Brian Armstrong Wants a Literacy Test, Not a Wealth Test. The SEC Might Agree.

TL;DR: Coinbase CEO Brian Armstrong called the accredited investor rule a "regressive tax" in June 2026. SEC Chair Paul Atkins said financial sophistication "can scarcely be measured by income or net worth alone." The INVEST Act would require the SEC to create a financial literacy path within one year. 87.4% of Americans are locked out of $15 trillion in private markets. This is the most significant push to reform accredited investor rules in a generation.

In June 2026, Coinbase CEO Brian Armstrong appeared on Yahoo Finance's Power Players podcast and called for eliminating the US accredited investor wealth thresholds, replacing them with a financial literacy test. His argument was direct: the current system requires you to already be rich before you can invest in private companies. Under current law, you need a net worth above $1 million (excluding your primary residence) or annual income above $200,000 to qualify. Armstrong called this a "regressive tax" and said "you have to be rich to get richer" under the existing framework. He is not wrong about the math.

Who Qualifies Now and What They Miss

12.6% of Americans currently qualify as accredited investors. That means 87.4% cannot access private placements, angel investments, most hedge funds, private equity funds, and venture capital funds without restrictions. They can buy lottery tickets. They cannot invest in a seed-stage startup raising $2 million on a SAFE note.

The private market these rules gate access to is not small. Global private markets AUM stands at roughly $15 trillion today. It is expected to reach $25 trillion by 2029. Angel investors and accredited investors in private equity have historically earned returns that outperform public market equivalents, particularly in early-stage venture and small buyout funds. The 87.4% of Americans who cannot access this market are not protected by the rule. They are excluded from it.

Of those who do qualify as accredited investors, 75% qualify on only one criterion, primarily net worth. Most of them qualified by owning a house in a city with rising real estate prices. They did not pass a financial literacy test. They did not demonstrate investment sophistication. They got lucky on geography and timing. The current rule conflates wealth accumulation with investment sophistication. Armstrong's critique is structurally correct.

What Armstrong Is Proposing

Armstrong wants a financial literacy test that covers dollar-cost averaging, how to read company disclosures and financial statements, position sizing, and how to behave during market downturns. He acknowledged that designing the test would be difficult given the variety of investing philosophies, but said a "common set of beliefs and best practices" could be agreed upon.

He is not the first to propose this. A 2020 SEC rule amendment already created a limited knowledge-based path to accredited investor status through certain FINRA licenses (Series 7, Series 65, Series 82). That change was narrow. Armstrong is proposing a broader, purpose-built exam that does not require working in the securities industry as a prerequisite.

The INVEST Act, currently moving through Congress, goes further. It would require the SEC to develop a financial literacy exam within one year of enactment and allow anyone who passes to qualify as an accredited investor regardless of income or net worth. The bill has bipartisan support and was introduced with backing from crypto and fintech industry groups, along with traditional investment reform advocates.

The SEC Is Moving in the Same Direction

Armstrong's proposal aligns with the current SEC leadership posture. Chairman Paul Atkins said in February 2026 that "financial sophistication can scarcely be measured by income or net worth alone." The SEC moved to dismiss a federal lawsuit filed in September 2025 by the Investor Choice Advocates Network challenging the wealth thresholds as arbitrary.

This is a meaningful signal. The current SEC is sympathetic to expanding accredited investor access. Formal rulemaking is slow, but the direction is clear. Expect a proposed rule expanding the knowledge-based path within 18 to 24 months if the political environment holds.

Coinbase has additional skin in the game. The company launched pre-IPO perpetual futures contracts on SpaceX (ticker: SPCX) for non-US users in June 2026 and plans to offer a similar product to US users in partnership with the SEC. That product only works if the regulatory framework allows retail investors to access pre-IPO instruments. Armstrong's public advocacy for accredited investor reform is not purely altruistic.

The Counterargument: Sophistication Is Not the Only Issue

Critics of the literacy-test approach make one compelling point: the accredited investor rule was designed not just to screen for sophistication but to screen for financial capacity to absorb losses. Private markets are illiquid. Lock-ups run three to ten years. Many early-stage companies fail completely. A financially literate investor who passes an exam but has $50,000 in total savings is not well-positioned to absorb the total loss of a $25,000 angel investment.

This is a real concern. It does not fully justify the current wealth-based test. But it suggests that any reform should pair a literacy-based qualification with some form of position-size limit relative to net worth. The 2020 Regulation Crowdfunding rules already do this for non-accredited investors: if you earn less than $107,000, you can invest up to 5% of your annual income or net worth per year in crowdfunded offerings.

A hybrid model, literacy test plus position limits, addresses both concerns. It does not require you to already be rich. It does require you to demonstrate you understand the risks and cannot invest more than you can afford to lose. That is a defensible framework.

What Changes Could Mean for Private Market Access

If the INVEST Act passes or the SEC expands the knowledge-based path materially, the pool of eligible private market investors grows dramatically. From 12.6% to potentially 30% to 40% of American adults, depending on exam pass rates.

That has real implications for capital formation. Founders raising seed rounds currently rely on a small pool of wealthy individuals. A larger accredited investor pool creates more competition among investors, potentially better terms for founders, and more capital available for early-stage companies. It also creates more opportunity for fraud and for unsophisticated investors to make bad decisions despite passing a test. Both things can be true.

For accredited investors reading this today: the rules are changing. If they change the way Armstrong and Atkins want them to change, the market you currently have privileged access to will open up. That is not a reason to panic. It is a reason to understand that the moat around private market access is narrowing, and the investors who will have an edge in the next 18 to 24 months are those who do the due diligence work, not just those who meet an income threshold.

To understand the current qualification requirements and how they differ by investor type, read our guide on accredited investor versus qualified purchaser status.

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.