Then why aren't there limits on lottery ticket purchases, or casino gambling, or making highly-leveraged real-estate purchases, or buying any number of other investments (including public stocks and options) that can send any initial amount of money to zero, quite rapidly?
It's an archaic set of rules, from a dumber era, and totally out-of-sync with what people are capable of, and what real risks to "all of their wealth" exist today.
Well, for lottery tickets and casino gambling, people understand it's gambling (a game of chance). If someone came up to you and said "Give me $100K and I'll double it by the end of the year by gambling" nearly everyone will think "that's high risk!".
You can lose all your money doing real-estate deals or buying stocks, but those are regulated financial activities. Basically the gov't is saying "I don't want just anyone buying a private company, but I'm OK with allowing them to purchase equity in a public company because those companies are forced to be transparent."
Note: I'm not defending the law, just trying to explain the rationale for it.
Apparently historically many of the rules came about during the early 20th century US oil boom. Guys used to go door to door selling shares in can't go wrong oil stocks and then not only did some wells not work but often there were no wells at all and the insiders just stole the money. There was political outcry so laws were passed to stop selling direct to small investors. The rational to allowing wealthy investors to punt is that a) they can afford to lose, or at least do so quietly without causing a political stink, and b) can afford professional advice and get their accountant to have a look and so on. Investor protection laws are still useful - there are plenty of scammers out there - but I think could be updated. For example the government could have lawyers and accountants at least check out the money was being invested in a business and not just paid out to the insiders. In the UK we have some equity crowd funding which seems to kind of work.
This has been explained to you about 100 times already, why not start with your best argument instead of pretending the question has never been asked before? For the record I support raising equity through things like Kickstarter and lowering the accreditation threshold for small investments, but you're being extremely disingenuous here.
I don't recall any good explanations, maybe you could recount the best ones?
It can't be because the rule provides strong protection of non-millionaire savings, because there are already endless ways for the gullible to lose all their money. It can't be millionaires are especially immune to common scams, because there's no evidence of that – and in fact quite a lot of evidence to the contrary.
Why not make these government policies wealth-oblivious, the same way they're race-, gender-, or religion- oblivious?
Why not base any necessary protections on objective tests of knowledge and ability, as with driver or occupational licensing?
The problem with small-scale investing is that the smaller your investment, the less you can afford to spend doing research and due diligence on what you're giving money to. Also, companies don't generally want to deal with a bunch of tiny investors if they don't have to, so even if it were legal most of the good investment opportunities still wouldn't be available to people who don't have enough money to count as qualified investors. This is apparently especially true of Silicon Valley VC, where everyone wants investors with good contacts.
Basically, it'd open up individuals to being scammed a lot more and the non-scams would still not be open to them.
>why aren't there limits on lottery ticket purchases, or casino gambling,
Because they're profitable to the state. There have historically been blanket bans on both of these things at all wealth levels in the US. I still know of no private lotteries.
Both exist to exploit people who don't understand probability, and are essentially voluntary regressive taxes. When it comes to these two, now is the dumber era.
Wow, way to live up to your name. There are many private lotteries, they're called raffles. Several times a year in SF there are billboard advertisements for the opportunity to buy lots in a raffling off of a house in the city or several million in cash.
Beside which, capital gains tax probably earns more for the state than either lottery or gambling income in many states.
Gambling is regulated. Loans for real-estate are regulated (sometimes imperfectly). Public stocks are simple and standardized enough that information about them is easily available and a buyer can be expected to understand.
It's an archaic set of rules, from a dumber era, and totally out-of-sync with what people are capable of, and what real risks to "all of their wealth" exist today.