Understanding the Square Peg of Crypto in the Round Hole of Regulation D

Understanding the complexity of crypto offerings within the framework of Regulation D can be a challenging task. The Securities and Exchange Commission (SEC) offers exemptions to its rules, allowing you to raise unlimited funds from accredited investors and up to 35 non-accredited investors within a 90-day period. This exemption, known as Regulation D, provides a platform for private investments beneficial to the economy. However, it comes with certain restrictions intended to prevent an unregulated secondary private market.

Crypto offerings pose a unique challenge to this framework due to their decentralized and fungible nature. Unlike traditional securities, the value of crypto is not tied to an underlying asset or company profit but is primarily driven by market speculation. This contradicts the SEC's requirement that securities should not be resold with the intent of capitalizing on their appreciation. The conflict arises when trying to fit the crypto offering, which operates on resale and appreciation, into the round peg of SEC rules, effectively making it a square peg in a round hole.

However, if your interest lies in the company behind the coin or a business linked to crypto, such as a mining operation, there are ways to navigate the regulatory landscape. The crucial aspect is to ensure that profits are not solely based on the appreciation or depreciation of the crypto coin itself, but on the actual business operations.

Read more about Reg D - What is Reg D? The King of Securities Exceptions: https://www.moschettilaw.com/reg-d/

Read more about PPMs - What Is In A Private Placement Memorandum?: https://www.moschettilaw.com/private-placement-memorandum-attorney/

Moschetti Syndication Law Group is a boutique syndication law firm, serving small and growth-bound syndicators, as well as private equity firms. Our attorney, Tilden Moschetti, is determined to keep the firm’s ‘boutique’ size so we can tailor the services to each client’s unique needs without turning the firm into a faceless factory churning out private placement memorandums or passing unnecessary overhead expenses onto our clients. (As our client, you’ll only pay a fixed fee, so no surprises.) As for the client experience, we give real-time answers with Tilden Moschetti without making you book an official appointment or get passed along to associates or paralegals. We’ll work with your ambitions and overall vision to help you close the current deal and fill in that ‘missing’ piece – whatever you need – to keep adding more syndications to your portfolio. We keep syndicators syndicating (TM).

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