ICAN Presses Case Against Accredited Investor Wealth Test as SEC Seeks Dismissal

The U.S. Securities and Exchange Commission has filed a motion to dismiss a federal lawsuit that challenges the agency’s longstanding accredited investor rules. The litigation argues that the SEC’s use of wealth as a proxy for financial sophistication is both arbitrary and contrary to law.

Previously reported by AltsWire in September 2025, the complaint was filed by the Investor Choice Advocates Network, a nonprofit public interest law firm, on behalf of plaintiffs Emily Kapszukiewicz, a healthcare professional, and Healthcare Shares P.B.C., a public benefit corporation dedicated to financing medical innovation, including research on treatments and cures.

The SEC filed its motion to dismiss on April 13 in the U.S. District Court for the Northern District of Texas, asserting that the plaintiff lacks standing and has failed to demonstrate that the regulation violates the Administrative Procedure Act.

The lawsuit targets Rule 501 of Regulation D under the Securities Act of 1933, which defines an “accredited investor” as an individual with an annual income exceeding $200,000 for the past two years, or a net worth exceeding $1 million, excluding their primary residence.

Kapszukiewicz, who holds a master’s degree in applied economics and serves as the chief executive officer of Owl Therapy, does not meet these criteria despite having a net worth of $850,000 and an annual income of approximately $195,000. Her lawsuit alleges that she was barred from investing her own savings into venture capital funds due to these requirements.

The legal battle has highlighted a significant tension between the SEC’s public policy goals and its defense in court.

ICAN’s lead attorney, Nicolas Morgan, noted that the SEC’s current leadership has publicly questioned the very rules they are now defending in court. Morgan pointed to statements made by Paul S. Atkins, chairman of the SEC, as recently as February when he suggested that financial sophistication is better measured by knowledge than by bank account balances.

“A modernized accredited investor definition … such as a knowledge-based exam, would recognize that financial sophistication can scarcely be measured by income or net worth alone,” Atkins stated previously.

In an opposition brief filed the same day as the SEC’s motion, Morgan argued that the commission is defending a regulation that its own leadership has labeled “irrational” and “unfair.”

Beyond the question of fairness, ICAN is challenging the statutory authority behind the income requirement. Morgan contends that while Congress authorized the SEC to define accredited investors based on financial sophistication, knowledge and experience, the specific income threshold lacks a direct statutory basis.

The case is proceeding as Congress separately considers legislation that would expand accredited investor eligibility.

• The U.S. House of Representatives passed the Fair Investment Opportunities for Professional Experts Act (H.R. 3394) in June 2025, which would expand accredited investor eligibility to individuals with certain licenses, education or job experience – both broadening access to alternative investments and supporting capital formation.
• Related legislation includes Michigan Republican Rep. Huizenga’s Accredited Investor Definition Review Act (H.R. 1579) and Nebraska Republican Rep. Mike Flood’s Equal Opportunity for All Investors Act (H.R. 3339).

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