Here's some news for businesses considering capital raises via the Internet. On June 14th, 2016 the US Court of Appeals for the District of Columbia Circuit rejected petitions by the states of Montana and Massachusetts challenging pre-emption of state securities laws by the SEC regulations implementing Regulation A. The new Regulation A went into effect on June 19th, 2015.
Under the new Regulation A, issuers can raise up to $20 million (a Tier One Offering) or up to $50 million (a Tier Two Offering). The issuers must file offering materials with the Securities and Exchange Commission, and in a Tier One Offering, after having been cleared by the SEC, the offering materials must be filed with the securities regulatory agency of one state, appointed by the North American Securities Administrators Association. In a Tier Two Offering, there is a complete pre-emption of state securities laws for securities offered or sold to "qualified purchasers".
In a decision rejecting both petitions from Massachusetts and Montana, the Court ruled that the SEC regulations pre-empting state securities laws in a Regulation A offering are permitted by the Securities Act of 1933, and are not arbitrary or capricious.
It remains to be seen whether the states will appeal to the Supreme Court and if so, whether the Supreme Court will take the case, or whether this one potential threat to use the Internet to raise capital under the new Regulation A has been removed.
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