Federal securities law has always imposed restrictions on how businesses advertise their investment offerings. But the emergence of social media as the primary marketing channel for small businesses created a collision between state equity crowdfunding laws—designed to let small businesses raise capital from local investors—and SEC enforcement guidance that effectively prohibited using the most efficient advertising tools available. Understanding how the SEC’s Compliance and Disclosure Interpretations interact with Michigan’s crowdfunding framework is essential for any Michigan business considering a MILE offering.
The Michigan Invests Locally Exemption (MILE) created an intrastate securities exemption allowing Michigan businesses to raise capital from Michigan residents by selling equity online without registering the offering with the SEC. The exemption is available because the SEC’s jurisdiction covers only interstate commerce—securities transactions that cross state lines. If a Michigan business raises money only from Michigan investors, uses only Michigan-based portals, and takes adequate measures to ensure the offering stays within the state, the offering may fall outside SEC jurisdiction.
MILE imposes its own requirements: offering size limits, per-investor maximums (up to $10,000 for non-accredited investors), disclosure obligations, and requirements to use a Michigan-registered crowdfunding portal. For businesses that qualify, it represents a genuine opportunity to access community capital.
The problem is advertising. The whole point of equity crowdfunding is to reach a large number of potential investors. Social media—Facebook, Instagram, Twitter/X, LinkedIn—is the obvious vehicle. But these platforms are inherently interstate. A Facebook ad targeted to Michigan users can still be seen by users in Ohio. A tweet can be retweeted by someone in California. And the SEC’s Compliance and Disclosure Interpretations treat this interstate exposure as potentially converting a MILE offering into a general solicitation subject to federal registration requirements.
The SEC’s interpretations require businesses relying on intrastate exemptions to take ‘adequate measures’ to prevent the offering from being made to out-of-state residents. For social media advertising, ‘adequate measures’ is a practical impossibility. Facebook’s advertising platform allows geographic targeting, but it does not guarantee that only Michigan residents see the ad. If a Michigan resident shares the ad with a friend in Wisconsin, the offering has arguably crossed state lines.
A business that inadvertently makes its equity offering to out-of-state investors—even a single investor—loses the benefit of the intrastate exemption. Without the exemption, the offering is an unregistered securities offering in violation of Section 5 of the Securities Act of 1933. The consequences can be severe:
Given these restrictions, Michigan businesses using MILE must rely on advertising channels that can be geographically restricted with reasonable reliability:
The Jumpstart Our Business Startups (JOBS) Act, enacted in 2012, created a federal Regulation Crowdfunding framework that allows businesses to raise up to $5 million from investors nationwide through SEC-registered portals. Unlike MILE, federal crowdfunding is not restricted to intrastate activity—it is specifically designed for internet-based fundraising. For businesses that need to advertise broadly and cannot limit their reach to Michigan, Regulation Crowdfunding offers a legally compliant path to using social media for investor acquisition.
Regulation A+ (Title IV of the JOBS Act) provides an even higher ceiling—up to $75 million annually—for businesses that qualify and are willing to meet higher disclosure standards.
Revision Legal’s attorneys advise Michigan businesses on MILE compliance, federal crowdfunding structures, and securities law implications of marketing strategies. If you are planning an equity crowdfunding campaign, contact us before you advertise. The cost of a pre-launch compliance review is far less than the cost of securities violations discovered after the fact.
Since the SEC implemented Regulation Crowdfunding (Reg CF) under Title III of the JOBS Act in 2016, Michigan businesses that need to advertise their offerings nationally have a lawful mechanism for doing so. Reg CF allows businesses to raise up to $5 million from any member of the public—accredited or non-accredited—through SEC-registered funding portals, without being restricted to in-state investors.
The trade-off for broader investor reach is increased federal oversight. Reg CF offerings require disclosure of financial information, use of a registered intermediary, and compliance with ongoing reporting requirements for companies that raise more than $124,000. For businesses that genuinely need to reach investors beyond Michigan, Reg CF provides a path to internet-based fundraising that does not run afoul of the SEC’s intrastate advertising interpretations.
For businesses seeking to raise more than $5 million, Regulation A+ (Regulation A, Tier 2) allows raises of up to $75 million per year from the general public without full SEC registration. Tier 2 offerings require audited financial statements and ongoing annual, semi-annual, and current event reports. In exchange for these requirements, Tier 2 offerings are exempt from state securities registration (blue sky) requirements—a significant advantage for businesses seeking to raise capital from investors in multiple states.
The cost and complexity of a Reg A+ offering is substantially higher than MILE, but the ceiling on how much can be raised and the breadth of investors who can participate is also substantially higher. For businesses with high capital needs and genuine national investor appeal, Reg A+ is worth evaluating.
For businesses committed to using MILE, there are practical approaches to investor outreach that minimize SEC risk:
Revision Legal’s attorneys advise Michigan businesses on the full spectrum of securities law issues, from MILE structuring and compliance to Regulation Crowdfunding and Regulation A+ offerings. Before you begin marketing an equity offering, consult with us to ensure your advertising strategy complies with both Michigan and federal securities law. Contact us today.
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