Coinbase CEO Welcomes Expansion Of Accredited Investor Definition
The definition of an Accredited Investor has long been a discriminatory rule that blocks millions from participating in the Reg D private securities marketplace. Securities issued under Reg D measure in the trillions each year, and almost all promising early-stage firms leverage the exemption to raise growth capital before going public (if they ever do). Because the regulatory ecosystem is overly aggressive, firms today seek to remain private for as long as possible. While this isn’t an issue for wealth investors, it excludes smaller investors, as investment options have narrowed because fewer firms are publicly listed. Additionally, early investors in private sectors can capture outsized capital gains prior to a public offering. Of course, this comes with increased risk, but that is how markets operate.
For many years, the general consensus has been that the current definition, tied to a wealth hurdle, discriminates against individuals with the experience or business acumen to understand the risks of investing in private securities. Conversely, some people qualify but lack the interest or capacity to determine whether an investment is right for them.
Finally, after many years of discussion, the Securities and Exchange Commission (SEC) is working to expand the definition. As it broadens the list of professional qualifications, a test is in the works to determine whether an individual can be deemed Accredited. FINRA will administer the test, but regulators have indicated they are open to other entities administering the exam.
Coinbase (NASDAQ:COIN), one of a growing number of venues offering private securities to Accredited Investors, saw its CEO, Brian Armstrong, welcome the expanded definition. On X, Armstrong stated:
“It’s great to see the SEC proposing merit-based private market access in the US. This will be a huge step forward. For too long, only the richest people have had access to the private markets. Retail has been missing out. And over the last few years, companies have been incentivized to stay private longer (so retail has been missing out even more at best, or become exit liquidity at worst).”
Coinbase already offers pre-IPO perpetual futures to non-US customers and retail access to IPOs. The company has signaled its interest in expanding its presence in the private securities marketplace. The company aims to be the everything exchange for the US and worldwide, which will inevitably include private securities offerings.
