[RockIslandLine]

"But if you want to put $5-$20K into a friend's business, or a business you know well, the SEC makes it hard unless you're already a millionaire."

What do you mean? Individuals are still allowed to sign contracts. So write up a specific contract.

[gojomo]

The SEC makes it easy to use standard arrangements if the investors are 'accredited'.

But mixing in any 'unaccredited' investors drives up the legal complexities and costs, through extra liabilities. A generous (or desperate) founder might still go through the extra headaches to take money from a wider circle, but many potential knowledgeable investors are encumbered and essentially frozen out, simply because they are sub-millionaires, due to extra legal hurdles. It's like everyone who's not a millionaire is a minor, not trusted to contract like an adult - but not based on age or competence, just net worth.

Millionaires face no such restrictions – and thus enjoy the state's support in preserving for themselves privileged, first-look access to a class of potentially-lucrative investments.

It'd be like if millionaires were granted their driver's license on request, because hey, they can be trusted. And we'll waive their fees for permit applications, because they surely hired good advice before applying. Car registration, marriage license? Free if you're rich, we know you won't be getting into any trouble.

But you're not a millionaire? Find a rich sponsor willing to be a counterparty, and pay extra fees, because you poor folks are just too risky to [drive, build, marry, etc].

[RockIslandLine]

"legally complex" is different from "impossible".

And yes, people who have years worth of expenses saved are clearly better able to accept risk than someone with $10K in an IRA.

You're not making persuasive arguments here at all. An in both theory and in practice I'm on your side.