Two states – Massachusetts and Montana – have filed suit against the U.S. Securities and Exchange Commission (SEC), challenging the validity of the SEC’s “Regulation A+”  rules on the grounds that the new rules will reduce the states’ powers to review securities offerings before they are sold to the public.  So-called “Regulation A” previously permitted companies to raise up to $5 million through public deals, but those offerings were subject to state securities laws, and registration was required in every state in which the securities were sold.  In March 2015, however (following Congressional approval of the JOBS Act), the SEC adopted new rules which create two tiers of offerings. Tier 1 would allow companies to raise $20 million but remain subject to state regulation; Tier 2, however, would allow companies to raise up to $50 million in any 12-month period and exempt “qualified purchasers” from state Blue Sky laws.  For practical purposes, the new rules automatically preempt states from reviewing offerings over $20 million. Massachusetts and Montana call those changes “arbitrary” and “capricious” and argue that the new rules are “inconsistent with the public interest and the protection of investors.” The states challenge the definition of “qualified purchaser,” arguing that the overly broad definition renders the term “qualified” meaningless. In response, the SEC argues that Congress, in approving the JOBS Act, could have directed the Commission to craft a more narrow definition of “qualified purchaser” (such as one that considers wealth, income, and investment sophistication, as such definitions exist elsewhere in federal securities laws), but it did not do so here. The states’ lawsuits have been consolidated in the United States Court of Appeals for the District of Columbia.