Witnesses urge raising Reg CF cap, removing Reg A limit to expand online capital formation
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Summary
DealMaker and other witnesses told the subcommittee that raising offering caps and harmonizing Reg A and Reg CF rules would let more communities participate in capital formation while proponents argued standardized disclosures already provide protections for smaller investors.
Witnesses testifying at the Subcommittee on Capital Markets urged Congress to update limits on online exemptions and to harmonize rules so more companies can raise capital through Reg CF and Reg A.
Rebecca Kasaba, CEO and cofounder of DealMaker, told the committee her platform has facilitated roughly $2 billion in raises for about 900 American companies and urged three main reforms: remove the $75 million cap on Reg A offerings, increase the Reg CF limit from $5 million to $10 million, and harmonize Reg CF and Reg A rules for marketing and reporting. Kasaba said removing the Reg A cap would “bring unregulated capital formation activities into a regulated space.”
Kasaba and other witnesses said raising the Reg CF limit has precedent: the 2020 increase from $1.25 million to $5 million produced a 250% market boost, she testified. She argued that harmonized, standardized disclosures make Reg CF accessible and that “more junior investors can become more sophisticated because every deal they look at, there's the same format.”
McKeever Conwell, founder of Rare Breed Ventures, described using Rule 506(c) and the 3(c)(1) amendment that let smaller funds solicit investors and raise from larger pools of smaller checks; he said those changes enabled him to have 1,128 meetings in his first 90 days and ultimately 194 investors in his fund, 83.5% of whom invested $50,000 or less.
Democratic members and some witnesses cautioned that expanding participation must be paired with investor protections. Alexandra Thornton said expanding private-market access “without providing accurate information about operations, management risks, and financial position” increases risk for nonprofessional investors.
The hearing did not result in votes. Members signaled an intent to consider bills that would raise caps, harmonize exemptions, and consider marketing rules; stakeholders were asked to submit written comments for the record.