Can the INVEST Act Shrink the Wealth Gap?
Over the past 15 years, private markets have grown faster than public ones, prompting Congress to act. And so they did: on December 11, 2025, the U.S. House of Representatives passed the Incentivizing New Ventures and Economic Strength Through Capital Formation (INVEST) Act. Still to be judged by the Senate, the INVEST Act would change how growing companies raise money and the requirements for who gets to invest in them. At its core, the legislation targets the phase of company growth where most of its value is created: before a company’s stock ever becomes available on a public trade exchange.
For most people, investing means that you buy shares of publicly listed companies through a 401(k), an index fund, or a brokerage account after a company is publicly listed. But those shares only become available to the average investor after a company goes through an IPO, an initial public offering, which is essentially the first time the general public can buy stock in a company. The problem is that companies have been taking longer and longer to reach that milestone, meaning that more of their appreciation happens while they’re still private and out of reach from everyday investors.
This recent shift in timing has become a contributing factor for wealth inequality. Ownership of private companies is generally concentrated among a small, elite group: founders, early employees who receive equity, venture capital/private equity firms, and high-net-worth individuals who are wealthy enough to access these deals and wait out long holding periods before seeing returns. Recent research has shown that as emerging markets have expanded, wealthier individuals have taken on an increasingly dominant role in early-stage funding and that the large returns they receive in successful startup investments have significantly contributed to increasing wealth concentration.
The INVEST Act attempts to address this by targeting two main areas. The first is startup fundraising: the bill requires the SEC (Securities and Exchange Commission) to create clearer guidelines for specific fundraising methods and increase the limits in crowdfunding rules, making it easier for early-stage companies to raise private capital. The second is the “accredited investor” rule: today, qualifying to participate in private investment offerings typically requires meeting a high income or net worth threshold. The INVEST Act hopes to increase access by directing the SEC to create an exam or certification process, allowing people to qualify based on their financial knowledge rather than the amount of money in their bank account.
The legislation’s supporters view this as democratizing access: if more people can qualify to invest based on knowledge, more people can participate in the early-stage gains that are currently only shared within a small group. On the other hand, critics argue that this isn’t enough to meaningfully address the systemic advantage wealthier individuals have: they still have better access to high-quality deals, better information, and a greater tolerance to long lock-up periods that come with holding private investments for years. They’re concerned that the bill will just add new players in a game that’s still biased towards the long-standing champions.
To better understand the stakes in the situation, it helps to understand how large private fundraising already is. Most of it happens under Regulation D, a set of SEC rules that allows companies to sell investments privately without going through the full public-offering process. The catch here is that investors have less information upfront and can’t easily sell their stake later. Usually, companies that follow this route file a short form called a Form D with the SEC, allowing them to track how value has grown and is distributed amongst investors. Now, the SEC’s compiled data shows that from 2009 till the end of 2025, the capital raised through Regulation D offerings is in the trillions of dollars.
The scale of these investments makes the potential risks very likely. If private fundraising becomes even easier, some companies might feel less pressure to go public at all, keeping their highest-growth phase permanently out of reach for most investors. And even if more people gain eligibility to invest, these downsides won’t disappear: government resources for investors remind them that private investments often involve limited information and are often highly illiquid, meaning that investors will struggle to cash out when they need to. State securities regulators have voiced similar concerns, warning that expanding private markets without stronger protections for investors could leave the newly eligible investors vulnerable to fraud and liquidity uncertainty.
Without the act having been implemented, it’s too early to know whether we will see an increase or decrease in America’s wealth inequality; we don’t have the ability to analyze any real-world data. If it’s passed, make sure to watch for whether companies continue delaying IPOs (even as private fundraising gets easier) and whether the newly eligible investors are actually able to earn bigger returns despite their disadvantages in their way.
