Most people who raise money in Minnesota assume the securities laws are about lying, so they reason from the wrong end: nobody was deceived, everybody knew the risk, these were my friends — therefore no problem.
Minnesota’s statute is not built that way. It is built as a prohibition with three exits, and the person who walks through an exit is the one who has to prove the exit was there. That structure — not the antifraud section — decides most Minnesota blue-sky disputes.
This article explains how the analysis is organized. It does not tell you whether any particular raise is exempt, and it is not a recommendation regarding any security or investment.
What does Minnesota actually prohibit?
One sentence, at Minn. Stat. § 80A.49:
It is unlawful for a person to offer or sell a security in this state unless:
(1) the security is a federal covered security;
(2) the security, transaction, or offer is exempted from registration under sections 80A.45 through 80A.47; or
(3) the security is registered under this chapter.
Read what is not in there. No requirement that anyone be misled, no requirement of intent or knowledge, no requirement that the investment lose money. The default position is that offering or selling a security is unlawful, and everything else is an argument about which of the three doors you went through. Note also the word offer: the prohibition attaches at the offer, not the closing, so a deal that never funds can still have violated § 80A.49.
Who has to prove the exemption?
The company claiming it. That is § 80A.70:
(a) Civil. In a civil action or administrative proceeding under this chapter, a person claiming an exemption, exception, preemption, or exclusion has the burden to prove the applicability of the claim.
An exemption in Minnesota is not a characteristic of the deal that a plaintiff must disprove. It is an affirmative case the issuer must make, on the issuer’s own records, years later, about conditions that existed at the time of each offer and each sale. Documenting an exemption contemporaneously is not tidiness — the file is the evidence, and the issuer is the one who needs evidence. (In a criminal case the allocation is lighter: § 80A.70(b) gives the defendant only “the burden of going forward with evidence of the claim.”)
Is a loan from a friend a security in Minnesota?
It can be. The definition at § 80A.41(30) opens with “a note; stock; treasury stock; security future; bond; debenture; evidence of indebtedness,” runs through “certificate of interest or participation in a profit-sharing agreement” and “investment contract,” and closes the gap with “in general, an interest or instrument commonly known as a ‘security.’” What you called the paper does not control.
Two clauses matter especially to closely held Minnesota businesses. Section 80A.41(30)(D) provides that the term:
includes as an “investment contract,” among other contracts, an interest in a limited partnership and a limited liability company and an investment in a viatical settlement or similar agreement
So “we’re an LLC, not a corporation, so we’re not selling stock” solves nothing. What those units entitle a member to — and what happens when the company later asks for more money — is a separate problem, covered in Minnesota’s LLC Act has no law of capital calls.
Selling the whole business is different. Section 80A.41(30)(E) excludes “any equity interest of a closely held corporation or other entity with not more than 35 holders of the equity interest of such entity offered or sold pursuant to a transaction in which 100 percent of the equity interest of such entity is sold as a means to effect the sale of the business of the entity if the transaction has been negotiated on behalf of all purchasers and if all purchasers have access to inside information regarding the entity before consummating the transaction.” Every clause there is a condition. Drop one and the exclusion is not the exclusion.
Exempt security, exempt transaction, federal covered security
Three different things, constantly conflated, operating on different objects.
| What is exempt | Where it lives | Typical fit | |
|---|---|---|---|
| Exempt security | The instrument, whoever sells it | § 80A.45 | Government paper, bank and insurance obligations, regulated utilities, listed securities, nonprofit issuers |
| Exempt transaction | The particular deal, not the instrument | § 80A.46 | Private placements, sales to accredited and institutional investors, employee plans, reorganizations |
| Federal covered security | Preempted from state registration | § 80A.49(1), § 80A.50 | Rule 506 offerings, exchange-listed securities, registered funds |
The scope clauses differ, and the difference matters. Section 80A.45 exempts its listed securities “from the requirements of sections 80A.49 through 80A.54 and 80A.71.” Section 80A.46 exempts its listed transactions “from the requirements of sections 80A.49 through 80A.54, except 80A.50, paragraph (a), clause (3), and 80A.71” — so the exempt-transaction door leaves the Form D notice filing in place. Section 80A.47 adds a layer on top: a rule or order under the chapter may exempt a security, transaction, or offer (a class of them takes a rule), and an order — not a rule — may “waive, in whole or in part, any or all of the conditions for an exemption or offer under sections 80A.45 and 80A.46.”
What do small Minnesota companies usually land on?
Two clauses of § 80A.46 carry most of the weight.
Clause (13) exempts a sale or offer to sell to an institutional investor, an accredited investor, a federal covered investment adviser, or any other person exempted by rule or order. “Accredited investor” is not defined independently in Minnesota; § 80A.41(1) borrows Rule 501(a) of federal Regulation D.
Clause (14) is the general private-offering exemption. It requires that the transaction be part of a single issue in which:
(A) not more than 35 purchasers are present in this state during any 12 consecutive months, other than those designated in paragraph (13);
(B) a general solicitation or general advertising is not made in connection with the offer to sell or sale of the securities;
(C) a commission or other remuneration is not paid or given, directly or indirectly, to a person other than a broker-dealer registered under this chapter or an agent registered under this chapter for soliciting a prospective purchaser in this state; and
(D) the issuer reasonably believes that all the purchasers in this state, other than those designated in paragraph (13), are purchasing for investment.
The clause adds its own filing obligation: notice to the administrator on a statement of issuer form, “filed at least ten days in advance of any sale or such shorter period as permitted by the administrator” — except that “an issuer who makes sales to ten or fewer purchasers in Minnesota during any period of 12 consecutive months is not required to provide this notice.”
Three traps. Subparagraph (C) is a finder problem: paying anyone who is not a registered broker-dealer or agent to introduce investors breaks the exemption, and the person paid has independent exposure under § 80A.57(a). The notice runs in advance of the sale — a different calendar from the federal Form D’s post-sale deadline. And “35 purchasers” is a term of art: § 80A.41(26) excludes accredited investors and certain related persons from the count for clauses (1) and (14), and treats a corporation or partnership as one purchaser unless it was organized specifically to buy the securities and is not itself accredited.
Clause (1) is routinely misread. It exempts “isolated nonissuer transactions, consisting of sale to not more than ten purchasers in Minnesota during any period of 12 consecutive months” — and § 80A.41(19) defines a nonissuer transaction as one “not directly or indirectly for the benefit of the issuer.” A company raising its own capital is not doing that, whatever the number of purchasers.
Minnesota also has a homegrown crowdfunding exemption. MNvest, § 80A.461, lets a Minnesota-based issuer sell through a registered portal, capped per 12 months at $2,000,000 with audited or CPA-reviewed financial statements and $1,000,000 without (subd. 3(5)), with a $10,000 per-purchaser limit for non-accredited purchasers (subd. 3(7)) and escrow until the minimum offering amount is reached (subd. 3(8)).
If the offering is federally exempt, does Minnesota still matter?
Yes, in three respects.
Registration, largely preempted. A Rule 506 offering is a covered security under Section 18(b)(4)(F) of the Securities Act of 1933, 15 U.S.C. § 77r(b)(4)(F), which preempts state registration for securities exempt under Commission rules issued under § 4(a)(2) — while saying in the same breath that the subparagraph “does not prohibit a State from imposing notice filing requirements that are substantially similar to those required by rule or regulation” under that provision as in effect on September 1, 1996.
Notice filings, preserved. Section 80A.50(a)(3) provides that for a federal covered security under Section 18(b)(4)(D) of the 1933 Act, a rule under the chapter may require a notice filing including “a copy of Form D, including the Appendix,” and a consent to service of process signed by the issuer “not later than 15 days after the first sale of the federal covered security in this state.” Federal law backs that up at 15 U.S.C. § 77r(c)(2)(A).
Antifraud, entirely preserved. 15 U.S.C. § 77r(c)(1) says state securities commissions “shall retain jurisdiction under the laws of such State to investigate and bring enforcement actions” with respect to “fraud or deceit” and “unlawful conduct by a broker, dealer, or funding portal.” Preemption of registration is not immunity.
And one 2026 requirement is not visible in the statute on screen. Laws 2026, ch. 124, art. 2, § 1 adds a new paragraph (e) to § 80A.50, a notice filing for offerings under federal Regulation Crowdfunding by an issuer that either has its principal place of business here or sells at least 50 percent of the offering’s aggregate amount to Minnesota residents. Revisor’s site still displays the 2025 edition with an amendment banner, so the operative text is in the session law — which specifies no separate effective date for that section, leaving the general rule of Minn. Stat. § 645.02.
What happens if the exemption fails?
Section 80A.76 — the same civil liability section discussed in our piece on FS Credit and why Minnesota’s blue-sky remedies became load-bearing — supplies an express private remedy. Under § 80A.76(b), “[a] person is liable to the purchaser if the person sells a security in violation of section 80A.49 or, by means of an untrue statement of a material fact or an omission to state a material fact . . . not misleading.”
The two branches are not written alike. The misstatement branch carries a reasonable-care defense in its own text — the seller escapes if the seller sustains “the burden of proof that the seller did not know and, in the exercise of reasonable care, could not have known of the untruth or omission.” No such clause is attached to the registration branch.
The remedy is rescission: under § 80A.76(b)(1) the purchaser may recover “the consideration paid for the security, less the amount of any income received on the security, and interest from the date of the purchase, costs, and reasonable attorneys’ fees determined by the court, upon the tender of the security,” with tender available “any time before entry of judgment.” A purchaser who no longer owns the security gets actual damages under (b)(3).
Liability does not stop at the company. Section 80A.76(g) makes jointly and severally liable, to the same extent, any person who controls a liable person; any “managing partner, executive officer, or director”; and any employee or associated person, or any broker-dealer, agent, or investment adviser, that “materially aids the conduct giving rise to the liability” — each “unless” the person carries a burden of proof about what they knew or could have known. Again the burden runs against the defendant.
Two more provisions surprise people. Section 80A.76(k) bars a person who made or performed a contract in violation of the chapter from basing an action on that contract. Section 80A.76(l) makes void “[a] condition, stipulation, or provision binding a person purchasing or selling a security or receiving investment advice to waive compliance with this chapter” — a subscription agreement cannot contract out of chapter 80A, the same architecture as the Minnesota Franchise Act. And § 80A.76(m) sets the outer boundary: the chapter’s remedies “are in addition to any other rights or remedies that may exist, but this chapter does not create a cause of action not specified in this section or section 80A.66(e).”
The clock is the shortest part of the statute
Section 80A.76(j) is where otherwise good claims die. A person may not obtain relief:
(1) under subsection (b) for violation of section 80A.49, or under subsection (d) or (e), unless the action is instituted within one year after the violation occurred; or
(2) under subsection (b), other than for violation of section 80A.49, or under subsection (c) or (f), unless the action is instituted within the earlier of two years after discovery of the facts constituting the violation or five years after the violation.
The registration claim — the one that needs no proof of anything anyone said — expires first, one year from the violation, with no discovery rule written into it. The word “earlier” in clause (2) does the same work from the other side: a violation buried for six years is time-barred whenever it surfaces.
There is a statutory off-ramp for the issuer. Section 80A.77 provides that a purchaser, seller, or advice recipient “may not maintain an action under section 80A.76” if a conforming rescission offer was received in a record before suit — one stating how liability may have arisen, fairly advising the person of their rights, curing material misrepresentations or omissions, and offering the consideration paid plus interest, less income received. The offer must state that it “must be accepted . . . within 30 days after the date of its receipt” (or a shorter period of not less than three days set by order), and the offeror must have “the present ability to pay the amount offered.”
Two things Minnesota expressly does not do for you
It does not bless anything. Section 80A.73 provides that the filing or registration “or the availability of an exemption, exception, preemption, or exclusion for a security or a transaction does not mean that the administrator has passed upon the merits or qualifications of, or recommended or given approval to, a person, security, or transaction,” and that it “is unlawful to make, or cause to be made,” a representation inconsistent with that. Telling investors the state approved or cleared the offering is its own violation.
Being out of state does not get you out. Section 80A.87 applies §§ 80A.49, 80A.50, 80A.56(a), 80A.57(a), 80A.58(a), 80A.68, 80A.73, 80A.76, and 80A.77 to any offer that “originates from within this state” or “is directed by the offeror to a place in this state and received at the place to which it is directed,” whether or not either party is physically present here.
One last asymmetry. The criminal provision, § 80A.75(a), reaches a person who willfully violates the chapter, with a maximum of “not more than $10,000 or imprisoned not more than five years or both.” Civil liability under § 80A.76(b) for a registration violation requires no such state of mind. That gap is why “we weren’t trying to do anything wrong” is a coherent criminal defense and a non-answer in a civil rescission case.
Madgett Law, LLC
We advise Minnesota closely held companies and their investors on how chapter 80A fits together — the registration prohibition, the conditions attached to each exemption, the notice filings, the civil liability provisions — and on what documentation an issuer needs to carry the burden § 80A.70 places on it. We also represent investors evaluating claims under § 80A.76, where the limitations analysis has to come first. We do not recommend securities or investments, and nothing on this site is an opinion about any offering.
Related reading: the Consumer Fraud Act and Deceptive Trade Practices Act, the private attorney general statute, Minn. Stat. § 8.31, and what forming a Minnesota company actually requires.
To discuss a Minnesota securities question, send us a message or call 612-470-6529.
Sources: Minn. Stat. § 80A.49 (registration requirement; three exceptions); § 80A.41(1) (accredited investor defined by Rule 501(a) of Regulation D), (19) (nonissuer transaction), (26) (purchaser counting for § 80A.46, clauses (1) and (14)), (30) (definition of “security”), (30)(D) (limited partnership and limited liability company interests as investment contracts), (30)(E) (whole-business exclusion; 35-holder cap); § 80A.45 (exempt securities; scope clause); § 80A.46 (exempt transactions; introductory carve-out for § 80A.50, paragraph (a), clause (3), and § 80A.71), clause (1) (isolated nonissuer transactions; ten purchasers), clause (13) (institutional and accredited investors), clause (14)(A)–(D) and its notice paragraph (35 purchasers, no general solicitation, remuneration limits, investment intent, ten-day advance notice, ten-or-fewer exception); § 80A.461, subd. 3(5), (7), (8) (MNvest offering caps, $10,000 per-purchaser limit, escrow); § 80A.47 (additional exemptions and waivers); § 80A.50(a)(3) (Form D notice filing not later than 15 days after first sale); § 80A.57(a) (agent registration requirement); § 80A.70(a)–(b) (evidentiary burden on the person claiming an exemption); § 80A.73 (no finding of merit; misrepresentation concerning exemption); § 80A.75(a) (willful violation; $10,000 / five years); § 80A.76(b), (b)(1), (b)(3), (g), (j)(1)–(2), (k), (l), (m) (civil liability, rescission remedy, joint and several liability, limitations periods, unenforceable contracts, antiwaiver, outer boundary of remedies); § 80A.77(1)–(3) (rescission offers; 30-day acceptance; present ability to pay); § 80A.87(a), (c) (jurisdiction over offers made in this state); Minn. Stat. § 645.02 (default effective date of session laws); Laws 2026, ch. 124, art. 2, § 1 (adding § 80A.50, paragraph (e), Regulation Crowdfunding notice filing). Securities Act of 1933 § 18(b)(4)(F), § 18(c)(1), and § 18(c)(2)(A), 15 U.S.C. § 77r(b)(4)(F), (c)(1), (c)(2)(A) (covered securities; preservation of state fraud authority and notice filings). Minnesota statutes and session laws verified at the Minnesota Office of the Revisor of Statutes; federal text verified at uscode.house.gov. Note: §§ 80A.41 and 80A.45 were amended by Laws 2026, ch. 56, §§ 19–20, which added approved credit union share guaranty corporations to the depository-institution provisions and did not alter any language quoted here.
This article is general information about Minnesota law, not legal advice, and reading it does not create an attorney–client relationship. It is not an opinion about whether any particular offering is exempt from registration, and nothing in it is a recommendation regarding any security or investment. Securities analysis depends entirely on the specific facts, documents, and timing of an offering. No outcome is promised or implied.