,500 or 5% of the greater of annual income or net worth in any 12-month period |
| Investor limit — upper band | Where both annual income and net worth are at or above the threshold, up to 10% of the greater of the two, subject to an absolute annual ceiling |
| Accredited investors | Not subject to the investment limits, following amendments adopted in 2020 |
| Resale restriction | Securities generally may not be transferred for one year after purchase, subject to defined exceptions such as transfers back to the issuer or to accredited investors |
Because the investor thresholds move with inflation, they should never be hard-coded into a platform's calculator without a review cycle. The SEC publishes the current figures, including in its investor bulletin on crowdfunding investment limits. As of mid-2026 the threshold separating the two investor bands stood at $124,000, with the same figure serving as the absolute annual ceiling for investors in the upper band. Rulemaking petitions seeking changes to the offering cap were pending before the Commission during 2026, so treat the current numbers as a snapshot.
The intermediary requirement
An offering must be conducted exclusively through one intermediary's platform, and the intermediary must be either a broker-dealer registered with the SEC or a funding portal registered with the SEC and a member of FINRA. Funding portals are a category created specifically for this regime, and their permitted activities are deliberately narrow.
- What portals must do: provide investor education materials, obtain investor representations about risk, take measures to reduce fraud risk including background checks on issuer principals, provide communication channels, and ensure funds are held with a qualified third party until the target is met.
- What portals may not do: offer investment advice or recommendations, solicit purchases of securities offered on the platform, compensate promoters or finders based on sales, or hold, manage, or handle investor funds or securities.
- Registration mechanics: a portal files with the SEC and becomes a FINRA member, after which it is subject to FINRA's funding portal rules and examinations.
- Anti-money-laundering: funding portals are subject to programme obligations administered by FinCEN, an overlap explored in our AML and Bank Secrecy Act primer.
Example (hypothetical): A software company builds a slick "invest in startups" app and plans to earn a percentage of each raise while highlighting the deals it finds most promising. Curating and recommending deals looks like advice and solicitation, which a funding portal may not do — pushing the business toward broker-dealer registration instead. The business model decision and the licensing decision are the same decision.
Disclosure and ongoing reporting
The issuer files a Form C offering statement with the SEC and provides it to investors and the intermediary. Its content is prescribed and includes a description of the business and business plan, the intended use of proceeds, the offering price or the method for determining it, the target amount and deadline, ownership and capital structure, related-party transactions, risk factors, and information about directors, officers, and holders of 20% or more of voting power.
Financial statement requirements scale with the size of the raise. Smaller offerings may rely on financial statements certified by the issuer's principal executive officer; mid-sized offerings require review by an independent public accountant; the largest require audited statements, with an accommodation for first-time issuers. The dollar boundaries between those tiers are inflation-adjusted, so confirm them against the SEC's current guidance for issuers before budgeting for an audit.
After the offering, obligations continue. Issuers file progress updates and then an annual report on the prescribed form, posted on the issuer's website, until one of the rule's termination conditions is met. Missing annual reports has a hard consequence: an issuer that has not filed as required becomes ineligible to use the exemption again.
Advertising, testing the waters, and communications
The advertising rule is narrower than most founders expect. An issuer may publish a notice that directs investors to the intermediary's platform and contains only limited factual information — such as the terms of the offering, a brief factual statement about the issuer, and how to find the offering. Substantive promotion must happen on the intermediary's platform, through the communication channels the intermediary provides, where the issuer must identify itself in any postings.
Issuers may test the waters before filing, subject to conditions and to a requirement that any solicitation materials be filed. Compensating promoters is permitted only with clear disclosure of that compensation in each communication. Sloppy influencer promotion is a recurring compliance failure in this market, and it is straightforwardly attributable to the issuer.
Fitting a crowdfunded round into the company
- Decide the security type first — common shares, preferred, convertible instruments, and revenue-sharing notes each carry different consequences for later financings.
- Consider whether a large number of holders of record will complicate a future institutional round or trigger reporting thresholds; many issuers use a custodial or nominee structure to manage this.
- Align the charter and shareholder documents with the offering terms before filing, using the framework in our guide to corporate governance for private companies.
- Confirm the entity form supports the securities being sold — see choosing a U.S. business structure.
- Budget for accountant involvement early, because the financial statement tier depends on the size of the raise you intend.
- Build a diligence file that supports every statement in the Form C; the anti-fraud provisions do not soften because the offering is small.
State securities regulators retain notice-filing and enforcement roles in this area even though the exemption preempts state registration for covered offerings, so verify state requirements rather than assuming federal compliance is complete compliance. The wider regulatory context is mapped in our overview of U.S. fintech regulation.
Frequently asked questions
Can we run a Regulation Crowdfunding round and a private placement at the same time?
Concurrent offerings under different exemptions are possible, but they require care so that general solicitation in one does not undermine the conditions of the other. The analysis depends on which exemptions are involved and how communications are managed. Get the structure reviewed before either offering launches.
What happens if the offering does not reach its target?
The rule requires that investor funds be held by a qualified third party and returned if the target amount is not reached by the deadline. Issuers may set a maximum above the target and accept oversubscriptions, subject to disclosure of how allocations will be handled.
Do investors have any right to cancel?
Yes. The rule gives investors a period to cancel their commitment, and requires reconfirmation in defined circumstances where material changes are made to the offering. Platforms must build these windows into their commitment flow rather than treating a commitment as final on submission.
Is a funding portal allowed to take equity in issuers on its platform?
The rule permits a portal to receive a financial interest in an issuer as compensation in defined circumstances, subject to conditions including that the interest be of the same class offered to investors. The details matter, and the general prohibitions on advice and solicitation remain in place regardless.
How liquid are securities bought this way?
Not very. A one-year transfer restriction applies with limited exceptions, and even afterwards there is rarely an established market. Investors should treat these positions as long-term and illiquid, and issuers should say so plainly in their risk factors.
Where to go from here
Companies considering this route should sequence three decisions: whether the business genuinely benefits from a retail shareholder base, whether the capped amount meets the funding need, and whether the disclosure and annual reporting burden is sustainable. Only then does intermediary selection matter. Because the dollar limits and financial statement thresholds are periodically adjusted, verify every number against current SEC materials at the time of the offering rather than relying on figures quoted in secondary sources — including this one. Further reading is collected in the fintech law topic hub. This article is general information, not legal advice or an offer of securities.
