The phrase “blue sky law” originated in the early 1900s, gaining widespread use when a Kansas Supreme Court judge declared he wanted to protect investors from speculative, risky ventures that had “no more basis than so many feet of ‘blue sky.'”

Blue sky laws are state regulations established as safeguards for investors against securities fraud. The laws, which typically vary by state require those offering new issues to register their offerings and provide financial details of the deal and the entities involved.

Consequently, investors have more verifiable information on which to base their judgment and investment decisions.

Blue sky laws serve as an additional regulatory layer to federal securities regulations—usually mandate licenses for brokerage firms, investment advisors, and individual brokers offering securities in their states. These laws require that private investment funds register not only in their home state but in every state where they wish to do business.

Issuers of securities must reveal the terms of the offering, including disclosures of material information that may affect the security. The state-based nature of these laws means each jurisdiction can include different filing requirements for registering offerings.

Even though a Reg A Tier 2 filing is pre-empted from State registration per SEC rules, the SEC has declared that States have the authority to require Notice filings and state fees.  Other offerings filed with states may be reviewed on merit or disclosure basis, specific to the states requirements.

While blue sky laws vary by state, they all aim to protect individuals from fraudulent or overly speculative investments.

These laws are crucial to protect investors and ensure they have the right amount of information available to them before making any investment decisions – they also give issuers an opportunity to spell out the terms of their securities offering to keep their investment communities informed.


Investors should recognize and accept the risks associated with investing.

Certain investments may require you to keep your holding for periods of many years with limited or no ability to resell unless there is a strongly regulated secondary market.

You may also have limited access to periodic reporting, see your holdings decrease and increase in value, or even lose your entire investment.

Investors should decide for themselves whether to make any investment, basing this on their own independent evaluation after consulting with financial, tax and investment advisors.

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