Federal preemption of state law under the Supremacy Clause is not a politically popular mode of legislation. When the Securities Act of 1933 (Securities Act) was passed, Congress did not preempt state blue sky laws, which required securities offerings to be registered and reviewed by state authorities. These laws preceded the federal securities laws. To the contrary, the Securities Act contained an explicit savings clause for blue sky statutes. In the 1990s, however, sweeping deregulation of state blue sky laws was accomplished by the National Securities Markets Improvement Act of 1996 (NSMIA). This statute preempted blue sky securities registration merit review and prospectus disclosure requirements for SEC-registered investment companies and stock exchange and Nasdaq listed securities. It also preempted blue sky law in most private placements—securities offerings to sophisticated investors that were not required to be registered with the SEC.1 Securities sold pursuant to the Regulation A exemption from registration remained subject to state blue sky review.

The Jump Start Our Business Startups (JOBS) Act changed this regime through its direction to the Securities and Exchange Commission to revamp Regulation A. When the SEC adopted such a revision (known as Regulation A-Plus) it preempted state blue sky law for larger Regulation A offerings. The securities regulators for the states of Massachusetts and Montana sued the SEC to vacate this rule. The North American Securities Administrators Association, Inc. (NASAA) and eight current and former Democratic congressmen filed amicus briefs in support of the plaintiffs. The National Small Business United Association supported the SEC.

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