Texas Crowdfunding Rules: Intrastate Crowdfunding and State Exemptions in 2025

Introduction

Texas offers several state-level securities exemptions that complement federal crowdfunding rules, including an intrastate crowdfunding exemption and traditional private placement exemptions. Understanding Texas-specific rules is essential for issuers based in Texas or targeting Texas investors, as state exemptions can provide additional flexibility and cost savings compared to federal exemptions. However, state exemptions also impose limitations, particularly restrictions on offering securities to out-of-state investors.

This guide explains Texas intrastate crowdfunding rules, traditional Texas private placement exemptions, the interaction between state and federal exemptions, and strategic considerations for choosing between state and federal exemptions for Texas-based offerings.

Texas Intrastate Crowdfunding Exemption

Texas adopted an intrastate crowdfunding exemption in 2015, permitting Texas companies to raise up to $5 million from Texas residents through registered funding portals. The exemption is modeled on federal Regulation Crowdfunding but is limited to intrastate offerings.

Key Requirements:

Issuer must be organized in Texas and have its principal place of business in Texas
All investors must be Texas residents
Offerings must be conducted through a registered funding portal
Maximum offering amount is $5 million in any 12-month period
Investment limits apply to non-accredited investors (similar to federal Reg CF limits)
Financial statement requirements vary based on offering size (similar to federal Reg CF)

Advantages over Federal Reg CF:

No SEC filing or ongoing reporting requirements (state filing only)
Potentially lower funding portal fees due to reduced regulatory burden
Faster execution timeline (no SEC review or comment process)

Disadvantages:

Limited to Texas investors only (cannot accept out-of-state investors)
Smaller potential investor pool compared to federal Reg CF
Limited to $5 million (same as federal Reg CF after 2021 amendments)
Must register with Texas State Securities Board

When to Use: Texas intrastate crowdfunding is most attractive for companies with strong Texas-based investor networks or community ties, companies seeking to avoid SEC filing and reporting requirements, and companies raising under $5 million from Texas investors only.

Texas Private Placement Exemptions

Texas offers several private placement exemptions that permit offerings without state registration:

Rule 139.19 (Limited Offering Exemption): Permits offerings to up to 35 non-accredited investors (plus unlimited accredited investors) if certain conditions are met, including delivery of disclosure documents and investor suitability standards. This exemption is coordinated with federal Regulation D Rule 506(b).

Rule 139.20 (Accredited Investor Exemption): Permits offerings to unlimited accredited investors without disclosure requirements. This exemption is coordinated with federal Regulation D Rule 506(c).

Rule 139.25 (Private Placement Exemption): Permits offerings to up to 35 investors (accredited or non-accredited) with no general solicitation and no commission-based compensation to unregistered persons.

Impact: Most Texas-based private placements rely on federal Regulation D Rule 506(b) or 506(c) combined with Texas exemptions to avoid both federal registration and state registration. The coordination between federal and state rules simplifies compliance for Texas issuers.

Blue Sky Compliance for Out-of-State Offerings

Texas companies offering securities to investors in other states must comply with each state's securities laws (blue sky laws) unless a federal exemption preempts state registration. Federal Rule 506(b) and 506(c) offerings are generally exempt from state registration requirements under the National Securities Markets Improvement Act (NSMIA), though states can still require notice filings and fees.

Regulation Crowdfunding offerings are also preempted from state registration requirements, though states can require notice filings. Regulation A+ Tier 2 offerings are preempted if the securities are listed on a national exchange, but Tier 1 offerings require state-by-state registration.

Impact: Most Texas companies conducting multi-state offerings use federal Regulation D Rule 506(c) or federal Regulation Crowdfunding to avoid the burden of state-by-state registration.

Choosing Between State and Federal Exemptions

Choose Texas Intrastate Crowdfunding When:

Your investor base is primarily or exclusively in Texas
You want to avoid SEC filing and ongoing reporting requirements
You have strong community ties or local brand recognition in Texas
You are raising under $5 million

Choose Federal Regulation Crowdfunding When:

You want to access investors nationwide
You want to use established national funding portals with large investor bases
You are comfortable with SEC filing and ongoing reporting requirements
You are raising under $5 million

Choose Federal Regulation D When:

You are targeting accredited investors only
You want unlimited offering amounts
You want to avoid ongoing reporting requirements
You want fast execution (2-4 weeks)

Choose Federal Regulation A+ When:

You are raising $15-75 million
You want freely tradable securities
You want to list on a national exchange
You are comfortable with SEC qualification process and ongoing reporting

Frequently Asked Questions

Can a Texas company use both Texas intrastate crowdfunding and federal Reg CF?

Not simultaneously. Integration rules would likely combine the offerings. However, you could conduct sequential offerings under different exemptions with appropriate time gaps.

Do I need to register with the Texas State Securities Board for a federal Reg D offering?

Federal Rule 506(b) and 506(c) offerings are exempt from Texas registration, but you must file a Form D with the SEC and may need to file a notice with Texas.

Can non-Texas residents invest in Texas intrastate crowdfunding offerings?

No. All investors must be Texas residents.

What is the penalty for violating Texas securities laws?

Violations can result in cease and desist orders, administrative penalties, disgorgement of proceeds, and in severe cases, criminal prosecution. Investors also have rescission rights.

Do I need a lawyer to conduct a Texas intrastate crowdfunding offering?

While not legally required, it is highly recommended to work with securities counsel experienced in Texas crowdfunding rules to ensure compliance.

Related Resources: