A new lawsuit challenges the Securities and Exchange Commission's accredited investor rule as arbitrary and capricious under the Administrative Procedure Act because it "uses wealth as a proxy for sophistication without sufficient justification."
The lawsuit was filed in the U.S. District Court for the Northern District of Texas by The Investor Choice Advocates Network (ICAN), a nonprofit public interest law firm headed by Nicolas Morgan, on behalf of Emily Kapszukiewicz, who is CEO of the health care startup Owl Therapy and has a master's degree in applied economics.
Kapszukiewicz has a net worth of $850,000, an annual income of approximately $195,000, and is not an “accredited investor” according to SEC regulations, the lawsuit states.
“The SEC has been warned for years that this rule widens the wealth gap and blocks capital from reaching entrepreneurs who need it most," Morgan, a former senior trial counsel at the SEC and a longtime ThinkAdvisor contributor, said in a statement. "Though policymakers and regulators continue to discuss reform, meaningful change has yet to materialize — making this lawsuit the next, and most powerful, step."
The accredited investor rule requires individuals to earn over $200,000 annually for the past two years (or $300,000 with a spouse) or to have a net worth of over $1 million to have access to certain alternative investments.
Wealth, the lawsuit states, "does not correlate with investment acumen. Many non-wealthy individuals, like Kapszukiewicz, possess the knowledge and experience to evaluate private investments but are excluded by the SEC’s arbitrary thresholds."
Kapszukiewicz "is trusted to oversee multimillion-dollar budgets and guide life-saving programs," the lawsuit continues, "but when she sought to invest her own savings in Healthcare Shares Fund, she was told she wasn’t 'qualified.'”
"The irony is striking: Emily is qualified to serve as the CEO of a healthcare company, but is barred from investing in the very fund she believes in," Morgan said.
Healthcare Shares Fund, the second plaintiff, is a public benefit corporation dedicated to financing medical innovation, including research on new treatments and cures.
In March and April 2025, Kapszukiewicz sought to invest in Fund I, a series of Healthcare Shares, LP, intending to contribute between $25,000 and $35,000, as aligned with the fund’s minimum investment requirement of $25,000, the lawsuit states.
Kapszukiewicz availed herself of two third-party service providers that verify accredited investor status, AngelList and Verify Investor.
"However, both services informed Kapszukiewicz that she did not qualify as an accredited investor under SEC rules, specifically Rule 501 of Regulation D," the suit states.
This rule requires, among other things, investors to have a net worth exceeding $1 million (excluding primary residence) or an annual income of at least $200,000 ($300,000 jointly with a spouse).
Bills in Play
The House recently passed two bills — H.R. 3394 (the Professional Experts Act) and H.R. 3339 (the Equal Opportunity for All Investors Act of 2025) — to expand the accredited investor definition.
The Professional Experts Act seeks to include those with relevant professional credentials or experience rather than just relying on wealth or income, while the Equal Opportunity for All Investors Act of 2025 seeks to let individuals qualify via a knowledge exam developed by the SEC and administered by the Financial Industry Regulatory Authority.
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