Glossary term
Regulation Crowdfunding (Reg CF)
Regulation Crowdfunding is a securities exemption that allows eligible companies to raise money from the public through SEC-registered crowdfunding intermediaries.
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What Is Regulation Crowdfunding (Reg CF)?
Regulation Crowdfunding, often called Reg CF, is a securities exemption that allows eligible companies to raise money from the public through SEC-registered crowdfunding intermediaries. It was created under the JOBS Act to let smaller companies sell securities to a broader group of investors without going through a traditional public offering.
Reg CF is not the same as donation crowdfunding or reward crowdfunding. Investors are buying securities, which may be equity, debt, revenue-sharing instruments, or other investment contracts depending on the offering.
Key Takeaways
- Reg CF lets eligible companies raise capital from both accredited and non-accredited investors.
- Offerings must be conducted through a registered funding portal or broker-dealer platform.
- Companies must provide required disclosures, including business, financial, ownership, and risk information.
- Investor limits, resale restrictions, and offering limits are part of the framework.
- Reg CF investments are usually illiquid, speculative, and difficult to value after purchase.
How Reg CF Offerings Work
A company using Reg CF lists its offering through an approved intermediary. The issuer provides offering materials, financial information, use-of-proceeds details, ownership structure, and risk disclosures. Investors review the materials and commit funds through the platform.
The platform handles parts of the process, including investor onboarding, communication channels, and transaction mechanics. If the offering reaches its minimum target and other conditions are met, funds are released to the company. If it does not, investor commitments may be cancelled or returned according to the offering terms.
Reg CF Compared With Other Capital-Raising Paths
Offering Path | Typical Use | Investor Access |
|---|---|---|
Reg CF | Smaller public crowdfunding raise | Broad public access, subject to limits |
Regulation A | Larger exempt public offering | Public access with more formal disclosure |
Private placement | Capital raise outside public markets | Often limited to accredited investors |
IPO | Traditional public-company listing | Public market after registration and listing |
Investor Risk and Liquidity
Reg CF offerings often involve early-stage or small private companies. These companies may have limited operating histories, uncertain revenue, concentrated ownership, and high failure risk. Investors may not receive regular market pricing, and resale options are usually limited.
That does not make every Reg CF offering unsuitable, but it means the investment should be evaluated like a private, speculative security rather than a liquid public stock.
Disclosure Questions to Ask
Useful review questions include how the company makes money, how much runway the raise creates, who controls voting rights, how the security can be sold later, and what happens if the company raises more capital. Those details can matter more than the crowdfunding format itself.
The Bottom Line
Regulation Crowdfunding allows eligible companies to raise securities capital from the public through registered platforms. It expands access to early-stage investing, but the securities are often risky, illiquid, and dependent on careful review of the offering disclosures.