Federalism and the Blue Sky Laws: Reevaluating U.S. Securities Regulation

Abstract

Securities regulation in the United States is an important example of federalism-in-action, given the overlapping jurisdiction of state and federal authorities over securities-related matters. However, the existing system has long been criticized as both overly burdensome and ineffective at achieving its core aims. In particular, the extensive network of state securities laws, often referred to as the “blue sky” laws, has been the subject of, and has exacerbated, many of these critiques. Tensions between federal and state activities in this area are ongoing and subject to numerous reform proposals. Yet, recent proposals to refashion the U.S. securities regulatory scheme have ultimately been unworkable and unrealistic, limited to proposals for either complete federal control of securities regulation or near-exclusive state authority in this same area. These proposals overlook key benefits built directly into the existing system