Update: Final SEC Rules on Intrastate Crowdfunding (Rule 147 and Rule 147A)
Updated February 2026
When this post was originally published in October 2015, the SEC had proposed changes to Rule 147 intended to modernize the federal intrastate offering exemption and better accommodate internet-based offerings and state crowdfunding laws.
Those proposals were finalized in October 2016, and the regulatory framework for intrastate offerings now differs in several important respects from what was contemplated at the time of the original post.
What Changed After 2015
In October 2016, the SEC adopted final rules that:
- Amended Rule 147, which continues to operate as a safe harbor under Section 3(a)(11) of the Securities Act for truly intrastate offerings; and
- Adopted new Rule 147A, a separate federal exemption designed to better align intrastate offerings with modern business practices and online communications.
These rules became effective in 2017 and remain the foundation for federal intrastate offering analysis today.
Key Features of the Current Rules
Rule 147 (amended):
- Remains tied to the statutory intrastate exemption in Section 3(a)(11).
- Sales must be made only to in-state residents.
- The issuer must have its principal place of business in the state and satisfy at least one “doing business” test.
- Issuers must have a reasonable belief as to investor residency and obtain written representations.
- Securities are subject to a six-month in-state resale restriction.
Rule 147A (new):
- Is a stand-alone federal exemption, not dependent on Section 3(a)(11).
- Offers may be made publicly, including via the internet, and may be accessible to out-of-state persons.
- Sales must still be made only to in-state residents.
- The issuer does not need to be incorporated in the state, so long as its principal place of business is located there.
- Includes similar residency verification and resale limitations.
Important State Law Caveat
Many state crowdfunding statutes were drafted before Rule 147A existed and explicitly require compliance with Section 3(a)(11) and/or Rule 147. As a result, issuers relying on state crowdfunding exemptions must still confirm whether Rule 147A is permitted under applicable state law, or whether the state statute effectively forces use of amended Rule 147 instead.
Why This Matters
The distinction between Rule 147 and Rule 147A can materially affect:
- Whether general solicitation is permitted,
- Where an issuer may be incorporated,
- How online offering materials are handled, and
- Whether a particular state crowdfunding exemption is even usable.
Founders and issuers should not assume that “intrastate crowdfunding” automatically allows internet advertising or out-of-state incorporation without careful legal analysis.
The remainder of this post reflects the SEC’s 2015 proposed rules and is preserved below for historical reference. Readers should not rely on the discussion below as a statement of current law.The SEC has proposed changes to Rule 147. You can find the proposed amendments here.
Rule 147 is one of the federal securities law rules that makes state-level equity crowdfunding more difficult.
The reason? Rule 147 is the rule issued pursuant to Section 3(a)(11) of the Securities Act of 1933. Section 3(a)(11) is the statutory basis for avoiding the application of the federal Securities Act in a state-level equity crowdfunding.
Rule 147 says that if you offer your securities across state lines, your offering is no longer "intrastate." It has been interpreted by the SEC to mean you can't post anything on the Internet that might be read in another state. Because if you do, you have "offered" the security in that other state, your offering is no longer intrastate, and then your offering doesn't qualify for the 3(a)(11) exemption.
The SEC issued guidance right after states started enacting state-level equity crowdfunding laws. Here is this guidance from the SEC, which is issued before it issued the proposed Rule 147 amendments.
Answer: Securities Act Rule 147 does not prohibit general advertising or general solicitation. Any such general advertising or solicitation, however, must be conducted in a manner consistent with the requirement that offers made in reliance on Section 3(a)(11) and Rule 147 be made only to persons resident within the state or territory of which the issuer is a resident. [April 10, 2014]
Answer: Use of the Internet would not be incompatible with a claim of exemption under Rule 147 if the portal implements adequate measures so that offers of securities are made only to persons resident in the relevant state or territory. In the context of an offering conducted in accordance with state crowdfunding requirements, such measures would include, at a minimum, disclaimers and restrictive legends making it clear that the offering is limited to residents of the relevant state under applicable law, and limiting access to information about specific investment opportunities to persons who confirm they are residents of the relevant state (for example, by providing a representation as to residence or in-state residence information, such as a zip code or residence address). Of course, any issuer seeking to rely on Rule 147 for the offering also would have to meet all the other conditions of Rule 147. [April 10, 2014]
Answer: Issuers generally use their websites and social media presence to advertise their market presence in a broad and open manner so that information is widely disseminated to any member of the general public. Although whether a particular communication is an "offer" of securities will depend on all of the facts and circumstances, using such established Internet presence to convey information about specific investment opportunities would likely involve offers to residents outside the particular state in which the issuer did business.
We believe, however, that issuers could implement technological measures to limit communications that are offers only to those persons whose Internet Protocol, or IP, address originates from a particular state or territory and prevent any offers to be made to persons whose IP address originates in other states or territories. Offers should include disclaimers and restrictive legends making it clear that the offering is limited to residents of the relevant state under applicable law. Issuers must comply with all other conditions of Rule 147, including that sales may only be made to residents of the same state as the issuer. [October 2, 2014]
So, the trouble with trying to raise money in a state-level equity crowdfunding is that you want to let people know about your offering. You would, if you could, like to post about the offering on Internet, without having to "implement technological measures to limit communications that are offers only to those persons whose Internet Protocol, or IP, address originates from a particular state or territory and prevent any offers to be made to persons whose IP address originates in other states or territories."
Now the SEC appears ready to modernize Rule 147. This is good. Interested parties should read the proposed rule carefully and put their comments into the SEC.
I like this statement from the proposed rules.
The proposed amendments to Rule 147 would amend these requirements and revise the rule to allow an issuer to engage in any form of general solicitation or general advertising, including the use of publicly accessible Internet websites, to offer and sell its securities, so long as all sales occur within the same state or territory in which the issuer’s principal place of business is located, and the offering is registered in the state in which all of the purchasers are resident or is conducted pursuant to an exemption from state law registration in such state that limits the amount of securities an issuer may sell pursuant to such exemption to no more than $5 million in a twelve-month period and imposes an investment limitation on investors.
And here is another quote from the explanatory materials in the proposed rules:
Rule 147, as proposed to be amended, would require issuers to limit sales to in-state residents, but would no longer limit offers by the issuer to in-state residents. 40 Accordingly, amended Rule 147 would permit issuers to engage in general solicitation and general advertising that could reach out-of-state residents in order to locate potential in-state investors using any form of mass media, including unrestricted, publicly available websites, to advertise their offerings, so long as all sales of securities so offered are made to residents of the state or territory in which the issuer has its principal place of business
Yesterday was a good day for crowdfunding.
What should Congress or the SEC do next? We need Congress or the SEC to extend the same exemption from '34 Act reporting for companies that crowdfunding under state law that Congress extended to companies crowdfunding under Title III.
