What is Reg D 506(c)?

For tokenized real estate, it is the most common path for offering tokens to US investors without registering the securities with the SEC.

What Rule 506(c) Permits

The defining feature of 506(c) is that it allows general solicitation. Issuers can advertise the offering publicly through websites, social media, conferences, and press coverage. This is the rule that makes a tokenized real estate offering visible to US investors at scale.

There is no limit on the amount that can be raised under 506(c) and no limit on the number of accredited investors who can participate. The exemption is widely used because it combines marketing freedom with a clean federal preemption from state-level securities registration.

Verified Accredited Investors Only

In exchange for the right to solicit publicly, the issuer must take reasonable steps to verify that every purchaser is an accredited investor. Self-certification by the investor, which is sufficient under Rule 506(b), is not sufficient under 506(c).

Verification typically involves reviewing tax documents, brokerage statements, or a written confirmation from a registered investment adviser, attorney, or CPA. Many platforms outsource verification to specialized providers who issue accreditation letters that satisfy the rule.

506(c) vs 506(b)

Rule 506(b) is the older and more restrictive sibling of 506(c). It prohibits general solicitation, meaning the issuer cannot publicly advertise the offering, but it allows up to 35 sophisticated non-accredited investors alongside an unlimited number of accredited investors. Investor self-certification is acceptable.

For tokenized offerings that depend on web-based marketing and a broad accredited investor base, 506(c) is usually the better fit. The verification burden is higher, but the ability to publicly market the property and the offering across digital channels generally outweighs the cost.

506(c) and Tokenized Real Estate

In a tokenized 506(c) offering, the SPV that holds the property issues tokens as the security. Each prospective investor completes accreditation verification before their wallet is whitelisted, and the smart contract enforces the requirement that only verified accredited wallets can hold or receive the token.

Tokens issued under 506(c) are restricted securities. They cannot be freely resold for at least one year unless a registration statement is filed or another exemption applies. Secondary trading therefore happens on regulated venues that recognize the holding period and restrict transfers to verified accredited counterparties.

Reg D 506(c) at Node Proptech

Where a Node Proptech offering is made to US investors under Rule 506(c), each prospective holder completes accredited investor verification before their wallet is whitelisted to receive the token. The smart contract enforces accredited-only holding and transfer restrictions throughout the life of the offering, with secondary trading routed through venues that recognize the holding period and verification requirements that apply under the rule.