I have written in the past that cannabis companies of all stripes (whether involved in marijuana or hemp) that are in fundraising mode need to know when they are offering securities for many different compliance-related reasons, the biggest of which is to avoid jail time for committing securities fraud.
According to the U.S. Securities Act of 1933:
The term “security” means any note, stock, …security future, security-based swap, bond, …evidence of indebtedness, … participation in any profit-sharing agreement, … transferable share, investment contract, … fractional undivided interest in oil, gas, or other mineral rights … option, or privilege on any security, … or group or index of securities … or any certificate of interest or participation in … or warrant or right to subscribe to or purchase, any of the foregoing.
In layperson’s terms, a “security” is any type of financial interest in any business venture for any amount over any period of time, even if that business is not a formally registered company. The security could be an offer or sale of a straight equity ownership percentage. It could be a simple loan or debt. It could be an option, warrant for future ownership, or a