In recent weeks, the President has taken initiatives to attract foreign investment to the U.S. His suggested "Gold Card" program would enable international investors to gain legal residency for an investment of $5 million. During his address to Congress, he praised a substantial $200 billion investment from SoftBank of Japan.
While seeking overseas investment is certainly reasonable, the government overlooks an important domestic investment source. The accredited investor criteria—requiring individuals to have a net worth exceeding $1 million or an annual income of at least $200,000—excludes far too many Americans from accessing some of the most rewarding securities markets. It’s time for a change.
In the American context, securities are generally divided into two main categories: public and private. Public securities are traded openly on national exchanges and are accessible to all investors, but the process for companies to go public is highly complex and laden with regulatory requirements. Many organizations, such as Stripe and SpaceX, are opting to remain private instead.
However, private markets come with their own limitations. To ease regulatory burdens, they confine access to accredited investors, meaning that a significant 80% of American households are effectively barred from these opportunities. As more companies choose to stay private, an increasing number of everyday Americans are unable to build wealth alongside them.
Historically, public markets provided substantial and reliable capital for large, fast-growing companies, benefiting the public by giving them access to top-tier investments. Yet, times have shifted.
According to SEC Commissioner Hester Peirce, “The once aspirational goal of becoming a public company seems to have lost its luster.” Recently, private markets have been expanding at approximately double the rate of global public equity markets.
And one specific SEC regulation is largely responsible.
The Accredited Investor Rule
The accredited investor rule, an SEC regulation, limits access to private investment opportunities by establishing criteria for participation in offerings like Regulation D, which is primarily used by private companies to raise funds. Consequently, this rule effectively keeps millions of Americans from investing in some of the most innovative companies.
Proponents of this rule often argue for its necessity. “Knowledge cannot protect people from potential losses… Only financial resources can,” stated the director of policy at Americans for Financial Reform in a recent interview.
We strongly disagree. Such a paternalistic perspective assumes that the public needs protection from itself. In reality, the accredited investor rule does not safeguard the public; it simply excludes them from investing in transformative companies like OpenAI, Anthropic, and Perplexity.
The Proposal for Change
Last year, a senator proposed the "Empowering Main Street in America Act," suggesting, among other reforms, a test-in definition for accredited investors.
This test-in approach offers distinct advantages. First, it’s equitable; any American who qualifies can invest. Second, wider access to private markets allows more citizens to participate in the country’s economic prosperity. If development is happening here, everyone should have the opportunity to invest. Third, this expansion of private markets enhances their overall value.
However, such legislation may not even be necessary; the SEC already possesses the authority to enact this change under existing laws. Therefore, an alteration to the rule on these grounds is unlikely to face significant legal challenges. By modifying the accredited investor rule, the SEC can transform private markets through regulatory actions alone. Action should be taken without delay.