Sexual orientation and angel investing

Here's where angel investing stands after the decision of the US Supreme Court yesterday in United States v. Windsor.

Sexual orientation is less relevant today for angel investing than it was on Tuesday.


This is because the Court struck down Section 3 of the federal Defense of Marriage Act (DOMA) as unconstitutional.

But, unfortunately, sexual orientation remains relevant to whether one can qualify to be an angel investor. This is because the Court's ruling appears to eliminate sexual orientation discrimination only with respect to angels who are legally married. It yet appears that individuals in same-sex relationships who are not allowed to marry, may need to meet a higher standard than do individuals who are legally married.

Doesn't the SEC, in light of the Court's decision, need to revisit Rule 501 of Regulation D before persons in same-sex marriages are treated the same way as persons in heterosexual marriages? I don't think so. I'm hearing and appreciate the media stories about how it may take some time for the executive branch of the federal government to fix various rules and policies in order to bring them into conformity with the Court's ruling, but, the Court's ruling on DOMA is self-executing with respect to the accredited investor definition for anyone who is married, regardless of gender.

"Spouse" under Rule 501 of Reg D now means any person with whom the potential accredited investor is married, full stop. The attenuated, mean-spirited and discriminatory gloss of DOMA previously overlayed on the definition of “spouse” is now gone.

Less clear, however, is whether couples in civil unions are "spouses" to one another. For someone who is part of a couple who wish to be married, but state law doesn't permit them to be, he or she may yet be shut out of the ability to combine income or net worth to meet what is effectively a lower accredited investor standard for married (now, regardless of gender) couples.

Photo: Ted Eytan / Flickr.

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