Temporary Rules to Include Certain “Platform Workers” in Compensatory Offerings

Conformed to Federal Register version 
SECURITIES AND EXCHANGE COMMISSION 
17 CFR 230, 239, and 240 
[Release Nos. 33-10892; 34-90948; File No. S7-19-20]  
RIN 3235-AM79 
Temporary Rules to Include Certain “Platform Workers”   in Compensatory Offerings 
under Rule 701 and Form S-8 
AGENCY: Securities and Exchange Commission. 
ACTION: Proposed rule. 
SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing for 
public comment amendments to the exemption from registration under the rules of the Securities 
Act of 1933 (“Securities Act”) for securities issued by non-reporting companies pursuant to 
compensatory arrangements and to Form S-8, the registration statement for offerings by 
reporting companies pursuant to employee benefit plans. The amendments would establish a 
temporary provision under Securities Act rules that, on a trial basis, would permit a non-
reporting issuer to offer and sell securities for a compensatory purpose to an expanded group of 
workers without having to register the offers and sales under the Securities Act, as long as 
certain conditions are met. Specifically, the proposed amendments would permit the issuer to 
offer and sell securities to those workers who provide services available through the issuer’s 
internet-based marketplace platform or through another widespread, technology-based 
marketplace platform or system (“platform workers”). The amendments would similarly, on a 
trial basis, permit a reporting issuer to include such workers in compensatory offerings registered 
on Form S-8. These proposed rule amendments would expire, absent further action by the 
Commission, five years from the date of their effectiveness. We are also proposing to amend the 
rules under the Securities Exchange Act of 1934 (“Exchange Act”). The amendment would 
extend the exclusio n from the definition of “held of record” and corresponding safe harbor, 

2 
which currently applies to securities held by persons who received them pursuant to an employee 
compensat ion plan, to securities held by persons who received them pursuant to a compensat ion 
plan for platform workers under the proposed Securities Act rule amendment. The proposed 
exclusion and safe harbor for securities issued to platform workers under Exchange Act rules 
would not be temporary.  
DATES: Comments should be received on or before February 9, 2021. 
ADDRESSES: Comments may be submitted by any of the following methods: 
Electronic comments:  
• Use the Commission’s internet comment form 
(https://www.sec.gov/rules/submitcomments.htm). 
Paper comments: 
• Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090. 
All submissions should refer to File Number S7-19-20. To help us process and review 
your comments more efficiently, please use only one method. We will post all comments on our 
internet website (https://www.sec.gov/rules/proposed.shtml). Comments are also available for 
website viewing and printing in our Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10 a.m. and 3 p.m. All comments received 
will be posted without change. Persons submitting comments are cautioned that we do not redact 
or edit personal identifying information from comment submissions. You should submit only 
information that you wish to make available publicly. 
We or the staff may add studies, memoranda, or other substantive items to the comment 
file during this rulemaking. A notification of the inclusion in the comment file of any such 
materials will be made available on our website. To ensure direct electronic receipt of such 

3 
notifications, sign up through the “Stay Connected” option at www.sec.gov to receive 
notifications by email. 
FOR FURTHER INFORMATION CONTACT: Elliot Staffin, Office of Rulemaking, at (202) 
551-3430, in the Division of Corporation Finance, U.S. Securities and Exchange Commission, 
100 F Street NE, Washington, DC 20549. 
SUPPLEMENTARY INFORMATION: We are proposing to amend 17 CFR 230.428 (“Rule 
428”), 17 CFR 230.701 (“Rule 701”), and 17 CFR 239.16b (“Form S-8”) under the Securities 
Act,
1
 and 17 CFR 240.12g5-1 (“Rule 12g5-1”) under the Exchange Act.
2
 
Table of Contents 
 
I.    INTRODUCTION  
A.  Rule 701, Form S-8, and the Concept Release  
B.  Summary of the Proposed Amendments   
II.  DESCRIPTION OF THE PROPOSED AMENDMENTS  
A.  Proposed Inclusion and Definition of “Platform Worker” under Rule 701 and Form S-8  
B.  Additional Requirements for Issuances to Platform Workers under Rule 701 and Form S-8  
C.  Integration of Proposed Rule 701(h) With the Existing Rule 701 Exemption  
D.  Integration with Exchange Act Rule 12g5-1  
E.   Considerations Specific to Form S-8  
F.   Requirement to Furnish Certain Information 
G.  Expiration of the Temporary Rules Authorizing Issuances to Platform Workers Under Rule 
701 and Form S-8    
III. GENERAL REQUEST FOR COMMENTS  
IV. ECONOMIC ANALYSIS  
A.   Economic Baseline  
                                                
1
  15 U.S.C. 77a et seq. 
2
  15 U.S.C. 78a et seq. 

4 
1.   Overview of the Gig Economy  
2.   Characteristics of Gig Economy Workers  
3.   The Online Platform Economy  
B.  Broad Economic Considerations   
C.  Expected Economic Benefits and Costs    
1.   Expected Economic Benefits  
2.   Expected Economic Costs 
D.  Effects on Efficiency, Co mpet it ion, and Capital Format ion  
E.   Reasonable Alternatives    
V.  PAPERWORK REDUCTION ACT  
A.  Summary of the Collection of Information  
B.  Summary of the Proposed Amendments’ Effects on the Collections of Information  
C.  Incremental and Aggregate Burden and Cost Estimates for the Proposed Amendments  
D.  Request for Comment  
VI. INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS     
A.  Reasons for, and Objectives of, the Proposed Action  
B.  Legal Basis  
C.  Small Entit ies Subject to the Proposed Rules 
D.  Reporting, Recordkeeping, and Other Compliance Requirements  
E.   Duplicative, Overlapping, or Conflicting Federal Rules   
F.   Significant Alternatives     
VII. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT  
VIII. STATUTORY AUTHORITY
 
I. INTRODUCTION 
A. Rule 701, Form S-8, and the Concept Release 

5 
Tit le 17, section 230.701 (“Rule 701”) provides an exempt ion from the registration 
requirements of Securities Act Section 5
3
 for offers and sales of securities by non-reporting 
companies
4
 to their employees, officers, directors, trustees, consultants, or advisors
5
 under 
written compensatory benefit plans
6
 or written agreements relat ing to compensation.
7
 The rule 
reflects the Commission’s long-standing position that offers and sales of securities for 
compensatory purposes raise different issues, and therefore should be treated differently, from 
offers and sales that raise capital for the issuer of the securities.
8
  
For example, when first proposing Rule 701, the Commission recognized that employee 
equity incentive arrangements are “a potentially important tool to attract, compensate and 
motivate emplo yees.”
9
 It further expressed the concern that private, smaller companies were 
                                                
3
  15 U.S.C. 77e. 
4
  Only issuers that are not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act (15 
U.S.C. 78m and 78o(d)) and are not investment companies registered or required to be registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) are eligible to use Rule 701.  See 17 CFR 
230.701(b). 
5
  When the Commission first proposed Rule 701, it initially limited the exemption to the issuer’s employees, 
directors, trustees or officers (or those of its parents or subsidiaries).  See Regulation D Revisions; Exemption 
for Certain Employee Benefit Plans, Release No. 33-6683 [52 FR 3015 (Jan. 30, 1987)] (“Rule 701 Proposing 
Release”).  The Commission specifically excluded consultants and “independent agents” due to a concern that 
including them could lead to an exemption broader than the intended compensatory purpose.  See, e.g., 
Employee Benefit Plans and Compensation Contracts, Release No. 33-6726 (July 24, 1987) [52 FR 29033 
(Aug. 5, 1987)] (“Rule 701 Reproposing Release”).  Eventually, however, when adopting Rule 701, the 
Commission included issuances to consultants and advisors within the rule’s scope.  The Commission noted 
comments pointing out that securities issuances to such persons could be for compensatory and non-capital-
raising purposes and determined that there was no meaningful basis for distinguishing issuances to them and to 
employees.  See Compensatory Benefit Plans and Contracts, Release No. 33-6768 [53 FR 12918-02 (Apr. 20, 
1988)] (“Rule 701 Adopting Release”).  In 1999, the Commission amended Rule 701, consistent with 
amendments to Form S-8, to prevent the misuse of that form for capital-raising transactions. See Rule 701—
Exempt Offerings Pursuant to Compensatory Arrangements, Release No. 33-7645 (Feb. 25, 1999) [64 FR 
11095 (Mar. 8, 1999)] (“1999 Rule 701 Adopting Release”).  Specifically, the Commission modified the 
definition of consultants and advisors to require that they be natural persons, provide bona fide services, and the 
services not be in connection with the offer or sale of securities in a capital-raising transaction and not directly 
or indirectly promote or maintain a market for the issuer’s securities.  See id. 
6
  17 CFR 230.701(c)(2) defines a “compensatory benefit plan” as “any purchase, savings, option, bonus, stock 
appreciation, profit sharing, thrift, incentive, deferred compensation, pension or similar plan.”  
7
  See 17 CFR 230.701(c).  The exemption also extends to offers and sales of securities under written 
compensatory plans or contracts established by the issuer’s parent or the issuer’s or parent’s majority-owned 
subsidiaries.  See id.  The Commission has also indicated that a person in a de facto employment relationship 
with the issuer, such as a nonemployee providing services that traditionally are performed by an employee, with 
compensation paid for those services being the primary source of the person’s earned income, would qualify as 
an eligible person under the exemption.  See 1999 Rule 701 Adopting Release, supra note 5. 
8
  See Rule 701 Reproposing Release, supra note 5, at 29033 (stating that “[t]he Commission historically has 
recognized that when transactions of this nature are primarily compensatory and incentive oriented, some 
accommodation should be made under the Securities Act”). 
9
  See Rule 701 Proposing Release, supra note 5, at 3020.  

6 
forgoing this potentially valuable means of compensation because of the costs of complying with 
Securities Act registration requirements.
10
 The Commission also has expressly addressed the role 
that equity compensation may play in the employment relationship by indicating that using 
equit y as a component of compensat ion may align the incentives of employees with the success 
of the enterprise, facilitate recruitment and retention, and preserve cash for the issuer’s 
operations.
11
 
Form S-8 is the simplified form for the registration of securities transactions involving an 
issuance to a registrant’s employees in a compensatory or incentive context and for a non-
capital-raising purpose.
12
 For purposes of Form S-8, the term “employee” includes consultants 
and advisors as long as they are natural persons and provide bona fide services to the registrant 
not in connection with a capital-raising transaction or promoting or maintaining a market for the 
registrant’s securities.
13
 Form S-8 provides for an abbreviated disclosure format, allows for 
updating through forward incorporation by reference of Exchange Act reports, and is effective 
immediately upon filing.
14
 It also requires the issuer to provide disclosure to emplo yees and 
                                                
10
  See id.; see also 1999 Rule 701 Adopting Release, supra note 5, at 11095 (stating that when adopting Rule 701, 
“we determined that it would be an unreasonable burden to require these private companies, many of which are 
small businesses, to incur the expenses and disclosure obligations of public companies when their only public 
securities sales were to employees,” and further noting that “these sales are for compensatory and incentive 
purposes, rather than for capital-raising”). 
11
  See Executive Compensation and Related Person Disclosure, Release No. 33-8732A (Aug. 29, 2006) [71 FR 
53158 (Sept. 6, 2006)] (“2006 Executive Compensation Adopting Release”) (stating that unlike salary and 
bonus compensation, stock option compensation does not require the payment of cash by the registrant, and 
therefore can be particularly attractive to registrants for which cash is a scarce resource; noting that stock option 
compensation may also provide an incentive for employees to work to increase the registrant’s stock price; and 
additionally indicating that some registrants may be able to use stock option compensation to help retain 
employees, because an employee with unvested in-the-money options forfeits his potential value if he leaves the 
registrant’s employ.).   
12
   See Registration of Securities on Form S-8, Release No. 33-7646 (Feb. 25, 1999) [64 FR 11103 (Mar. 8, 1999)] 
(“1999 Form S-8 Adopting Release”).  
13
   See Form S-8, General Instruction A.1.(a)(1).  See also 1999 Form S-8 Adopting Release (stating that issuers 
may continue to use securities registered on Form S-8  to compensate persons who have a de facto employment 
relationship with them.  Such a relationship may exist where a person not employed by a registrant provides the 
registrant with bona fide services that traditionally are performed by an employee, and the compensation paid 
by the registrant for those services is the primary source of the person’s earned income.). 
14
  See Registration and Reporting Requirements for Employee Benefit Plans, Release No. 33-6867 (June 6, 1990) 
[55 FR 23909 (June 13, 1990)] (“1990 Form S-8 Adopting Release”).  

7 
others receiving securities in the offering. In addition, the full spectrum of investor protections 
associated with registration under the Securities Act applies to the transaction. 
In July 2018, the Commission published a concept release to solicit comment on whether 
and how best to modernize the exemption under Rule 701 and to update Form S-8.
15
 In the 
release, the Commission requested comment on how to address, consistent with investor 
protection, the significant evolution that has taken place in the types of compensatory offerings 
issuers make and the composition of the workforce since the Commission last substantively 
amended this rule and form.
16
 Regarding workforce changes, the Commission focused on the 
new types of work relationships between companies and individuals that have emerged in the so-
called “gig economy.”
17
  
These new types of work relat ionships have arisen in large part due to the internet and 
reductions in the costs of communication and information processing. They typically involve an 
individual’s use of an internet “platform” provided by a company (the “platform provider”) to 
find a particular type of work, or “gig” (i.e., task or job). The work could involve the individual 
providing services to end users, such as ride-sharing, food delivery, household repairs, dog-
                                                
15
  See Concept Release on Compensatory Securities Offerings and Sales, Release No. 33-10521 (July 18, 2018) 
[83 FR 34958 (July 24, 2018)] (“Concept Release”).  Unless otherwise indicated, comments cited in this release 
are to the public comments on the Concept Release, which are available at https://www.sec.gov/comments/s7-
18-18/s71818.htm. 
  
16
  See id.  While the Commission amended Rule 701 in 2018 to implement the Congressional mandate to raise the 
Rule 701(e) disclosure threshold from $5 million to $10 million, see Release No. 33-10520 (Jul. 18, 2018)  
 [83 FR 34940 (Jul. 24, 2018)], the last substantive amendment of Rule 701 prior to then was in 1999.  See 1999 
Rule 701 Adopting Release supra note 5.  The Commission last substantively amended Form S-8 in 2005.  See 
Release No. 33-8587 (Jul. 15, 2005) [70 FR 42234 (Jul. 21, 2005)].
17
  See id., at Section I.B.  Other 
names for the “gig economy” include the “on-demand economy” and the “sharing economy.”  See, e.g., Alex 
Kirven, “Comment: Whose Gig Is It Anyway? Technological Change, Workplace Control and Supervision, and 
Workers’ Rights in the Gig Economy, 89 U. Colo. L. Rev. 249, 253 (Winter 2018), available at 
http://lawreview.colorado.edu/wp-content/uploads/2018/05/Kirven-Whose-Gig-Is-It -Anyway-Technological-
Change-Workplace-Control-and-Supervision-and-Workers-Rights-in-the-Gig-Economy.pdf.
 
17
  See id., at Section I.B.  Other names for the “gig economy” include the “on-demand economy” and the “sharing 
econom y.”  See, e.g., Alex Kirven, “Comment: Whose Gig Is It Anyway? Technological Change, Workplace 
Control and Supervision, and Workers’ Rights in the Gig Economy, 89 U. Colo. L. Rev. 249, 253 (Winter 
2018), available at http://lawreview.colorado.edu/wp-content/uploads/2018/05/Kirven-Whose-Gig-Is-It -
Anyway-Technological-Change-Workplace-Control-and-Supervision-and-Workers-Rights-in-the-Gig-
Economy.pdf.
 

8 
sitting, or tech support, or using the platform to sell goods or lease property to third parties.
18
 
Other new work relationships may involve individuals using the platform to perform tasks or 
services for the platform provider itself.
19
  
A significant characteristic of these new work relationships is that the individual worker 
may have greater flexibility in determining when and how much he or she works than in a 
traditional employment relationship where those determinations are typically made by the issuer. 
In addition, these new work relationships can be, and often are, on a short-term, part-time, or 
freelance basis. Another significant characteristic is that an individual who provides services or 
goods through these platforms may have similar relationships with multiple companies through 
which the individual may engage in the same or different business activities. Given the 
characteristics of these new work relationships, the individual workers might not be emplo yees, 
consultants, advisors, or de-facto employees
20
 eligible to receive securities in compensatory 
arrangements under Rule 701. 
Numerous commenters on the Concept Release who addressed issues relat ing to “gig 
economy” workers supported including them within the scope of Rule 701 and Form S-8.
21 
 
Several noted that they did not believe or were uncertain that “gig economy” workers would fall 
within Rule 701’s current categories of employees, consultants, or advisors, and recommended 
adding a new category of worker to include them.
22
 
                                                
18
  See id. 
19
  See, e.g., Working the Crowd: Employment and Labor Law in the Crowdsourcing Industry, 32 Berkeley J. Emp. 
& Lab. L. 143 (2011) (providing examples of crowdsourcing, such as a platform provider’s use of multiple 
workers to tag photographs according to their content, or to build the back-end of a platform provider’s 
interactive web site). 
20
     See supra note 7. 
21
  See the letters from Airbnb, Inc. (Sept. 21, 2018) (“Airbnb”), the American Bar Association, Business Law 
Section (Nov. 28, 2018) (“ABA”), Center for Capital Markets Competitiveness, U.S. Chamber of Commerce 
(Sept. 24, 2018) (“Chamber”), Davis Polk & Wardwell, LLP (“Davis Polk”), Indigo Ag, Inc. (Jul. 8, 2019) 
(“Indigo”), Postmates (Oct. 17, 2018), Brian Sament (Oct. 14, 2018) (“Sament”), Sullivan & Cromwell LLP 
(Sept. 24, 2018) (“Sullivan’), and Uber Technologies, Inc. (Oct. 11, 2018) (“Uber”). 
22
  See, e.g., letters from ABA, Chamber, Indigo, and Postmates.   

9 
The new work relationships of the gig economy have become increasingly significant to 
the broader U.S. economy.
23
 They also raise some of the same considerations that led the 
Commission to adopt Rule 701. For example, “gig economy” issuers may have the same 
compensatory and incentive motivations to offer equity compensation to individuals participating 
in the companies’ platform-based businesses. Permitting gig economy issuers to utilize the Rule 
701 exemption on a temporary basis would allow the Commission to assess the appropriateness 
of the exemption for these new work relationships and thus should help inform the 
Commission’s ongoing efforts to modernize its rules in light of changing economic and market 
conditions. 
For the above reasons, we propose to include a new category of worker, the “platform 
worker,” within the scope of Rule 701 and Form S-8.
24
 As we stated in the Concept Release, any 
such expansion of Rule 701 and Form S-8 must be consistent with the Commission’s mandate to 
protect investors.
25
 It    should not facilitate offers and sales of unregistered securities under the 
guise of being compensatory when in fact they are undertaken for capital-raising purposes. 
Therefore, we are proposing to expand Rule 701 and the use of Form S-8 to facilitate 
compensatory transactions with platform workers while also proposing conditions designed to 
limit the possibility that the rule changes could result in offers and sales for capital-raising 
purposes.
26
   
                                                
23
  See, e.g., The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015, Lawrence F. 
Katz and Alan B.Krueger, National Bureau of Economic Research, available at 
http://www.nber.org/papers/w22667 (finding a substantial rise in the incidence of alternative work 
arrangements for U.S. workers from 2005 to 2015, and defining alternative work arrangements as including 
temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers); 
see also Contingent Workforce, U.S. Government Accountability Office, GAO-15-168R (2015), available at 
https://www.gao.gov/assets/670/669766.pdf (finding that, while the size of the U.S. contingent workforce varies 
by definition and data source, using an expansive definition of alternative work arrangements, 40.4% of the 
U.S. employed labor force in 2010 was in an alternative work arrangement).     
24
  See proposed Rule 701(h) and proposed 17 CFR 239.16b(c).  As explained below, the proposed expanded scope 
of Rule 701 and Form S-8 would be temporary while we examine whether to adopt the rules or similar rules on 
a more permanent basis.   
25
  See Concept Release, supra note 15, at Section II.A.  
26
  See, e.g., proposed Rule 701(h)(3) and proposed 17 CFR 239.16b(c)(1).   

10 
We are also proposing these changes on a temporary basis
27
 to allow us to assess whether 
unregistered issuances o f securit ies to platform workers under expanded Rule 701, or issuances 
registered on expanded Form S-8, are being made for appropriate compensatory purposes and 
not for capital-raising purposes.  Similarly, we intend to assess whether such issuances have the 
expected beneficial effects for issuers in the “gig economy,” their platform workers, and 
ultimately their investors and whether such issuances have resulted in any unintended 
consequences.  This assessment, in turn, should help us determine whether to modify or expand 
the scope of Rule 701 and Form S-8   on a permanent basis. 
We welcome feedback and encourage interested parties to submit comments on any or all 
aspects of the proposed rule amendments.  When commenting, it would be most helpful if you 
include the reasoning behind your position or recommendation. 
            B. Summary of the Proposed Amendments 
   We propose to amend Rule 701 by adding a temporary rule provisio n that, for five years, 
would enable issuers to use Rule 701 to compensate certain “platform workers,” subject to 
specified conditions.  Under the amendments, an issuer would be able to use the Rule 701 
exemption to offer and sell its securities on a compensatory basis to platform workers who, 
pursuant to a written contract or agreement, provide bona fide services by means of an internet-
based platform or other widespread, technology-based marketplace platform or system provided 
by the issuer if:  
• The issuer operates and controls the platform, as demonstrated by its abilit y to provide 
access to the platform, to establish the principal terms of service for using the platform 
and terms and conditions by which the platform worker receives payment for the services 
provided through the platform, and to accept and remove platform workers participating 
in the platform; 
                                                
27
  See infra Section II.G. 

11 
• The issuance of securities to participating platform workers is pursuant to a compensatory 
arrangement, as evidenced by a written compensation plan, contract, or agreement, and is 
not for services that are in connection with the offer or sale of securities in a capital-
raising transaction, or services that directly or indirectly promote or maintain a market for 
the issuer’s securit ies; 
• No more than 15 percent of the value of compensation received by a participating worker 
from the issuer for services provided by means of the platform during a 12-month period, 
and no more than $75,000 of such compensation received from the issuer during a 36-
month period, shall consist of securities, with such value determined at the time the 
securities are granted; 
• The amount and terms of any securities issued to a platform worker may not be subject to 
individual bargaining or the worker’s ability to elect between payment in securities or 
cash; and 
• The issuer must take reasonable steps to prohibit the transfer of the securities issued to a 
platform worker pursuant to this exemption, other than a transfer to the issuer or by 
operation of law.
28
 
The proposed amendments also would permit an Exchange Act reporting issuer to 
register the offer and sale of its securities to its platform workers using Form S-8.  The same 
conditions proposed for Rule 701 issuances would apply to issuances to platform workers that 
are registered on Form S-8, except for the proposed transferability restriction.  Like the proposed 
amendments to Rule 701, the proposed Form S-8 amendments would be temporary and would 
expire, absent further Commission action, on the same date as the Rule 701 amendments. 
In order to help in our evaluation of the proposed expanded scope of Rule 701 and Form 
S-8, we are also proposing that any issuer that issues securit ies to platform workers would be 
                                                
28
     An issuer using proposed Rule 701(h) would also be able to continue to use Rule 701 for transactions to persons 
eligible under 17 CFR 230.701(c). 

12 
required to furnish information to the Commission at six-month intervals (each, an “interval”), 
regarding: 
1.   The criteria used to determine eligibility for awards, whether those criteria are the same 
as for other compensatory transactions, and whether those criteria, including any 
revisions to the criteria, are communicated to platform workers in advance as an 
incentive; 
2.   The type and terms of securities issued and whether they are the same as for other 
compensatory transactions by the issuer during that interval; 
3.   If pursuant to Rule 701, the reasonable steps taken to prohibit the transfer of the securities 
sold pursuant to this temporary rule; 
4.   The percentage of overall outstanding securities that the amount issued cumulatively 
under this temporary rule represents;  
5.   During the interval, the number of platform workers, the number of non-platform 
workers, the number of platform workers who received securities pursuant to the 
temporary rule, and the number of non-platform workers who received securities 
pursuant to the issuer’s Rule 701 or Form S-8 issuances;  
6.   Both in absolute amounts and as a percentage of the issuer’s total Rule 701 or Form S-8 
issuances during the interval: 
a.   The aggregate number of securities issued to platform workers; and 
b.   The aggregate dollar amount of securities issued to platform workers.  
II. DESCRIPTION OF THE PROPOSED AMENDMENTS 
A. Proposed Inclusion and Definition of “Platform Worker” under Rule 701 
and Form S-8 
We propose to amend Rule 701 and Form S-8 to permit an issuer on a temporary basis to 
offer and sell securities to certain platform workers.  Under the proposed definition of “platform 

13 
worker,”
29
 eligible workers would be those persons unaffiliated with the issuer who meet two 
condit ions.  First, the worker must provide bona fide services through or by means of the issuer’s 
internet-based or other widespread, technology-based marketplace platform or system 
(“platform”).  Workers providing services to third-party end-users would qualify, as long as the 
issuer benefits from such services (e.g., by receiving a fee for the worker’s use of the platform or 
a percentage of the compensat ion received from the end-user for the worker’s services).
30
  
Consistent with the treatment of persons eligible for the current exempt ion under 17 CFR 
230.701(c) (“Rule 701(c)”), platform workers providing services to the issuer, or the issuer’s 
parents, subsidiaries,
31
 or subsidiaries of the issuer’s parent, would also qualify.
32
  Second, the 
services must be provided pursuant to a written contract or agreement between the issuer and the 
platform worker
33
 and must be provided through a plat form-based marketplace (or other 
widespread, technology-based marketplace platform or system) that the issuer operates and 
controls.
34
   
Commenters who supported expanding the scope of Rule 701 and Form S-8 to include 
offers and sales of securities to plat form workers stated that updating Rule 701 and Form S-8 to 
                                                
29
   See proposed Rule 701(h)(1); see also proposed 17 CFR 239.16b(c) and proposed amended General Instruction 
A.1.(b)(1) to Form S-8, which reference the proposed definition of “platform worker” under proposed Rule 
701(h)(1). 
30
  See proposed new Rule 701(h)(2)(i) (the first prong of the proposed definition of platform worker); see also 
proposed 17 CFR 239.16b(c)(1) and proposed amended General Instruction A.1.(b)(1) to Form S-8.  As 
explained below in Section II.B., the services may not be in connection with the offer or sale of securities in a 
capital-raising transaction. 
31
     In a companion rulemaking, we are proposing to expand the scope of coverage of the Rule 701 exemption, 
which currently includes compensatory issuances to employees of an issuer’s or its parent’s majority-owned 
subsidiaries, to include compensatory issuances to employees of all of an issuer’s or its parent’s subsidiaries.  
See Release No. 33-10891 (Nov. 24, 2020), at Section II.C.3 (proposing to amend Rule 701(c)).  Our proposed 
inclusion of platform workers of an issuer’s subsidiaries, without regard to whether they are majority-owned, 
would be consistent with the proposed amendment of Rule 701(c).  Like this proposed amendment, the meaning 
of “subsidiary” under Rule 701(h) would be governed by the general definition of subsidiary for purposes of the 
Securities Act.  Under that definition, a “subsidiary” of a specified person is an affiliate controlled by such 
person directly or indirectly through one or more intermediaries.  See 17 CFR 230.405. 
32
   See proposed Rule 701(h)(2)(i). 
33
     For the purpose of Rule 701(h), the term “written contract or agreement” would include an electronic, internet-
based contract or agreement.  We believe that a similar interpretation applies to the term “written compensation 
contract” in Rule 701(c).  Because the proposed Rule 701(h) definition of “platform worker” would also be used 
in Form S-8, the same meaning of “written contract or agreement” would apply in that context.  See proposed 
General Instruction A.1.(b)(1) of Form S-8; see also proposed 17 CFR 239.16b(c)(1).  
34
   See proposed Rule 701(h)(2)(ii). 

14 
include such workers is necessary to keep pace with evolutions in the economy and the labor 
market.
35
  One commenter indicated that such an update would be consistent with the goals of 
the Jumpstart Our Business Startups Act (“JOBS” Act) to spur entrepreneurship and support the 
business startups and private companies that are vital to the U.S. economy, and that increased 
alignment of incentives between gig economy companies and participating platform workers 
would benefit both.
36
   
Some commenters emphasized the potential benefits to plat form workers of expanding 
Rule 701.  Commenters stated that expanding eligibility for Rule 701 issuances would help 
democratize share ownership and wealth by allowing the many ordinary Americans participating 
in the gig economy to make significant strides toward greater wealth and financial security.
37
   
Other commenters noted the potential benefits to the platform providers of expanding 
Rule 701.  One commenter indicated that enabling privately held companies to grant equity 
compensation to platform workers performing services would enable those platforms to attract 
and retain talent.
38
  Another commenter stated that the ability to grant equity compensation to 
platform workers would significantly enhance the growth and expansion of new economy 
companies and help level the playing field between private companies and public companies 
participating in the new economy.
39
   
Some commenters, however, opposed the expansion of the scope of Rule 701 and Form 
S-8 to include offers and sales of securities to plat form workers because of their belief that the 
Commission lacks the expertise to assess accurately changes in the labor market, and due to their 
                                                
35
  See, e.g., letter from Chamber; see also letter from Airbnb. 
36
  See letter from Airbnb.  
37
   See letter from Sament; see also letter from Airbnb. 
38
  See letter from Postmates. 
39
  See letter from Indigo.  

15 
concern that such regulatory changes to Rule 701 and Form S-8 would encourage companies to 
misclassify employees and undermine American workers.
40
 
We agree with commenters that expanding the scope of Rule 701 and Form S-8 to 
include offers and sales of securities to plat form workers participating in an issuer’s platform-
based marketplace could benefit the issuer and its investors, including those platform workers 
that are new equity holders.  We are mindful, however, that the gig economy is evolving.  We are 
therefore making the rule amendments temporary so that we can reassess their impact as these 
markets develop.
41
   
Although we understand that the development of the gig economy raises a number of 
issues under labor, tax, and other regulatory regimes, our proposed amendments to Rule 701 and 
Form S-8 to include these workers solely reflect considerations relevant to the U.S. Federal 
securit ies laws.  The proposed amendments are not meant, and should not be construed, to 
address issues raised under any other regulatory regimes.  We express no opinion on whether or 
not these “gig economy” or plat form workers would be considered “employees” for purposes of 
other laws or regulations.        
The proposed amendments would require an eligible platform worker to be a natural 
person or an entity meeting specified conditions.  We recognize that the “gig economy” is a 
                                                
40
  See letter from Sen. Sherrod Brown (Mar. 7, 2019); see also letter from National Employment Law Project 
(Mar. 4, 2019) (“NELP”) (“Expanding the rule has the potential to further muddy the waters on ‘gig’ workers’ 
employment status and even legitimize their independent contractor status at a time when this issue is being 
examined by legislatures, courts, and agencies with expertise on employment status.”); and letter from 
Chairwoman Maxine Waters (Apr. 1, 2020) (opposing “weakening Rule 701 of the Securities Act of 1933 to 
allow companies to compensate certain non-traditional employees with equity compensation in lieu of a 
traditional paycheck and without important investor protections”).  But see, e.g., infra Section II.B for a 
discussion of certain investor protection conditions; and letter from Rep. Patrick McHenry (Mar. 30, 2020) 
(requesting that any recipient of funds under the Coronavirus, Aid, Relief, and Economic Security (CARES) 
Act be encouraged to provide equity compensation to its entire workforce, including non-traditional workers).
 
41
     The proposed amendments provide, however, that, following the expiration of temporary Rule 701(h), an issuer 
may continue to rely on the Rule 701(h) exemption for the sale of securities underlying options, warrants, or 
rights previously issued in an exempt transaction pursuant to Rule 701(h).  See proposed Rule 701(h)(1)(ii) and 
infra Section II.G.  We believe this provision is necessary in order to remove a potential disincentive to the use 
of the proposed exemption to issue options to platform workers.  The Commission has taken a similar approach 
regarding securities sold by an issuer after it has become public that were initially offered pursuant to Rule 701.  
See 17 CFR 230.701(b)(2).     

16 
fluid, developing market in which participating workers may be organized in various ways.  In 
this regard, we note that some commenters recommended that platform workers should not be 
subject to a natural person requirement to participate in Rule 701 offerings.
42
  We recognize that 
some plat form workers may form limited liabilit y companies or similar legal entit ies for a variet y 
of reasons, such as tax planning and personal liability protection.  In order to accommodate such 
workers and provide additional flexibility for an evolving market, the proposed rules provide that 
a platform worker may be an entity as long as substantially all of its activities involve the 
performance of bona fide services that meet the requirements of proposed Rule 701(h), and the 
ownership interest of the entity is wholly and directly held by the natural person performing the 
services pursuant to the proposed rule.  This proposed approach would be similar to the 
Commission’s recognition of personal services businesses as corporate alter egos of natural 
persons with respect to the ability to participate in Form S-8 offerings under existing employee, 
consultant, and advisor categories, where such businesses are wholly-owned by (or jointly owned 
with the spouse of) the natural person who provides services to the issuer.
43
  
We also recognize that the “gig economy” is a multi-faceted economic phenomenon and 
that, in some cases, participants may sell goods or conduct other activities—beyond providing 
services—by means of platforms.  Some commenters recommended expanding the Rule 701 
exemption to include any activity where there is an issuer  providing a technology-based 
                                                
42
  See letters from Chamber and Davis Polk.  In the companion rulemaking, we are proposing to eliminate the 
“natural person” requirement in connection with Rule 701 eligibility for consultants and advisors by extending 
such eligibility to service-providing entities meeting specified conditions (e.g.,
 limits on the number of persons 
owning an entity and requiring a certain percentage of those persons to provide services).  See Release No. 33-
10891 at Section II.C.1.  We are also proposing a similar change regarding consultant and advisor eligibility 
under Form S-8.  See Release No. 33-10891 at Section II.C.2.  
  
43
  See 1999 Form S-8 Adopting Release at Section II.A.1 (“We agree with commenters that it should not matter if 
the consulting contract is with an entity or a natural person, as long as the securities registered are issued to the 
natural persons working for the consulting entity who provide bona fide services to the issuer. Where the 
securities are issued to these persons, contracting with a consulting entity would not abuse Form S-8. We have 
revised the amendments to eliminate the proposed requirement that issuers contract only with natural persons, 
while retaining the requirement that the securities must be issued to natural persons.”); see also letter from 
Davis Polk.         

17 
marketplace platform as long as the activity does not include capital-raising of the type currently 
prohibited by Rule 701.
44
  Nevertheless, we are limiting this init ial expansion of Rule 701 and 
Form S-8 eligibility to participants who provide bona fide services not in connection with 
capital-raising or with promoting or maintaining a market for the issuer’s securit ies.  The 
proposed expansion would not cover the use of a platform for the sale or transfer of permanent 
ownership of discrete, tangible goods.
45
  We view the expansion of Rule 701 and Form S-8 to 
include platform workers who provide services, subject to the above limitat ions, as an 
incremental evolutionary step that is consistent with the compensatory function of Rule 701 and 
Form S-8   while limiting the potential for abuse.  Depending on the results of the initial expanded 
use of Rule 701 and Form S-8, if adopted, the Commission could consider expanding eligibility 
to other activities, such as selling goods or other non-service-providing activities in the future. 
The proposed definition of platform worker would also include the condition that the 
issuer operates the platform for the provision of services pursuant to a written contract or 
agreement
46
 between the issuer and the platform worker under which the issuer controls the use 
of the internet plat form. We believe that this “issuer control” condition would help maintain an 
appropriate compensatory nexus between the issuer and participating platform workers.
47
 
The appropriate nexus would be demonstrated by meeting three express requirements.  
First, the issuer must be able to provide access to the platform and establish the principal terms 
                                                
44
  See, e.g., letter from ABA; see also letter from Sullivan (stating that to encompass the new types of alternative 
work arrangements, Rule 701 (and Form S-8) should encompass those individuals providing services to or on 
behalf of an issuer or making or distributing the products sold or provided to the issuer’s consumers). 
45
  See proposed Rule 701(h)(2)(i).  For example, a platform that provided for the permanent transfer of real estate 
in fee simple, as opposed to the temporary rental of real estate, would not constitute bona fide services within 
the meaning of the rule. 
46
     The Commission has similarly included a “written contract or agreement” requirement as a condition of using 
the Rule 701 exemption to help ensure that an issuance of securities is being undertaken for a compensatory 
purpose.  See the Rule 701 Adopting Release, supra note 5, at 12919 (justifying the inclusion of issuances to 
consultants or advisors under Rule 701 in part because of the condition requiring a written plan or contract). 
47
     Although one commenter stated that “it is not necessary for a revised Rule 701 to micromanage the level of 
control” over a worker, see letter from Chamber, we agree with another commenter that indicated that some 
level of control by an issuer over the use of its platform would help ensure that the issuance of securities to 
workers participating in its marketplace platform under an expanded Rule 701 is compensatory only.  See letter 
from Airbnb. 

18 
of service for using the platform.  Second, the issuer must be able to establish terms and 
conditions by which the platform worker receives payment for the services provided through the 
platform.  This could include an ability to establish the amount of the fees charged for using the 
platform.  Such fees may include any fee charged to the participating worker for the use of the 
plat form as well as any fee or percentage of payment charged to an end-user for the services 
provided by the worker.  If there are no end-users, and multiple workers provide services directly 
to the issuer via the platform, the issuer must be able to determine the amount and method of 
payment for such services.  Third, the issuer must have the authority to accept and remove the 
platform workers providing services through the platform.   
We believe that these three requirements are necessary and appropriate to demonstrate 
the requisite nexus for purposes of an expanded Rule 701 and Form S-8.  A written contract or 
agreement providing the issuer with control over the platform’s terms of use, including payment 
terms, would evidence that the issuance of securities to the worker is for compensatory and 
incentive purposes relating to the services being provided.  In addition, requiring that the issuer 
control who may provide services through its platform would help prevent participating workers 
from using the platform primarily for non-compensatory purposes.  The proposed conditions 
would not, however, limit what services an issuer could facilitate through its platform or how 
participating workers could provide the services. 
Rule 701 currently exempts offers and sales of securities to former emplo yees, directors, 
general partners, trustees, officers, consultants, and advisors only if such persons were employed 
by or providing services to the issuer at the time the securities were offered.
48
  The proposed 
amendment to Rule 701 would similarly exempt offers and sales to former platform workers if 
such workers met the conditions of § 230.701(h) at the time the securities were offered.
49
   
                                                
48
  See Rule 701(c). 
49
  See proposed Rule 701(h)(1)(i). 

19 
In a companion rulemaking, at the suggestion of commenters, we are proposing to 
expand the eligibility of former employees under Rule 701 to include post-resignation or 
termination offers and sales to: 
• Persons who were employed by or providing services to an issuer during a performance 
period ending within 12 months preceding resignation or termination of their 
emplo yment or service for which the securities were issued; and 
• Former employees of an acquired entity, as long as the securities are being issued in 
subst itution or exchange for securities that were issued to the former employees of the 
acquired entity on a compensatory basis while such persons were employed by or 
providing services to the acquired entity.
50
 
In the interest of providing consistent treatment, we are similarly proposing to include 
under Rule 701 offers and sales to former platform workers who met the conditions of  
§ 230.701(h) during a period of service ending within 12 months preceding the termination of 
service for which the securities were issued.
51
  We believe that exempting post-termination 
grants of securities to former platform workers that are made in respect of prior service during 
the specified 12-month period would benefit both issuers and platform workers by facilitating 
compensatory transactions.  Moreover, because we believe that expanding the use of Form S-8 to 
former platform workers would be consistent with the compensatory purposes of Form S-8, we 
are similarly proposing to amend Form S-8 to include securities issued to former platform 
workers, including post-termination grants made in respect of prior service during the 12 months 
preceding the cessation of service.
52
 
For similar reasons, we also are proposing to include in the exemption under Rule 701(h), 
and to allow the registration on Form S-8   of, securities issued to former platform workers of an 
                                                
50
   See Release No. 33-10891 at Section II.C.2. 
51
  See proposed Rule 701(h)(1)(i).   
52
  See proposed General Instruction A.1.(b)(4)(i) of Form S-8 . 

20 
acquired entity in substitution or exchange for securities that were issued to the former platform 
workers of the acquired entity on a compensatory basis while such workers were providing bona 
fide services to the acquired entity.
53
  Those persons would be able to participate in the acquiring 
issuer’s plan with respect to equity awards granted in connection with the acquisition to replace 
awards issued by the acquired entity while such workers provided services to the acquired 
entity.
54
 
In addit ion to former emplo yees, Form S-8 currently includes under its scope executors, 
administrators, or beneficiaries of the estates of deceased employees, guardians or members of a 
committee for incompetent former employees, or similar persons duly authorized by law to 
administer the estate or assets of former employees.
55
  We are proposing a similar provisio n 
under Rule 701 and Form S-8 for the estates of deceased platform workers and the 
representatives of incompetent former platform workers.
56
  Although the proposed changes to 
Rule 701 to include platform workers would be temporary rules, we believe that this proposed 
provision could prove useful to the administration of the estate of a deceased platform worker or 
the representation of an incompetent former platform worker, particularly because, under the 
proposed rules, sales of securities underlying options issued pursuant to the temporary rules may 
occur following the rules’ expiration. 
Request for Comment 
                                                
53
  See proposed Rule 701(h)(1)(i); see also proposed General Instruction A.1.(b)(4)(ii) of Form S-8.  Such 
treatment would be consistent with the expanded scope of Form S-8 proposed in the companion rulemaking.  
See Release No. 33-10891 at Section III.D.1. 
54
  The companion release includes other proposed amendments pertaining to business combinations that could be 
applicable to issuances to platform workers if adopted.  For example, we are proposing to amend Rule 701(e) to 
address the disclosure delivery obligations regarding acquired entity derivative securities that the acquiring 
issuer assumes in a business combination transaction.  Another proposed amendment would clarify that, in 
determining whether the amount of securities the acquiring issuer sold during any consecutive 12-month period 
exceeds $10 million under Rule 701(e) [17 CFR 230.701(e)], the acquiring issuer would consider only the 
securities that it sold in reliance on Rule 701 during that period, and would not be required to include any 
securities sold by the acquired entity pursuant to the rule during the same 12-month period.  See Release No. 
33-10891 at Section II.A.6.  
55
  See General Instruction A.1.(a)(3) of Form S-8.  In the companion release, we are proposing to amend Rule 701 
to include a similar provision for the executors, administrators, or beneficiaries of the estates of deceased 
employees who may receive securities underlying options previously issued to former employees pursuant to 
Rule 701.  See Release No. 33-10891 at Section II.C.2.   
56
  See proposed General Instruction A.1.(b)(4)(iii) to Form S-8 and proposed Rule 701(h)(1)(i). 

21 
1.   Should we expand the scope of Rule 701 and Form S-8 to include offers and sales of 
securities to platform workers unaffiliated with the issuer who provide bona fide services 
to an issuer by means of the issuer’s internet-based platform, or through other widespread 
technology-based marketplace platforms, as proposed?  Should the expansion of Rule 
701 and Form S-8 also include services provided by such workers to the issuer’s parents, 
majorit y-owned subsidiaries, or majorit y-owned subsidiaries of the issuer's parent, as 
proposed?   
2.   Is there a basis for treating plat form workers differently than any other non-emplo yees 
not covered under the current exemption?  Does the use of an internet-based plat form 
establish a sufficient basis for treating those workers differently than non-emplo yees in a 
different context? 
3.   Should we also expand the scope of Rule 701 and Form S-8 to include offers and sales of 
securit ies to platform workers unaffiliated with the issuer who provide bona fide services 
to third-party end-users by means of the issuer’s internet-based marketplace platform, or 
through other widespread technology-based marketplace platforms or systems, and from 
which the issuer benefits, as proposed?  
4.   Should we define or provide examples of a “widespread, technology-based marketplace 
platform or system” (other than an internet-based marketplace platform) that would fall 
within the scope of the proposed amendments?  If so, how should we define that term, or 
what examples should we include? 
5.   Is the term “services” sufficiently clear?  Should we define it differently?  If so, what 
should the definition be?  Should we provide addit io nal specific guidance concerning 
what activities constitute “services” for purposes of the proposed expansion of Rule 701 
and Form S-8?   
6.   Should we limit issuances under Rule 701(h) or an expanded Form S-8 to platform 
workers who are unaffiliated with the issuer, as proposed?  If so, should we provide a 

22 
definition of or additional guidance concerning the meaning of “unaffiliated with the 
issuer”?  For example, should we define “unaffiliated” as a person who is not an 
“affiliate” as defined by 17 CFR 230.405?  Should we instead specify the types of 
persons that would satisfy the “unaffiliated” provision?  For example, should 
“unaffiliated” mean persons who are not an issuer’s employees, officers, directors, 
advisors, or consultants, or certain family members of such persons?  If so, which family 
members would be treated as affiliates of the issuer and therefore be ineligible to receive 
securities under the proposed amendments to Rule 701 and Form S-8?    
7.   Should we limit the use of the expanded Rule 701 and Form S-8 only to workers who 
provide bona fide services through an issuer’s marketplace platform, as proposed?  Or 
should we consider other alternatives?  For example: 
a.   Should we permit an issuer to offer or sell securities to workers who engage in other 
platform-based activities, such as selling goods?  If so, should we limit the types of 
goods?  For example, should we only permit an issuer to offer or sell securities to 
workers who engage in selling of unique or value-added goods and not workers who 
merely use a platform to resell goods?   
b.   If we were to permit an issuer to offer or sell securities to workers who engage in 
other platform-based activities, such as selling goods, what characteristics or factors 
would help ensure that the nexus between the issuer and worker is compensatory and 
the issuance of securities is not in connection with capital-raising or for speculative 
purposes?  For example, should we require that the worker meets minimum annual or 
aggregate sales thresholds or that the worker has been engaged in performing 
platform-based activities for the issuer for a minimum period of time before she is 
eligible to receive shares under expanded Rule 701 and Form S-8.   Should we only 
permit securit ies that do not have capital-raising features, such as restricted stock 

23 
units, to be issued to platform workers for plat form-based activities that involve the 
sale of goods?   
c.   Should we include offers and sales of securities to workers having other types of new 
work relationships?  If so, which types of new work relationships should we include, 
and what characteristics or factors would help ensure that the nexus between the 
issuer and worker is compensatory and the issuance of securities is not in connection 
with capital-raising?  Are there new work relationships that are not provided through 
an internet-based or other widespread, technology-based marketplace platform or 
system that we should include in the exemption? 
8.   Should we require that a platform worker be a natural person or an entity meeting 
specified criteria to be able to receive securities pursuant to an expanded Rule 701 or 
Form S-8, as proposed?  Should we instead require a platform worker to be a natural 
person?  Do a significant number of platform workers currently operate through a 
business entity?  If so, would a natural person requirement impact the extent to which 
they would continue to perform as platform workers or continue to do so through a 
business entity?  Should we limit the types of business entities through which a platform 
worker would be able to operate?  Should we permit an entity to be a platform worker, as 
proposed, if substantially all of its activities involve the performance of bona fide 
services that meet the requirements of proposed Rule 701(h), and the ownership interest 
of the entity is wholly and direct ly held by the natural person performing the services 
pursuant to the proposed rule?  Are there different or additional eligibility conditions that 
we should adopt to allow platform workers to perform services as entities pursuant to the 
temporary rules?  For example, should we permit more than one natural person to own 
the entity through which the services are being performed by the platform worker?  If so, 
should we limit the number of natural persons that may own the entity or require that a 
co-owner be the spouse or other family member?  Should we condition allowing more 

24 
than one natural person to own the entity by requiring each owner to perform the services 
of a platform worker?     
9.   Should we require that an issuer operating a platform control the platform as a condition 
to using the Rule 701 exemption and Form S-8 registration for issuances of securities to 
workers providing services through the platform, as proposed?  Should we permit the use 
of the exemption for issuances to such workers if an issuer’s affiliate controls the 
platform? 
10. Should we require that services be provided pursuant to a written contract or agreement, 
as proposed?  If so, should we include an express provision that the term “written 
contract or agreement” includes an electronic, internet-based contract or agreement?  
Should we provide the same provision for the term “written compensation contract” in 
Rule 701(c)?  
11. Are the proposed conditions demonstrating control of the platform appropriate?  Should 
we require that an issuer satisfy all of the specified conditions?  Should we only require 
that an issuer have the ability to determine terms of use, including payment terms?  
Should we instead only require that an issuer have the ability to accept and remove the 
workers providing services through its platform?   
12. Are there other conditions, in addition to or in lieu of the proposed conditions, that we 
should adopt?    
13. Instead of, or in addition to, an issuer control requirement, are there other issuer 
eligibility conditions that we should adopt to help ensure that the issuance of securities to 
platform workers is for a compensatory purpose?  For example, when the issuer’s 
platform is used to provide services to end-users, should we require that an issuer earn a 
substantial amount of its annual revenues from fees or other payments resulting from 
platform workers using the issuer’s platform?  Would such a condition make it less likely 
that the issuance of securities to those workers would be for a capital-raising purpose? 

25 
14. Should we expand the scope of Rule 701 and Form S-8 to include offers and sales of 
securities to former platform workers, including former platform workers of an entity 
acquired by an issuer, as proposed?  Should such expansion include securities issued to 
former platform workers, including post-termination grants made in respect of prior 
service during the 12 months following the cessation of service, as proposed?  Should we 
include under Form S-8 issuances to executors, administrators, or beneficiaries of the 
estates of deceased platform workers, or other persons similar to those included for 
deceased or incompetent former emplo yees, as proposed?  Should we amend Rule 701 to 
include a similar provision for the estates of deceased employees or deceased platform 
workers and representatives of incompetent former employees or incompetent former 
platform workers, as proposed? 
15. Would state blue-sky laws affect the operation of the proposed temporary platform 
worker exemption?  If so, how?  Are there changes we should consider to address state 
law issues?  For example, should we provide for the preemption o f state securit ies law 
registration requirements for offers made pursuant to Rule 701(h)?  Are there other state 
law implications that would be relevant to consider in connection with the proposed 
amendments?  For example, would the proposed temporary platform worker exemption 
have any implications regarding the enforceability of state laws pertaining to non-
competition arrangements?  Would the proposed exemption result in an increase in the 
use of non-compete provisions regarding issuers’ arrangements with plat form workers?  
Would the proposed exemption affect the ability of issuers under state law to provide 
additional benefits to platform workers, such as minimum wage guarantees, healthcare 
stipends, and occupational auto insurance?   
B. Additional Requirements for Issuances to Platform Workers under Rule 701 
and Form S-8 

26 
We are proposing four additional requirements with which an issuer must comply in 
order to use the exemption for issuances to plat form workers under Rule 701.
57
  In addit ion, we 
are proposing that the first three of these conditions would also apply to issuances to platform 
workers registered on Form S-8.
58
 
Because of certain structural differences between platform-based work relat ionships and 
traditional emplo yer-emplo yee relat ionships,
 
we are mindful that compensatory offerings in this 
context may be more susceptible to misuse.  For example, a traditional employer-emplo yee work 
relationship will involve some degree of interpersonal interactions between the issuer and the 
employee by which the former supervises and monitors the work and conduct of the latter.  In 
contrast, there may be no or very few interpersonal interactions in the issuer-platform worker 
relationship.  In addition, platform workers frequently work for multiple companies and may 
have exclusive control over their work schedules, including how often and for how long they will 
work.  These short-term and/or intermittent work relat ionships across mult iple issuers may 
increase the likelihood that workers would establish a work relationship with a platform as a 
means of realizing an investment opportunity with the issuer or that issuers would use the 
proposed provisions to engage in capital-raising activities.  The additional requirements we are 
proposing are designed to work together to help ensure that issuances made to platform workers 
pursuant to revised Rule 701 are for compensatory purposes while reducing any opportunity for a 
platform worker to use her relationship with the issuer to engage in speculative activity.
59
 
The first condition is that the issuance must be pursuant to a compensatory arrangement 
that is evidenced by a written compensation plan, contract, or agreement between the issuer and 
the platform worker.
60
  The compensatory arrangement may not be for services in connection 
                                                
57
  See proposed Rule 701(h)(3). 
58
  See proposed 17 CFR 239.16b(c)(1) and proposed General Instruction A.1(b)(2)(i) through (iii) to Form S-8.  
  
59
     One commenter specifically recommended imposing additional restrictions regarding the issuance of securities 
to platform workers beyond those typically applicable to equity issuances under Rule 701 because of the third-
party, contractual relationship between the issuer and platform worker.  See letter from Airbnb. 
60
  See proposed Rule 701(h)(3)(i). 

27 
with the offer or sale of securities in a capital-raising transaction or services that directly or 
indirectly promote or maintain a market for the issuer’s securities.  Thus, an issuer may not rely 
on the exemption to issue securities to a platform worker for compensation for performing 
services analogous to those of an underwriter or promoter or otherwise made in connection with 
a capital-raising transaction.  An issuer also may not rely on the exemption to issue securities to a 
platform worker as part of a plan or scheme to evade the compensatory purpose of Rule 701 or 
otherwise evade the registration requirements of the Securit ies Act.
61
  This condit ion is based on 
the requirements under Rule 701 and Form S-8   currently applicable to consultants and 
advisors,
62
 which were designed to prevent abuse of the rules as conduits for unregistered 
securities distributions to the general public and for securities issuances to stock promoters.
63
   
Second, as proposed, no more than 15 percent of the value of compensation received by a 
platform worker from the issuer for services provided during a consecutive 12-month period, and 
no more than $75,000 of such compensation received from the issuer during a consecutive 36-
mo nth period, may consist of securities issued pursuant to Rule 701 or a registration statement on 
Form S-8.
64
  The issuer would be required to determine the value of such securities as of the time 
the securities are granted.
65
  For the purpose of assessing compliance with these limits, an issuer 
                                                
61
  See Preliminary Note 5 to Rule 701, which would remain applicable to issuances under proposed Rule 
701(h).We are also proposing to add a similar note in proposed General Instruction A.1(b)(2) to Form S-8.  
 
62
   See Rule 701(c)(1)(ii) and (iii) [17 CFR 230.701(c)(1)(ii) and (iii)], and General Instruction A.1(a)(1)(ii) and 
(iii) to Form S-8. 
63
   See 1999 Rule 701 Adopting Release, supra note 5, at Section II.D., and 1999 Form S-8 Adopting Release (“ at 
Sections I.A. and II.A.  A number of commenters that addressed expanding our rules to encompass “gig 
economy” workers generally supported such a condition.  See, e.g., letters from ABA, Airbnb, Chamber, and 
Uber. 
64
    For example, if a platform worker received $1,000 in total compensation during a 12-month period from Issuer 
X for services provided to or for the benefit of Issuer X, no more than $150 of that compensation could consist 
of securities.  These proposed annual limits on the amount of securities a platform worker could receive as 
compensation from an issuer are in addition to the limits on the aggregate sales price or amount of securities 
that an issuer can sell in reliance on Rule 701 during any consecutive 12-month period.  See 17 CFR 
230.701(d).  As discussed below, the Rule 701(d) limits would continue to apply, and an issuer would be 
required to aggregate issuances to platform workers with all other issuances under Rule 701 during a 12-month 
period for the purpose of complying with Rule 701(d).  See infra Section II.C. 
65
   See proposed Rule 701(h)(3)(ii).   

28 
would be able to use any reasonable, recognized valuation methodology
66
 as long as the 
methodology is consistently applied during the same 12-month or 36-month period.
67
   
This proposed cap on the amount of compensation that a plat form worker may receive as 
securities from the issuer is designed to limit an issuer’s incentive and ability to use the new 
exemptive rule as a conduit for a public distribution of its securities, contrary to the 
compensatory purpose of Rule 701 and Form S-8.
68
  In addition, we believe the proposed cap 
would reduce any incentive for plat form workers to use the exemption primarily for realizing 
speculative investment opportunities and would limit the risk that issuances would be for capital-
raising or other non-compensatory purposes.
69
     
Third, we are proposing that the amount and terms of any securities issued to a plat form 
worker may not be subject to individual bargaining.  Similarly, as proposed, plat form workers 
would not be permitted to elect between payment in securities or cash.
70
  We believe this 
proposed requirement would also reduce any incentive for plat form workers to use the 
exemption as a means of realizing speculative investment opportunities rather than receiving the 
securities as a compensatory grant.
71
 
                                                
66
     We expect that issuers would use the same valuation methods that they currently use to make valuations for 
compensatory issuances under Rule 701(c). 
67
     In this regard, an issuer’s use of multiple, different valuation methodologies during the same period could raise 
concerns that the issuer was doing so as part of a plan or scheme to evade the compensatory purpose of Rule 
701. 
68
     Some commenters supported imposing a limitation on the amount of equity compensation a “gig economy” 
worker could receive to prevent abuses under an expanded Rule 701 and Form S-8.  See letters from ABA and 
Airbnb. 
69
     The Commission has historically expressed concern about the potential for abuse in the area of issuances of 
securities for compensation.  See, e.g., 1999 Rule 701 Adopting Release, 64 FR at 11098; see also Rule 701 
Reproposing Release, 52 FR at 29034.  
70
  See proposed Rule 701(h)(3)(iii). 
71
    One commenter recommended the adoption of this type of condition in order to prevent abuses from occurring 
under any expanded rules.  See letter from Airbnb.  This proposed condition is also consistent with the “no sale” 
position taken by the staff that, where securities are awarded to employees at no direct cost through broad-based 
bonus plans, there has been no sale, and therefore no public distribution of the securities, since employees do 
not individually bargain to contribute cash or other tangible or definable consideration to such plans.  See 
Changes to Exchange Act Registration Requirements to Implement Title V and Title VI of the JOBS Act, Release 
No. 33-10075 (May 3, 2016) [81 FR 28689 (May 10, 2016)]. 

29 
 The preceding three conditions would apply equally to securities issuances to platform 
workers under both Rule 701 and Form S-8.
72
  For purposes of Rule 701, however, we are 
proposing a fourth condition that would require the issuer to take reasonable steps to prohibit the 
transferability of securities issued to plat form workers pursuant to the exemption except for 
transfers to the issuer or by operation of law.
73
  Such reasonable steps could include the 
placement of special legends on the securities to be issued to platform workers or appropriate 
instructions to transfer agents that would provide adequate notice of the transfer prohibition to 
platform workers.  The purpose of this provision is to help ensure that the shares are obtained for 
compensatory and not speculative purposes.  Specifically, it would prevent the development of a 
market in such securities unt il after the issuer becomes subject to the reporting requirements of 
Section 13 or 15(d) of the Exchange Act, which would in turn greatly reduce, if not eliminate, 
any incentive for a worker to seek out securities issued pursuant to Rule 701 for speculative 
purposes.   
Currently, all securities issued pursuant to Rule 701 are “restricted securities,” and any 
resales must comply with Securities Act registration requirements or qualify for an exemption 
therefrom.
74
  As proposed, the additional transferability prohibition on Rule 701 securities issued 
to plat form workers would preclude any transfers, except transfers back to the issuer or by 
operation of law.
75
  Transfers by operation of law would include, for example, transfers pursuant 
to the laws of descent and distribution and domestic relations orders in divorces.  One 
commenter recommended the adoption of enhanced transfer restrictions for securit ies issued to 
gig economy workers beyond those applicable to equity currently issuable pursuant to Rule 701 
because of the third-party contractual relationship between gig economy participants and gig 
                                                
72
  See proposed 17 CFR 239.16b(c)(1) and proposed General Instruction A.1.(a)(3) to Form S-8.  
73
  See proposed Rule 701(h)(3)(iv). 
74
   See 17 CFR 230.701(g)(1) and (2). 
75
  See proposed Rule 701(h)(3)(iv). 

30 
economy companies.
76
  As noted earlier, we agree that applying enhanced transfer restrictions is 
appropriate in light of the more remote contractual relationship between an issuer and its 
plat form workers, compared to the relat ionship wit h its emplo yees.
77
  As with other securities 
issued pursuant to Rule 701, however, ninety days after the issuer becomes subject to Exchange 
Act reporting requirements, securities issued to platform workers would become available for 
resale under 17 CFR 230.701(g)(3).
78
   
We are not proposing similar transfer restrictions for securities issued to plat form 
workers pursuant to a Form S-8   registration statement.  Securities Act and Exchange Act 
protections for such securities would already exist, making the use of the issued securities for 
speculative purposes by a platform worker less likely.
79
 
Request for Comment  
16. Would the proposed conditions for issuances to platform workers under Rule 701 or 
Form S-8 help ensure that the issuances are for a compensatory purpose?  Should we 
adopt only some of the conditions?  If so, which ones?  For example, should we require 
only that the issuance be pursuant to a compensatory arrangement for services not in 
connection with the offer or sale of securities in a capital-raising transaction? 
17. Should we impose a cap on the amount of compensation that a plat form worker may 
receive as securities from the issuer on an annual basis under Rule 701 and Form S-8 to 
limit the potential that the issuance to plat form workers would be used for capital-raising 
or speculative purposes, as proposed?  If so, should we require that no more than 15 
percent of the value of compensation received by a platform worker from the issuer for 
                                                
76
    Letter from Airbnb. 
77
  See supra note 59 and accompanying text. 
78
  See proposed Rule 701(h)(3)(iv).  Following that 90-day period, persons who are not affiliates may resell Rule 
701 securities in reliance on 17 CFR 230.144 without compliance with the current public information 
requirements under 17 CFR 230.144(c) and holding period requirements under 17 CFR 230.144(d), and 
affiliates may resell such securities without compliance with the holding period requirements. 
79
     For example, to be eligible to use Form S-8, the issuer must be a reporting issuer and must have filed all reports 
and other materials required to be filed during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports and materials). 

31 
services provided during a 12-month period be in securities, as proposed?  Should the 
annual cap be less than or greater than 15 percent of the compensation received by the 
platform worker during a 12-month period?  Should the annual cap apply only to 
issuances under Rule 701 rather than both Rule 701 and Form S-8?  Should the annual 
cap apply only to issuances under Form S-8? 
18. Should we impose a cap on the amount of compensation that a platform worker may 
receive as securities from the issuer during a 36-month period (under Rule 701 and 
registered on Form S-8) to limit the potential that the issuance to platform workers would 
be used for capital-raising or speculative purposes, as proposed?  Should we require that 
no more than $75,000 of such compensation received from the issuer during a 36-month 
period may consist of securities, as proposed?  Should this cap be less than or greater 
than $75,000, and/or apply to a shorter or longer period than 36 months?  For example, 
should we limit the amount of securities a platform worker may receive as compensation 
from an issuer to no more than $50,000 for a consecutive 24-month period?  I  nstead of, 
or in addition to, the 36-month cap, should there be an aggregate limit on the dollar 
amount of securities that a platform worker may ever receive from an issuer?  If so, what 
should that cap be?  Should the $75,000 cap apply only to issuances under Rule 701?  
Should the $75,000 limitation apply only for as long as the issuer is not subject to the 
reporting requirements of Section 13 or 15(d) of the Exchange Act?  Should the $75,000 
cap apply only to issuances registered on Form S-8?   
19. Should we impose only the proposed 12-month cap or only the proposed 36-month cap, 
but not both?  Should we not impose any cap on the amount of compensation that a 
platform worker may receive as securities in light of other proposed conditions?  Should 
either cap apply to limit the total amount of compensation issued as securities to platform 
workers by an issuer as well as an issuer’s affiliates, or should either cap apply 
individually to each issuer or issuer’s affiliate? 

32 
20. For purposes of the 12- and 36-month caps on the amount of compensation that a 
platform worker may receive as securities from the issuer, should the value of 
compensation be measured at the time the securities are granted, as proposed?  For the 
same purposes, should an issuer be able to use any reasonable, recognized valuation 
methodology for purposes of determining the fair market value of the securities issued to 
platform workers under Rule 701?  Should an issuer be able to change the valuation 
methodology used for purposes of the proposed caps as long as the change is motivated 
by bona fide reasons unrelated to the proposed exemption for platform workers? 
21. Should we specify in Rule 701 and Form S-8 that the issuer must use the same valuation 
method that it currently uses to make valuations for compensatory issuances under Rule 
701(c), if applicable, and apply the methodology consistently during the same period?   
22. Should we require that the amount and terms of any securities issued to a platform 
worker may not be subject to individual bargaining or the worker’s ability to elect 
between payment in securities or cash, as proposed?  If a platform worker is unable to 
negotiate the amount and terms of securities to be issued as compensation, should that 
worker be able to elect to receive payment only in cash?  
23. For issuances pursuant to the Rule 701 exemption, should we require the issuer to take 
reasonable steps to prohibit the transfer of securit ies issued to platform workers, other 
than to the issuer or by operation of law, as proposed?  Should we limit the prohibit io n on 
transferability to a specific period, e.g., for two or three years?  Should we mandate the 
specific steps that an issuer must take to prohibit the transfer of such securities?  If so, 
what should those steps be?  For example, should we require that issuers put special 
legends on the securities issued to platform workers, or should we require that issuers 
provide appropriate instructions to transfer agents concerning the transfer prohibition on 
shares issued to platform workers?  Are there other reasonable steps that we should 
require an issuer to take in connection with the proposed prohibition on transferability to 

33 
help ensure that the shares issued to platform workers are for compensatory and not 
speculative purposes? 
24. Instead of requiring an issuer to take reasonable steps to prohibit the transfer of securities 
issued to platform workers, should we instead allow platform workers to resell their 
securities using an applicable exemption or safe harbor?  For example, should platform 
workers be allowed to resell their securities pursuant to Rule 144?  Alternatively, in Rule 
701(h), should we require a different holding period than is    in Rule 144, such as a two-
year holding period, or is any holding period insufficient to mitigate concerns about 
misuse of the temporary exemption?  Are there other transfer restrictions that would be 
more appropriate in this context? 
25. Should we apply the proposed conditions only to securities that have capital-raising 
features (e.g., stock options) and not to securities that do not have such features (e.g., 
restricted stock units)?  If so, which of the proposed conditions should not apply to such 
securit ies?  
26. Should we limit the type of securities that can be issued to platform workers under Rule 
701 or on Form S-8?  For example, should we limit issuances to equity securities and 
securities convertible    into or exchangeable for equity securities?   
27. Are there other conditions in addition to, or instead of, the proposed conditions that we 
should adopt to help ensure that issuances to platform workers under Rule 701 or 
registered on Form S-8 are undertaken for compensatory and not capital-raising or 
speculative purposes?  For example, should we require that a plat form worker provide 
services through an issuer’s platform (or other widespread, technology-based marketplace 
platform or system) for a certain period of time before the worker is eligible to receive 
securities from the issuer?  If so, should the minimum period be six months, one year, or 
some other period?  Should we require that the platform worker provide services for a 
continuous period of time?  Should we require that the securities issued to a plat form 

34 
worker not vest until after a particular period of time?  If so, should the vesting period be 
six months, one year, or some other period after the grant of securities? 
28. Do the addit ional conditions for issuances to platform workers provide adequate investor 
protections for platform workers who receive shares pursuant to Rule 701 or registered 
on Form S-8?  If not, what additional conditions or measures would be appropriate to 
provide an acceptable level of investor protection?   
C. Integration of Proposed Rule 701(h) With the Existing Rule 701 Exemption 
Tit le 17, section 230.701(d) (“Rule 701(d)”) imposes limits on the aggregate sales price 
or amount of securit ies that an issuer can sell in reliance on the rule during any consecutive 12-
mo nth period.
80
  In addit ion, 17 CFR 230.701(e) (“Rule 701(e)”) provides that if the aggregate 
sales price or amount of securities sold during any consecutive 12-month period exceeds $10 
million, the issuer must deliver certain disclosure to investors a reasonable period of time before 
the date of sale.
81
 
 Proposed Rule 701(h) would not create a separate and independent ceiling on the amount 
of securities that could be offered or sold under Rule 701.  Rather, plat form workers would be an 
additional class of persons temporarily eligible under Rule 701(c) to participate in the issuer’s 
Rule 701 offers and sales, and would be subject to the same Rule 701(d) limitations on the total 
amount of securities that an issuer may sell.  In this regard, the securities sold to platform 
workers would be aggregated with all other securities sold by the issuer to persons meeting 
existing Rule 701(c) eligibility conditions for purposes of applying the Rule 701(d) ceiling.   
                                                
80
   See 17 CFR 230.701(d)(2), which imposes alternative caps on the aggregate sales price or amount of securities 
sold under the rule during a consecutive 12-month period.  In the companion Rule 701/Form S-8 release, we are 
proposing to raise: the cap under 17 CFR 230.701(d)(2)(i) permitting issuance from $1 million to $2 million, to 
reflect inflation; and the cap under 17 CFR 230.701(d)(2)(ii) from 15% to 25% of the issuer’s total assets, to 
reflect that start-up companies may be more dependent upon human capital than fixed assets.  See Release No. 
33-10891 at Section II.B. 
81
    In the companion release, we are proposing to require that Rule 701(e) enhanced disclosure be provided only 
for those sales that exceed the rule’s $10 million threshold.  See Release No. 33-10891 at Section II.A.1.  If 
adopted, this provision would be applicable to all Rule 701-exempt issuances, including those granted to 
platform workers. 

35 
We believe that it is appropriate to apply the same ceiling to all Rule 701 exempt 
offerings rather than to provide a separate ceiling for offers to persons eligible to receive 
securities under the temporary provision.  If we were to provide separate ceilings, issuers with 
technology-based marketplace platforms would be able to sell securities in excess of the amount 
they are permitted to sell to traditional workers, while issuers that rely only on traditional 
emplo yment would be limited to the ceiling imposed under Rule 701(d).  We believe it is better 
to propose an approach that treats all issuers equally, rather than one that favors issuers 
conducting their businesses through platforms as defined by the proposed rule.   
Similarly, an issuer that offered and sold securities to platform workers pursuant to 
proposed Rule 701(h) would be subject to the same Rule 701(e) disclosure requirements.  Those 
securities would be aggregated with all other securities offered and sold by the issuer to persons 
meeting existing Rule 701(c) eligibility conditions for purposes of applying the $10 million 
disclosure thresho ld in Rule 701(e).
82
 
Request for Comment 
29. Should we require that the securities sold to platform workers be aggregated with all 
other securities sold by the issuer to persons meeting existing Rule 701(c) eligibility 
conditions for purposes of applying the Rule 701(d) ceiling, as proposed?  Should we 
instead impose a separate and independent ceiling on the amount of securities that an 
issuer could sell to plat form workers during any consecutive 12-month period?  If so, 
what should the ceiling be? 
30. Should we require that the securities issued to platform workers be aggregated with all 
other securities sold by the issuer to persons meeting existing Rule 701(c) eligibility 
                                                
82
    In the companion release, we are proposing amendments to the disclosure requirements under Rule 701(e) that, 
if adopted, would be applicable to issuances to platform workers under proposed Rule 701(h).  For example, we 
are proposing to conform the age of financial statement requirement in Rule 701(e) to the corresponding 
requirement in Part F/S of Form 1-A.  See Release No. 33-10891 at Section II.A.2.  In addition, we are 
proposing to allow issuers to provide alternative valuation information, similar to that required under Internal 
Revenue Code Section 409A, in lieu of financial statements, for purposes of Rule 701(e) disclosure.  See id. at 
Section II.A.4. 

36 
conditions for purposes of applying the Rule 701(e) disclosure threshold, as proposed?  
Should we instead impose a separate disclosure threshold for issuances to platform 
workers?  If so, what should that threshold be?   
D. Integration with Exchange Act Rule 12g5-1 
For purposes of determining whether an issuer is required to register a class of equity 
securities with the Commission pursuant to Section 12(g)(1) of the Exchange Act,
83
 17 CFR 
240.12g5-1   (“Rule 12g5-1”) permits the exclusion of certain securities.
84
 Specifically, 17 CFR 
240.12g5-1(a)(8)(i)(A) permits the exclusion of securities held by persons who received the 
securities pursuant to an employee compensation plan in transactions exempt from, or not subject 
to, the registration requirements of Securities Act Section 5.  Tit le 17, section 240.12g5-
1(a)(8)(i)(B) permits the exclusion of securities held by persons who received the securities in  a 
transaction exempt from, or not subject to, the registration requirements of Securities Act 
Section 5 from the issuer, a predecessor of the issuer or an acquired company in substitution or 
exchange for securities received pursuant to a compensatory plan in transactions exempt from, or 
not subject to, the registration requirements of Securities Act Section 5, as long as the persons 
were eligible to receive securities pursuant to Rule 701(c) at the time the excludable securities 
were originally issued to them.  In addit ion, Rule 12g5-1 provides a non-exclusive safe harbor by 
which an issuer may deem a person to have received the securities pursuant to an employee 
                                                
83
     15 U.S.C. 78l(g)(1).  Section 12(g)(1) requires, among other things, that an issuer with assets exceeding 
$10,000,000 and a class of equity securities held of record by either 2,000 persons, or 500 persons who are not 
accredited investors, register such class of securities with the Commission. 
84
  See 17 CFR 240.12g5-1(a)(8).  The Commission adopted this provision of Rule 12g5-1 pursuant to Section 503 
of the JOBS Act, which instructed the Commission to amend the definition of “held of record” to exclude 
securities held by persons who received them pursuant to an “employee compensation plan” in transactions 
exempted from the registration requirements of Section 5 of the Securities Act.  Section 503 also instructed the 
Commission to adopt a safe harbor that issuers can use when determining whether holders of their securities 
received them pursuant to an employee compensation plan in transactions exempted from the registration 
requirements of Section 5 of the Securities Act.  The Commission adopted the term “employee compensation 
plan” and left it undefined so that “issuers will have appropriate flexibility to make a principles based 
determination about securities received as employee compensation when determining their holders of record 
under Section 12(g)(5).”  See  Release No. 33-10075.    
 

37 
compensation plan if such plan and the person who received the securities pursuant to the plan 
met the plan and participant conditions of Rule 701(c).
85
       
We are proposing similar treatment for issuances to platform workers under proposed 
Rule 701(h).
86
  We believe that these proposed amendments to Rule 12g5-1 are appropriate 
because they would remove a potential disincentive to an issuer’s offer and sale of securities as 
compensation to platform workers and would avoid favoring companies that do not have 
platform workers over companies that have them.  Specifically, the proposed revisions would 
eliminate the requirement for an issuer to count platform workers who receive shares pursuant to 
a compensation plan
87
 under Rule 701(h) as record holders for the purpose of determining its 
Section 12(g) registration obligations.
88
  In addition, similar to the existing exclusion in 17 CFR 
240.12g5-1(a)(8)(i)(B), the proposed amendment would exclude securities received in a 
transaction exempt from, or not subject to, the registration requirements of Securities Act Section 
5 in substitution or exchange for securities
 received pursuant to Rule 701, as long as the persons 
were eligible to receive the securit ies when they were originally issued to them.
89
  Finally, the 
proposed amendments would extend the safe harbor in 17 CFR 240.12g5-1(a)(8)(ii), for 
securities received in a Rule 701(c) offering, to compensatory issuances to platform workers 
pursuant to Rule 701(h).
90
   
                                                
85
     See 17 CFR 240.12g5-1(a)(8)(ii)(A). 
86
     Two commenters supported excluding platform workers from the definition of record holder under Rule 12g5-
1.  See letters from Airbnb and Davis Polk. 
87
     Similar to the current Rule 12g5-1 exclusion for securities issued pursuant to an employee compensation plan, 
we propose to use and leave undefined the term “compensation plan” to provide issuers with the appropriate 
flexibility to make a principles based determination about securities issued as compensation to their platform 
workers when determining their holders of record under Section 12(g)(5).  Not defining a “compensation plan” 
for platform workers would also avoid unnecessary complexity and potential conflict with existing terms, such 
as “compensatory benefit plan.”  See Release No. 33-10075, 81 FR at 28694. 
88
  See proposed Exchange Act Rule 12g5-1(a)(8)(i)(A). 
89
  See proposed Exchange Act Rule 12g5-1(a)(8)(i)(B).   
90
  See proposed Exchange Act Rule 12g5-1(a)(8)(ii)(A)(2).  The Rule 12g5-1 safe harbor would continue to 
provide that an issuer may, solely for the purposes of Exchange Act Section 12(g), deem the securities to have 
been issued in a transaction exempt from, or not subject to, the registration requirements of Securities Act 
Section 5 if the issuer had a reasonable belief at the time of the issuance that the securities were issued in such a 
transaction.  See 17 CFR 240.12g5-1(a)(8)(ii)(B). 

38 
The proposed amendments to Rule 12g5-1 would also include a note to remind issuers of 
the temporary nature of Rule 701(h).
91
  Upon expiration of Rule 701(h), without further 
Commissio n action, an issuer would no longer be able to issue additional Rule 701-exempt 
securit ies to its plat form workers.  Importantly, however, we are not proposing the Rule 12g5-1 
exclusion and safe harbor for securities issued to platform workers on a temporary basis.  
Therefore, an issuer could continue to rely on the exclusion and safe harbor subsequent to Rule 
701(h)’s expiration date. 
Request for Comment 
31. Should we permit an issuer to exclude platform workers to which it has issued securities 
under Rule 701(h) from the definition of “holders of record” for the purpose of 
determining its registration obligations under Section 12(g), as proposed? 
32. Should we extend the Rule 12g5-1 safe harbor to cover issuances to platform workers 
under Rule 701(h) pursuant to a compensation plan, as proposed? 
33. Should we leave “compensation plan” for platform workers undefined, as proposed?  If 
not, how should we define a “compensation plan” for platform workers? 
E. Considerations Specific to Form S-8 
 Form S-8 provides a number of accommodations to registrants that seek to register the 
offer and sale of securities to their employees, consultants, and advisors.
92
  For example, to 
satisfy the Securities Act prospectus delivery requirements set forth in Rule 428, the form 
requires only abbreviated disclosure and permits the delivery of regularly prepared materials 
advising employees and other eligible persons about emplo yee benefit plans, together with a 
statement of availability of documents containing registrant information.
93
  Form S-8 also 
permits the incorporation by reference of a registrant’s Exchange Act reports without regard to 
                                                
91
  See proposed Note 1   to paragraph (a)(8)(ii) of Rule 12g5-1. 
92
  See 1999 Form S-8 Adopting Release, supra note 12, at 11103; see also 1990 Form S-8 Adopting Release, 
supra n. 14. 
93
  See Form S-8, Part I, Item 2.  

39 
the length of the issuer’s reporting history or the aggregate market value of its securities held by 
the non-affiliated public (its “public float”).
94
  The Commission has justified this differing 
treatment for Form S-8 offerings because of their compensatory, incentivizing, and non-capital -
raising purpose.
95
        
 We propose to amend Form S-8 so that the accommodations available to registrants 
currently offering securities on that form to employees and other covered persons would 
generally be available to registrants offering securities to plat form workers.  We also propose to 
amend Rule 428 so that its prospectus content, delivery, updating, and related procedural 
requirements are applicable to offerings to platform workers pursuant to a written compensation 
plan, contract, or agreement.  Thus, a registrant registering an offering of securit ies to platform 
workers on Form S-8 would be able to deliver a Section 10(a) prospectus consisting of plan or 
compensation contract information, a statement of availability of registrant information, and 
other documents required of current Form S-8 registrants, and follow the same Form S-8 
procedural requirements.
96
  We believe that the proposed conditions designed to help ensure that 
an offering to such workers is for a compensatory purpose justify extending the same treatment 
to issuers seeking to register an offering of securities to platform workers on Form S-8. 
 Many of the substantive plan disclosure requirements for Form S-8 pertain to tax 
qualified defined contribution plans.  We believe, however, that issuers that elect to register an 
offering of securities on Form S-8 for issuance to plat form workers would do so to incentivize 
those workers in the short-term by offering options and restricted stock units, rather than 
pursuant to a defined contribution plan for the purpose of retirement savings.  Accordingly, we 
are not proposing amendments to those items of Form S-8 that pertain to defined contribution 
plans to include platform workers.   
                                                
94
  See Form S-8, Part II, Item 3. 
95
  See, e.g., 1999 Form S-8 Adopting Release, supra note 12, at 11103.  The Commission has also justified the 
abbreviated disclosure format of Form S-8 because of “employees’ familiarity with the issuer’s business 
through the employment relationship.”  Id. 
96
   See proposed Rule 428(d). 

40 
Request for Comment 
34. Platform workers may not be as familiar with the registrant’s    operations as employees 
and other persons currently eligible to receive securities under Form S-8   may be.  As 
such, should registrants offering securities to plat form workers be subject to different 
information content, prospectus delivery, or other procedural requirements than those 
applicable to current Form S-8 registrants?  If so, what additional requirements under 
Form S-8 or Rule 428 or what different or additional disclosure requirements should 
apply to offerings to plat form workers?   
35. Are there circumstances in which registrants would issue securit ies to platform workers 
pursuant to defined contribution plans?  If so, should we amend those items of Form S-8 
that pertain to defined contribution plans to include platform workers? 
F. Requirement to Furnish Certain Information 
As explained in detail below, the proposed expansion of Rule 701 and Form S-8 to 
include securities issuances to platform workers would be temporary.
97
  Related to this, we are 
also proposing a requirement that an issuer furnish certain information to the Commission.  If the 
proposed amendments are adopted, we plan to use this information to assist us in evaluating the 
expanded use of Rule 701 and Form S-8, in order to help determine whether to permit such use 
on a permanent basis and under the same or different conditions.  The information should 
provide insight into how, and to what extent, the exemptions are being used, as well as the extent 
and type of benefits provided to issuers, platform workers, and other investors.  This would 
enable us to assess the utility of the issuances of securities to platform workers under Rule 701 or 
Form S-8 and to assess whether the proposed conditions have achieved their purpose of helping 
to prevent non-compensatory issuances.  Although the proposed rule would require issuers to 
furnish certain information, furnishing the identified information would not be a condition to rely 
                                                
97
  See infra Section II.G. 

41 
on Rule 701 or Form S-8.  Thus, a failure to furnish the information would not result in the loss 
of the proposed exemption in Rule 701 or Form S-8 eligibility for issuances to platform 
employees.  The information would, however, be important for determining whether the 
exemptions should expire, be extended, or be made permanent. 
The required information would be furnished, rather than filed, and therefore would not 
be subject to potential liability under Section 18 of the Exchange Act.
98
  The informat ion would 
be intended only for the Commission’s use and would be non-public.  It would not be furnished 
through the Commission’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
 
 
Rather, it would be furnished in  a non-public manner designated by the Division of Corporation 
Finance for this purpose, for example, electronically by email or by some other means of 
electronic communication. 
As proposed, the issuer would be required to provide the fo llowing informat ion 
concerning its issuances to plat form workers to the Commission at six-month intervals 
commencing six months after the first such issuance: 
1.   The criteria used to determine eligibility for securities awards to platform workers, 
whether they are the same as for other compensatory transactions, and whether those 
criteria, including any revisions to such criteria, are communicated to workers in advance 
as an incentive; 
2.   The type and terms of securities issued to platform workers during the prior six months, 
and whether they are the same as for other securities issued in compensatory transactions 
by the issuer during that interval; 
3.   If issuing securit ies pursuant to Rule 701(h), the steps taken to ensure that the securities 
sold are non-transferable; 
                                                
98
     15 U.S.C. 78r. 

42 
4.   The percentage of overall outstanding securities that the amount issued to platform 
workers  cumulatively under Rule 701(h) or pursuant to a registration statement on Form 
S-8 (pursuant to § 239.16b(c)), as applicable, represents;  
5.   During the interval, the number of platform workers, the number of non-platform 
workers, the number of platform workers receiving securities pursuant to the temporary 
rule, and the number of non-platform workers who received securities pursuant to the 
issuer’s Rule 701 or Form S-8 sales; and 
6.   The number and dollar amount of securities issued to platform workers under Rule 701 or 
pursuant to a registration statement on Form S-8, both in absolute amounts and as a 
percentage of the issuer’s total sales under Rule 701   or total sales pursuant to a 
registration statement on Form S-8, as applicable during the interval.
99
 
 
We recognize that some non-reporting issuers may view certain information concerning 
compensation practices for plat form workers as privileged or confidential.  For that reason, the 
proposed rules would provide that to the extent that the issuer treats such information as 
privileged or confidential, it may submit a confidential treatment request pursuant to 17 CFR 
200.83
100
 for the furnished information.
101
 
Request for Comment  
36. Should the temporary rules require an issuer to furnish certain information to the 
Commission if it seeks to register issuances to platform workers on Form S-8, as 
proposed?  If so, should an issuer be required to furnish the information at six-month 
                                                
99
  See proposed Rule 701(h)(4) and proposed 17 CFR 239.16b(c)(3).  The amounts calculated as a percentage 
should compare the amount of securities issued to platform workers under Rule 701 or Form S-8 with the total 
amount of securities issued to all workers (both platform and non-platform) and other covered persons under 
Rule 701 or on Form S-8. 
100
   Under Rule 83, an issuer can request that the non-public information not be disclosed pursuant to a request 
under the Freedom of Information Act (“FOIA”).  Written requests for confidential treatment under Rule 83 
relating to the furnished materials may be submitted either in paper format or electronically.  If there are no 
FOIA requests, the information will remain non-public for 10 years.  After 10 years, the confidential treatment 
request will expire unless an issuer requests and is granted an extension.  In the event of a FOIA request, the 
Commission may require the issuer to provide substantiation of its confidential treatment request. 
101
  See proposed Rule 701(h)(5) and proposed 17 CFR 239.16b(c)(4).  
 

43 
intervals, as proposed?  Should the issuer be required to furnish the information annually 
or on another periodic basis?  If so, which periodic basis would be appropriate? 
37. Should the same reporting interval apply to issuances of securities both under Rule 701 
and pursuant to a registration statement on Form S-8? 
38. Is the proposed information appropriate for the purpose for which it is being sought?  
Should issuers be required to furnish less information or other informat ion in addit io n to, 
or instead of, the proposed information? 
39. What method should the Commission require issuers to use to furnish the informat ion 
required?  For example, should the information be furnished electronically via email for 
this purpose?  Should the Commission provide a form for this purpose? 
  Are there other steps that the Commission should take to facilitate the reporting 
requirement? 
40. Should we require that an issuer notify the Commission that it intends to make offers or 
sales to plat form workers pursuant to the exemption in proposed Rule 701(h)?  If so, 
when and how should issuers be required to provide such notice? 
G. Expiration of the Temporary Rules Authorizing Issuances to Platform 
Workers Under Rule 701 and Form S-8 
With limited exceptions, we propose to make this exemptive rule temporary in order to 
have an opportunity to evaluate the appropriateness of extending the Rule 701 exemption to 
issuances to workers in this relatively new type of work arrangement, including whether such 
issuances are being made for compensatory, incentive, and non-capital-raising purposes.
102
  
Moreover, given the rapid pace of technological change, particularly in the area of the internet 
and platform software, and the evolving nature of the platform worker labor market, making the 
                                                
102
   As previously discussed, the exemption would continue to be available to issuers for the post-expiration 
issuance of securities underlying options previously issued in an exempt transaction pursuant to Rule 701(h).  
See supra note 41 and accompanying text.  In addition, as previously noted, an issuer could continue to rely on 
the Rule 12g5-1 exclusion and safe harbor for securities issued to its platform workers prior to the expiration of 
Rule 701(h) and continue to exclude those workers as record holders subsequent to Rule 701(h)’s expiration 
date.  See supra Section II.D.   

44 
expanded Rule 701 exemption temporary would also provide us with the opportunity, subject to 
public notice and comment, to implement amendments to this area of the exemptive framework 
in light of such technological and labor market changes.   
As proposed, Rule 701(h) would apply only to offers and sales of securities occurring 
within five years following the date of the rule’s effectiveness.  On that date, Rule 701(h) would 
expire and no longer be effective.
103
  Prior to the expiration date, the Commission may decide to 
let the exemption expire, extend the temporary exemption, or adopt the exemption on a 
permanent basis.  If the Commission extends the exemption or adopts it on a permanent basis, it 
may also consider whether any revisions to the rule are appropriate.  We believe that five years is 
an appropriate period for the temporary exemption.  On the one hand, it would provide issuers 
with sufficient time to develop and conduct successful securities offerings to platform workers, 
the demand for which initially may not be readily apparent.  On the other hand, the limited 
period would allow the Commission to evaluate the temporary exemption and make necessary 
adjustments in response to technological, labor market, or other changes. 
The rule authorizing the temporary use of Form S-8 for issuances to plat form workers (17 
CFR 239.16b(c)) would also expire five years from the date of that rule’s effectiveness, which 
we expect would be the same date as the expiration date for Rule 701(h).  Rule 428(d), the 
temporary rule authorizing the application of the same streamlined disclosure, prospectus 
delivery, and related procedural requirements to issuances to plat form workers as those currently 
applicable to other Form S-8   issuances, would expire on the same date as 17 CFR 239.16b(c). 
Request for Comment 
41. Should we adopt each of proposed Rule 701(h), the proposed amendment to Form S-8 
(17 CFR 239.16b(c)), and proposed Rule 428(d) as temporary rules, as proposed?  If we 
do, should the rules expire five years from the date of their effectiveness, as proposed?  
                                                
103
   In the event that the Commission determines to let the exemption expire, we anticipate addressing any transition 
or related issues at that time. 

45 
Should the rules expire on a different date (e.g., one, two, three, or four years from the 
date of effectiveness)? 
42. Should we permit an issuer, following expiration of Rule 701(h), to issue securities 
underlying options, warrants, or rights that were previously issued to platform workers in 
an exempt transaction pursuant to Rule 701(h), as proposed? 
43. Should we make the expiration date for the temporary Form S-8 provisio ns different fro m 
the expiration date for issuances under Rule 701(h)?  If so, should the effective period of 
the Form S-8 provisions be longer or shorter than the effective period of Rule 701(h)? 
44. Should the proposed extensio n of Rule 701 and Form S-8 to platform workers expire 
absent further Commission action, as proposed?  Are there any transition or related issues 
(e.g., related to transfer restrictions) that we should address in connection with the 
proposed expiration of the temporary rules?  
45. Rather than making the rules temporary,
104
 should we adopt any of the proposed rules on 
a permanent basis? If so, which ones?   
III. GENERAL REQUEST FOR COMMENTS 
We request and encourage any interested person to submit comments on any aspect of the 
proposed amendments, other matters that might have an impact on the proposed amendments, 
and any suggestions for additional changes. With respect to any comments, we note that they are 
of greatest assistance to our rulemaking initiative if accompanied by supporting data and analysis 
of the issues addressed in those comments and by alternatives to our proposals where 
appropriate. 
IV. ECONOMIC ANALYSIS 
The Commission is proposing amendments to Rule 701 to establish a temporary 
provision that, on a trial basis, would expand the scope of the rule to include a new category of 
worker, the platform worker, to whom an issuer would offer and sell securities, under certain 
                                                
104
  But see supra note 102. 

46 
conditions, without registration under the Securities Act.  Similarly, the Commission is 
proposing amendments to permit an Exchange Act reporting issuer to register offers and sales to 
platform workers on Form S-8.
105
  The Commission is proposing these amendments on a 
temporary basis for a five-year period.  Permitting gig economy issuers to utilize the Rule 701 
exemption on a temporary basis would allow the Commission to assess the appropriateness of 
the exemption for these new work relationships and thus should help inform the Commission’s 
ongoing efforts to modernize its rules in light of changing economic and market conditions.  In 
connection with the proposed amendments, issuers that offer and sell securities to platform 
workers would be required to furnish certain information to the Commission at six-month 
intervals to assist in evaluating the proposed expanded scope of Rule 701 and Form S-8.  The 
Commission also is proposing to amend Rule 12g5-1 under the Exchange Act to extend the 
exclusion from the definition of “held of record” and corresponding safe harbor, for securities 
issued to platform workers.  
We are mindful of the costs imposed by and the benefits obtained from our rules and 
amendments.
106
  The discussion below summarizes information about the gig economy in 
general, various attributes of platform workers and specific information about the online 
platform economy.  We then discuss the potential economic effects of the proposed amendments.  
These include the likely benefits and costs, effects on efficiency, competition, and capital 
format ion, and reasonable alternatives.  We attempt to quantify these economic effects whenever 
                                                
105
   Unlike the proposed amendment to Rule 701, the proposed amendment to Form S-8 does not include a transfer 
prohibition.  We discuss the anticipated economic effects of this difference below. 
106
   Section 2(b) of the Securities Act [15 U.S.C. 77b(b)] and Section 3(f) of the Exchange Act [15 U.S.C. 78c(f)]  
requires the Commission, when engaging in rulemaking where it is required to consider or determine whether 
an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, 
whether the action will promote efficiency, competition and capital formation.  Further, Section 23(a)(2) of the 
Exchange Act [15 U.S.C. 78w(a)(2)] requires the Commission, when making rules under the Exchange Act, to 
consider the impact that the rules would have on competition, and prohibits the Commission from adopting any 
rule that would impose a burden on competition not necessary or appropriate in furtherance of the Exchange 
Act. 

47 
possible; however, due to data limitations, we are not able to quantify many of the economic 
effects. 
 A.  Economic Baseline 
 The baseline for the economic analysis consists of the current regulatory requirements 
applicable to issuers issuing securit ies to their emplo yees as part of their compensat ion 
arrangements.  Non-reporting issuers are able to rely on Rule 701 to offer compensatory 
securit ies to their emplo yees.  Registrants are able to register the offer and sale of compensatory 
securit ies to their emplo yees on Form S-8.     As discussed above, these provisio ns currently are 
not available for platform workers because of their non-tradit ional emplo yment status.  Thus, the 
affected parties for the proposed amendments would consist of online platform-based businesses 
wishing to offer securit ies as compensat ion, their plat form workers, and any companies with 
which these businesses compete in the labor market. 
  1. Overview of the Gig Economy 
Numerous recent studies document an evolution and expansion of the gig economy over 
time.  These studies examine various aspects of the nature of non-tradit ional (or alternative) 
work arrangements and corresponding trends in this area.  The findings across these studies may 
vary for multiple reasons.  For example, there is no general consensus on the definition/scope of 
the gig economy, or its various constituents.
107
  Consequently, the results of these studies may 
vary because they use different definitions of the gig economy.  Moreover, various sources of 
data are utilized to study the field.  The three main sources of data used in these studies are 
government surveys such as the Current Population Survey,
108
 administrative data such as IRS 
                                                
107
   Katherine Abraham, John Haltiwanger, Kristin Sandusky, and James Spletzer, The Rise of the Gig Economy: 
Fact or Fiction, 109 AEA PAPERS & PROCEEDINGS 357 (2019) (the “2019 Abraham Study”). 
108
   The Current Population Survey (CPS) is conducted on a monthly basis by the United States Census Bureau on 
behalf of the Bureau of Labor and Statistics. The CPS may include supplementary questions/topics on a non-
periodic basis.  In 2005 and again in 2017 the supplementary questions focused on contingent workers. See, 
e.g., U.S. Bureau of Labor Statistics, Electronically mediated work: new questions in the Contingent Worker 
Supplement, MONTHLY LAB. REV. (Sept. 2018) (the “2017 Contingent Worker Supplement”), 
https://www.bls.gov/opub/mlr/2018/article/electronically-mediated-work-new-questions-in-the-contingent-
worker-supplement.htm. 

48 
filings, and private sector data.  Due to the differing nature of the data analyzed, different types 
of errors or biases in the data may affect the findings of these studies.
109
  We discuss some of the 
main findings of this literature below and then focus on data and statistics from studies using 
definitions of gig economy that are more likely to be relevant to the scope of the proposed 
amendments to Rule 701 and Form S-8. 
A 2019 study,
110
 using a broad definition of alternative work arrangements,
111
 finds a 
significant increase in alternative work arrangements over the 2005–2015 period.  It estimates 
that about 15.8 percent of survey participants engaged in some form of alternative work 
arrangement in 2015 as compared to 10.7 percent in 2005.
112 
 It also finds that workers providing 
services through an online intermediary accounted for 0.5 percent of all workers in 2015.
113
 
The 2019 Abraham Study reports self-employment rates increasing from 13 percent in 
2004 to 15 percent in 2016, based on published Census Bureau statistics on non-emplo yer 
businesses.
114
  The largest increase in non-employers between 2010 and 2016 took place in the 
Ground Passenger Transportation sector,
115
 which grew by almost 300 percent (651,000 drivers) 
                                                
109
  See, e.g., Katherine Abraham, John Haltiwagner, Kristin Sandusky, and James Spletzer, Measuring the gig 
economy: Current Knowledge and Open Issues (Nat’l Bureau of Econ. Research Working Paper 24950, 2018) 
(the “2018 Abraham Study”).  The 2018 Abraham Study finds that there has been a growing discrepancy 
between the level of self-employment as measured in core household surveys versus the level of self-
employment as measured in administrative data.  The study concludes that examining integrated data sets that 
combine survey, administrative, and private data are likely to improve the measurement of self-employment 
activity. 
  
110
   Lawrence Katz & Alan Krueger, The Rise and Nature Of Alternative Work Arrangements in the United States, 
1995-2015, 72 ILR REV. 382 (2019) (the “Katz Study”). 
111
   The definition of alternative work arrangements used in the Katz Study includes temporary help agency 
workers, on-call workers, contract workers, and independent contractors or freelancers. 
112
  The 2005 results in the Katz Study were based on data from the 2005 Contingent Worker Supplement and the 
2015 results in the Katz Study were based on a survey conducted by RAND-Princeton as part of the RAND 
American Life Panel (the “Rand-Princeton Survey”). 
113
   The Katz Study does not discuss 2005 online platform participation rates. 
114
  A non-employer business is defined by the Census Bureau as one that has no paid employees, has annual 
business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income 
taxes.  Most non-employers are self-employed individuals operating very small, unincorporated businesses, 
which may or may not be the owner’s principal source of income.  
https://www.census.gov/quickfacts/fact/note/US/NES010217 
115
   This sector corresponds to North American Industry Classification System (NAICS) code 485. 

49 
during the period.
116
  The study also finds positive growth in non-employers for the following 
sectors:  NAICS 488 (Support Activities for Transportation), NAICS 611 (Educational Services), 
NAICS 448 (Clothing and Clothing Accessories Stores), and NAICS 446 (Health and Personal 
Care Stores), although to a much less extent as compared to the growth observed in the Ground 
Passenger Transportation sector. 
The 2017 Contingent Worker Supplement estimated that there were about 1.6 million 
electronically mediated workers in the United States,
117
 accounting for one percent of total 
emplo yment. 
The Federal Reserve 2018 Survey of Household Economics and Decision Making (the 
“2018 SHED Survey”)
118
 finds that 30 percent of adults engaged in gig economy related work, 
including both the provision of services and the sale of goods, and using both online and offline 
methods, in 2018.  The survey also finds that three percent of adults surveyed participated in gig 
economy work enabled by the internet or a mobile app to connect to customers.  
Another study uses private data to examine various characteristics and trends of a 
subsection of the gig economy, namely the online platform economy and its participants.
119
  It 
analyzed a sample comprised of 39 million unique checking accounts over the October 2012 – 
March 2018 period
120
 and found a significant increase in the number of families receiving 
                                                
116
  See also Jonathan Hall & Alan Krueger, An Analysis of the Labor Market for Uber’s Driver-Partners in the 
United States, 71 ILR Review 705 (2018) (the “Hall Study”). The Hall Study finds that the number of Uber 
drivers increased from a base of zero in 2012 to 460,000 active drivers by the end of 2015. 
117
    The 2017 Contingent Worker Supplement defines electronically mediated work as an employment arrangement 
where workers: (1) use a platform provider’s website or mobile app to connect to clients or customers and 
obtain short jobs, projects, or tasks; (2) are paid by or through the platform provider that owns the website or 
mobile app, (3) choose when and whether to work, (4) may do these short jobs, projects, or tasks in person or 
online. 
118
   The Federal Reserve has conducted the Survey of Household Economics and Decision Making on an annual 
basis starting in 2013. 
119
   Diana Farrell, Fiona Greig & Amar Hamoudi, The Online Platform Economy in 2018: Drivers, Workers, 
Sellers, and Lessors, JPMorgan Chase Institute, (2018) (the “Farrell Study”). 
120
   The study applies multiple filters to select the accounts in the final sample.  These filters are described in the 
Appendix of the study.  

50 
income from providing goods and services using online platforms.
121
  For example, in 2013, less 
than 0.5 percent of the sample checking accounts received income from work performed through 
an online platform, whereas that number increased to 1.6 percent in 2018.
122
  The study further 
breaks down income sources from online platform utilization into four categories: (1) 
transportation, (2) non-transport work (includes services such as dog walking and home repair), 
(3) selling of goods, and (4) leasing.
123
  As of March 2018, online platform workers in categories 
(1) and (2) constituted approximately 65 percent of the workers in all four categories.  Over the 
2013–2018 period, the transportation services category has shown the most significant growth, 
increasing from less than 10 percent of online platform workers in 2013 to approximately 60 
percent of online platform workers in 2018.   
  2. Characteristics of Gig Economy Workers 
 In this section, we summarize findings from studies and surveys on the gig economy with 
respect to the characteristics of participants in such work arrangements.  In general, mult iple 
sources lead to the conclusion that, although the frequency of participation varies, the average 
gig economy worker engages in such work periodically throughout the year.  In addit ion, the 
average gig economy worker seems to participate in such work in order to supplement her basic 
source of income and is relatively younger in age than traditional employees. 
The 2018 SHED Survey finds that the majorit y o f gig economy workers tend to engage in 
such work to generate income in addition to their primary source of income.  For example, the 
                                                
121
   In order for an online platform to be included in the Farrell Study, it had to meet the following criteria: (1) the 
platform connects independent suppliers to customers, (2) the platform mediates the flow of payment from 
customer to supplier, (3) the platform empowers participants to enter and leave the market whenever they want.  
The study identified 128 online platforms based on the three criteria above.  We believe the definition of gig 
economy applied in this study most closely resembles the definition of online platform workers used in the 
proposed amendments to Rule 701 and Form S-8. 
 
122
   The Farrell Study also notes that as of March 2018, about 4.5% of accounts examined received income from an 
online platform at some point over the prior year. 
123
   Companies identified in categories (1) and (2) in the Farrell Study are likely to have a significant overlap with 
the companies that are likely to be included in the proposed expansion of Rule 701 and Form S-8, given the 
overlap between the provided definition of these categories and the scope of the proposed amendments. 
Specifically, categories (1) and (2) represent companies that are online platforms specializing in connecting 
customers with independent suppliers for the provision of services.  Some of the companies in the Farrell 
Study’s leasing category may also fall within our proposed definition of services.   

51 
survey finds that about 37 percent of gig economy workers indicated that they engage in such 
work to supplement their income, whereas 18 percent indicated that their primary source of 
inco me co mes fro m gig-related work.  In addition, only 30 percent of gig economy workers 
responded that they earn income from such activities in all or most months of the year.  With 
respect to participation rates involving the use of a website or mobile app to connect to 
customers, the survey documents five percent of individuals between the ages of 18 and 29 using 
such methods to find customers, whereas one percent of individuals aged 60 or older used such 
method to find work.  The 2018 SHED Survey also documents that individuals younger in age 
tend to be more active in gig-related work.  Overall participation rates ranged from 37 percent 
for individuals between the ages of 18 and 29 to 21 percent for individuals 60 year old or older.  
The Farrell Study finds that among individuals or families participating in the gig 
economy through online platforms, more than 60 percent derived earnings from online platform 
related work between one and three months out of the year.  About 10 percent of workers 
received payments due to online platform related work between 10 and 12 months of the year.  
For transportation platforms specifically, 12.5 percent of individuals generated income between 
10 and 12 months of the year.  These statistics indicate that the majority of online platform 
workers generated income from the use of these online platforms periodically throughout the 
year. 
The Hall Study analyzes the labor market for Uber drivers in the United States based on a 
survey of Uber drivers in 2014 and 2015.  Among other findings, the study documents that more 
than half of Uber drivers who started on the platform in the first half of 2013 remained active a 
year after starting, and one-third were still active two years after starting.  In general, the study 
finds that the majority of Uber drivers use the platform because they value the flexibility to 
choose when to work and the ability to generate additional income when needed. 
  3. The Online Platform Economy 

52 
As discussed above, we observe that there is a trend of increased activity under all   
definitions of the “gig economy,” although the extent of that increase varies across the data 
analyzed in various studies.  Concerning online platform work specifically, the trends are 
relatively clear in  that there has been a significant expansion of both online platforms and 
individuals using these online platforms to generate income in the last few years.  Moreover, the 
majority of users of such platforms use them to supplement their income when needed and value 
the flexibilit y o f the working hours that the platform work offers. 
The Rand-Princeton Survey estimates that about 0.5 percent of the workforce in 2015 
used an online platform to connect to customers.  The 2017 Contingent Worker Supplement 
estimates that 1.6 million workers, or approximately one percent of the workforce, used an 
online platform to connect to customers and provide services.  The Farrell Study estimates that 
about one percent of the 37 million checking accounts examined received income from the use of 
an online platform to connect with customers to provide services, with a growth rate from 2016 
to 2018 of 100 percent.  Finally, the 2018 SHED Survey documents that three percent of adults 
surveyed participated in gig work enabled by the internet or a mobile app to connect to 
customers, a percentage that includes both the provision of services and the sale of goods.  
Among all sectors examined, the passenger transportation services sector is the only sector where 
all available evidence suggests a dramatic increase in the use of online platforms as an 
intermediary for such work.
124
 
 B. Broad Economic Considerations 
  Below, we discuss broad economic considerations derived from the academic literature 
focusing on non-executive employee incentive-based pay and ident ify certain limitations of the 
applicability of such literature to platform providers and platform workers due to their differing 
characteristics relative to traditional employees. 
                                                
124
  See 2019 Abraham Study, supra note 107. 

53 
In general, economic theory suggests that variable pay, including equity-based pay,
125
 
can serve as a mechanism to align the incentives of agents with those of principals and can lead 
to enhanced agent performance.
126
  Academic literature that examines compensation 
arrangements of Chief Executive Officers (CEOs), in general, finds a positive correlation 
between various forms of variable pay and future outcomes, such as issuer performance, when 
such forms of variable pay are used appropriately.
127
  There is also academic literature that 
examines non-executive employee compensation arrangements.  Although this stream of 
literature highlights the potential incentive alignment effect that equity-based pay may have on 
emplo yees, it also highlights other important considerations that may drive issuers to use such 
compensatory benefit plans.  Specifically, it finds that issuers may use non-executive employee 
compensation arrangements to attract and retain talent.  Thus, we expect that the proposed 
amendments likely would enhance the ability of affected issuers to compete in the labor market.  
This benefit likely would be more important if these issuers compete with tradit ional issuers for 
the same pool of workers, particularly for workers with specialized skills. 
Academic literature also finds that issuers with non-executive employee option plans use 
funds that would otherwise be used to compensate employees in other areas of the issuer.  We 
expect affected issuers would be able to improve their allocation of capital as a consequence of 
the proposed rules.  The latter may be particularly important for issuers that are financially 
constrained. 
Although academic theory and findings concerning the economic effects of the use of 
equit y-based pay may apply to both traditional employees and platform workers up to a certain 
                                                
125
   Although the scope of the proposed rules is broader than “equity-based” compensation, we believe that most, if 
not all, issuances under Rule 701(h) will be equity-based securities. 
126
   Academic literature usually considers the agency relationship between investors or issuer owners (principals) 
and issuer management (agents).  Within the issuer, agency relationships can also exist between management 
(principal) and non-management employees (agents).  See, e.g., Michael Jensen & William Meckling, Theory of 
the Firm: Managerial Behavior, Agency Costs, and Ownership Structure, 3 J. FIN. ECON. 305 (1976). 
127
   Under certain circumstances, inappropriate structures of compensation contracts may lead to undesirable 
outcomes, such as inappropriate risk taking. 

54 
extent, there could be differences due to the differences between online platform workers and 
traditional emplo yees.  Specifically, platform workers may have different motives for 
undertaking such work and different emplo yment horizons.
128
  As such, online platform workers 
might respond differently to equity-based pay as compared to traditional employees, making the 
economic effects of equity-based pay for these workers difficult to predict.  Moreover, the 
economic effects of the proposed amendments will be affected by the restrictions on the use of 
equit y-based pay under the proposed amendments and will depend on how affected issuers 
structure compensation arrangements based on each issuer’s facts and circumstances.   
Equity-based pay also will introduce liquidity and valuation risks to the compensation of 
platform workers.  Such risks are likely to be more significant for compensation offered by non-
reporting issuers.  For example, the transferability prohibition in the proposed amendments to 
Rule 701 will introduce illiquidity in the compensation of non-reporting issuers’ plat form 
workers.  Further, the relatively more opaque information environment of non-reporting issuers 
is likely to lead to increased valuation risk in the equity-based compensation offered.  These 
increased risks are likely to reduce the expected benefits of the proposed amendments for non-
reporting issuers and their platform workers.   
Below we discuss the expected benefits and costs from the proposed rules in more detail. 
 C. Expected Economic Benefits and Costs 
In this section, we discuss the expected economic benefits from the proposed 
amendments, including potential factors that are likely to introduce some uncertainty as to the 
expected benefits from the proposed amendments.  We then discuss how the furnished 
information concerning how platform providers use the provisions in the proposed amendments 
may serve to inform the Commission about whether to undertake further action.  Finally, we 
discuss potential costs related to the proposed amendments.  
                                                
128
   For example, the majority of gig economy workers appear to engage in such work to supplement their basic 
income, and may engage in such work on a more sporadic basis, relative to traditional employees.  See supra 
Section IV.A.2. 

55 
  1. Expected Economic Benefits 
Providing issuers greater flexibility in the use of equity-based compensation may allow 
issuers to design compensation contracts or arrangements that are more efficient in aligning 
employee incentives with those of investors.  Improved incentives could lead to increased effort 
and improved decisio n-making by platform workers.
129
  Evidence in the academic literature 
shows a positive correlation between the use of non-executive stock option compensation and 
measures of operating performance and issuer innovation, but that such effect varies depending 
on facts and circumstances.
130
  Evidence also shows that the effect of non-executive stock 
options tends to be stronger when such plans are broadly implemented within the issuer.
131
 
The proposed amendments may provide affected companies with addit ional resources, 
which may particularly benefit issuers that face capital constraints.  Permitting issuers to use 
securit ies to compensate online platform workers may free up resources.  This would permit 
issuers to reallocate resources towards other productive uses.  Academic literature that examines 
the use of non-executive employee stock options finds that such compensatory plans are more 
                                                
129
   It should be noted that the efficiency of variable pay may be higher when the metric/signal used to determine 
the variable component of pay accurately reflects the agent’s effort and performance.  Due in part to the 
business model of online platforms, and in part due to technological advances, online platform workers’ effort 
and performance may be measured with higher accuracy than in traditional business models.  For example, 
Uber drivers have an individual rating that is based on direct inputs from multiple customers receiving the 
service.  This characteristic of the online platform business model may facilitate more efficient contracting 
between the issuer and workers.  
130
  See Xin Chang, Kangkang Fu, Angie Low & Wenrui Zhang, Non-executive employee stock options and 
corporate innovation, 115 J. FIN. ECON. 168 (2015). The study uses a sample of S&P 1500 companies over 
the 1998-2003 period to examine the effect of stock options granted to non-executive employees on corporate 
innovation, as measured by patent applications and patent citations.  The study documents a positive relation 
between the use of stock options to compensate non-executive employees and proxies for corporate innovation. 
The study also finds that the effect of employee stock options on innovation is due mostly to the risk-taking 
incentive that stock options provide to employees rather than the incentive to exert effort.  See also Yael 
Hochberg & Laura Lindsey, Incentives, Targeting, and Firm Performance: An Analysis of Non-executive Stock 
Options, 23 REV. FIN. STUD. 4148 (2010) (the “Hochberg Study”). The study uses a sample of S&P 1500 
companies over the 1997-2004 period to examine the effect of employee stock options on issuer performance.  
The study documents a positive relation between implied incentives from employee stock options and future 
operating performance, on average.  The study also documents that the positive relation between employee 
stock options and firm performance is concentrated in smaller firms and firms with significant growth options.  
Moreover, the study shows that such effect is stronger for broad-based option plans as they induce a mutual 
monitoring effect within employees. 
131
  See Hochberg Study, supra note 130. 

56 
frequently used by issuers facing capital requirements and financing constraints.
132
  We expect 
that capital constraints are more likely to be a concern for at least a subset of non-reporting 
issuers.  We thus expect the proposed amendments to provide these issuers with increased 
flexibility in terms of available resources. 
The proposed amendments would permit affected issuers to offer compensatory securit ies 
to, in addition to natural persons, entities meeting specified conditions.  As stated above, the gig 
economy is an evolving market in which participating workers may be organized in various 
ways.  We expect this proposed amendment to expand the set of affected issuers that would be 
eligible to use securities to compensate platform workers.  Also, the proposed amendment may 
benefit platform workers as it would allow them to optimize their preferred organizational 
structure while being eligible to receive compensatory securities for services provided through 
the online platform. 
Finally, to the extent that issuers that use plat form workers – i.e., “platform providers” – 
compete for labor with issuers that offer tradit ional emplo yment, the use of equity-based 
compensation could permit platform providers to be more competitive in the labor market.  
Currently, platform providers cannot rely on Rule 701 or use Form S-8 to issue securities as 
compensation to their platform workers.  They are thus at a disadvantage in terms of offering 
compensation contracts that are likely to attract and retain platform workers.  Facilitating 
                                                
132
  See John Core & Wayne Guay, Stock Option Plans for Non-Executive Employees, 61 J. FIN. ECON. 253 
(2001).  The study examines detailed information about non-executive employee stock option holdings, grants, 
and exercises for 756 companies during the 1994-1997 period.  Among other findings, the study’s results 
support the hypothesis that options are granted to non-executives more intensively when firms have greater 
financing needs and face financing constraints.  See also Ilona Babenko, Michael Lemmon & Yuri 
Tserlukevich, Employee Stock Options and Investment, 66 J. FIN. 981 (2011).  The study examines a sample of 
1,773 companies over the period 2000 to 2005 with regards to their broad-based employee stock option 
programs.  The study finds evidence consistent with the idea that stock options can mitigate financing 
constraints by substituting for cash wages at the time of the grant, and by providing significant cash inflows at 
the time of exercise, conditional on a high stock price. The study further estimates that $0.34 of each dollar of 
cash inflow received by the firm from the exercise of stock options is allocated to increasing capital and R&D 
expenditures. 

57 
plat form providers’ efforts to attract and retain platform workers could increase their 
compet it iveness.   
To the extent that platform providers require platform workers with specialized skills, the 
academic literature provides evidence that issuers are more likely to use employee stock option 
plans when they need to attract employees with skills that may be crit ical for an issuer’s 
success.
133
  Relatedly, to the extent that platform providers benefit from having exclusive access 
to plat form workers, we expect the proposed amendments to facilitate such efforts. 
There are, however, potential factors that likely introduce some uncertainty as to the 
expected benefits from the proposed amendments.  First, issuing securities as compensation 
would introduce liquidit y and valuation risks.  These risks are likely to create uncertainty in the 
value of platform workers’ compensation.  This may partially offset benefits arising from greater 
incentive alignment.  Specifically, depending on the facts and circumstances, this uncertainty 
could lead platform workers to discount the value of such pay to varying extents.  We expect the 
liquidity and valuation risks to be relatively more pronounced for non-reporting issuers, as their 
information environment is more opaque and the compensatory securities would not be sellable.  
If platform workers demand additional pay as compensation for bearing these risks, equit y-based 
pay would be a more costly form of compensation for the issuer (relative to cash).
134
  Thus, 
issuers may need to provide increased amounts of equit y-based pay to be able to offer an overall 
compensation value that would attract and retain employees.
135
 
                                                
133
  See id.  
134
  See Brian Hall & Kevin Murphy, Stock Options for Undiversified Executives, 33 J. ACCT. & ECON. 3 (2002).  
The study analyzes the value of non-tradeable options held by undiversified and risk-averse executives.  The 
study distinguishes between the value of the option to the executive, and the cost of the option to the issuer.  
Intuitively, the paper provides evidence that risk-aversion and non-diversification create a difference between 
the issuer cost and the executive value of stock options.  See also Lisa Meulbroek, The Efficiency of Equity-
Linked Compensation: Understanding the Full Cost of Awarding Executive Stock Options, 30 FIN. MGMT. 2 
(2001).  The study argues that undiversified managers will value stock or option-based compensation at less 
than its market value and derives a method to measure such deadweight costs, ultimately concluding that 
undiversified managers at rapidly growing, entrepreneurial-based firms heavily discount the value of these 
options.  
135
   In economic theory, this is referred to as the reservation wage of the agent/employee. The expected value of the 
compensation offered must meet the minimum required compensation that the employee requires to participate 
in a specific job or task. 

58 
In addit ion, the motives of workers that choose to engage in platform work differs from 
those of workers that engage in tradit ional forms of emplo yment.  As discussed above, surveys 
of the online platform economy show that the majority of online platform workers (1) earn 
secondary income from such work and (2) tend to participate selectively in such work during 
times when their demand for immediate income is high.  As such, it may be reasonable to 
assume that the majority of online platform workers place particular value on the ability to 
generate immediate income from platform-based work.  Therefore, the transfer prohibitions in 
the proposed amendments
136
 may limit the benefit of the amendments in terms of platform 
worker attraction and retention, and plat form worker incentive alignment.
137
 
Platform workers may benefit from the proposed amendments, depending on how 
affected issuers structure compensation contracts under the proposed amendment.  For example, 
the proposed amendments would provide an opportunity for platform workers to own equit y in 
the platform provider, possibly at an earlier stage of development.  If the platform provider’s 
value increases in the future, platform workers holding its securit ies would experience an 
increase in their wealth. 
Under the proposed amendments, issuers that issue securities to platform workers would 
be required to furnish certain information to the Commission on a periodic basis.
138
  We believe 
that this informat ion would provide insight into how affected companies are using these 
compensatory securities.  We also believe it could help inform our assessment of the potential 
benefits of broadening the scope of work relationships for which issuers may issue securities as 
                                                
136
   Specifically, the proposed amendments to Rule 701 require the issuer to take reasonable steps to prohibit the 
transfer of securities issued to platform workers pursuant to the exemption, other than a transfer to the issuer or 
by operation of law. 
137
 Transfer restrictions reduce the liquidity of equity-based compensation, leading recipients of such compensation 
to discount the value of the equity-based pay they are offered.  Companies thus may need to provide additional 
pay to compensate online platform workers for the possible lack of liquidity in their compensation arrangements. 
138
   Although the proposed rule would require issuers to furnish certain information, furnishing the identified 
information would not be a condition to rely on Rule 701 or Form S-8.  See supra Section II.F. 

59 
compensat ion.
139
  If, however, not all of the issuers furnish the required informat ion, the 
collected information would be incomplete and could be biased, which could weaken the 
magnitude of this benefit. 
The proposed amendments to Rule 12g5-1 would extend the exclusion from the 
definit ion o f securit ies “held of record,” and the corresponding safe harbor, to securities held by 
platform workers who received them under the proposed amendment to Rule 701.  This would 
allow non-reporting issuers that issue compensatory securities to platform workers to control 
how and when they become subject to reporting requirements.  The proposed amendment to Rule 
12g5-1   could be particularly beneficial for cash-constrained issuers, which would be able to issue 
compensatory securities to their platform workers without being subject to the compliance costs 
associated with the Exchange Act reporting requirements.  The proposed amendment to Rule 
12g5-1 would not be temporary.  We expect that issuers will benefit fro m the non-temporary 
nature of this proposed amendment because it will allow them to weigh the costs and benefits of 
using the exemption without it causing them to become subject to Exchange Act reporting 
requirements and the associated compliance costs, if the exemption is not extended. 
The proposed amendments would ensure that estates of deceased employees and 
representatives of incompetent former employees would receive securities underlying options, 
warrants, or rights issued to a former employee pursuant to Rule 701.  Given that such options, 
warrants, or rights typically include a vesting period, the proposed amendment would benefit 
issuers and platform workers as it would provide certainty to platform workers that securities 
related to options, warrants, or rights would be received by executors, administrators, or 
beneficiaries in the future.  We expect the proposed amendment to strengthen the anticipated 
benefits described above. 
  2. Expected Economic Costs 
                                                
139
  Relatedly, while it is too early to assess the long-term effects of the COVID-19 pandemic on the gig economy, 
we intend to monitor developments in this area.
 

60 
To the extent that the proposed amendments result in an expanded use of Rule 701 and 
Form S-8 to issue compensatory securities, there would be a corresponding increase in the 
overall burden estimates associated with these provisions for purposes of the Paperwork 
Reduction Act.  We discuss these increased burden estimates in Section V.C below. 
Under the proposed amendments, any issuer that grants compensatory securities to 
platform workers would be required to furnish certain information to the Commission at six-
month intervals.  Furnishing this required information would impose certain costs on affected 
issuers to compile and submit the specified information.  As discussed in Section V.C below, for 
purposes of the Paperwork Reduction Act, we estimate that this aspect of the proposed 
amendments would result in an additional 1.5 burden hours per semi-annual response for non-
reporting issuers and 1 additional burden hour per semi-annual response for registrants. 
Affected issuers may incur costs in establishing and administering a compensation 
program for platform workers.  We expect such costs (including but not limited to accounting 
and legal costs, and costs related to preparing and filing a registration statement, if applicable) to 
vary based on facts and circumstances.  If an affected issuer already has an established 
compensat ion plan for emplo yees, then the incremental cost to administer a similar program for, 
or amend the plan to include, platform workers is likely to be relatively low.  Such costs are 
likely to be relatively higher for issuers that do not have an existing employee co mpensation plan 
in place.
140
  Similarly, the incremental costs incurred by registrants that already register offers 
and sales of securities on Form S-8 under their employee compensation plans would be lower 
than those for registrants registering securities on Form S-8 for the first time.  We are not able to 
quantify these potential costs due to lack of data. 
                                                
140
 We expect that platform providers would incur legal costs to create the equity-based compensation contract.  We 
do not expect plan administration costs to be material, however, as it is our understanding that most plans are 
not tax-qualified plans and therefore are not required to adhere to ERISA requirements, which can be costly. 
 

61 
Affected workers could incur costs that could vary based on how issuers structure 
compensation packages and to the extent awards under compensation plans are substituted for 
cash or other compensation.  As discussed above, any illiquidity and valuation risks associated 
with these securities could lower their value to the holder.  If affected companies offer securities 
in lieu of cash compensation, the overall value of the compensation to the platform worker may 
decline.  We expect such potential costs to be mitigated by the limit on the amount of 
compensatory securities that may be offered by affected issuers, as well as by competition for 
platform workers in labor markets. 
  D. Effects on Efficiency, Competition, and Capital Formation 
The proposed amendments are expected to increase the competitiveness of affected 
issuers in their efforts to attract and retain  workers, to the extent that the affected issuers compete 
with one another and with tradit ional issuers for the same workers.  As discussed above, 
however, the extent of any increase in their co mpetit iveness would depend on how affected 
issuers use the increased flexibility offered by the proposed amendments in designing 
compensat ion arrangements for online platform workers.   
To the extent that the proposed amendments enable affected issuers to improve the 
quality and the incentive alignment of their workforce, it could improve these issuers’ overall 
operational efficiency and thus enhance their ability to attract capital.  Similarly, the additional 
flexibility to issue securities as compensation for platform workers may free up resources, 
particularly for capital-constrained issuers, permitting these issuers to reallocate resources to 
other productive uses. 
 E. Reasonable Alternatives 
The amendments are proposed primarily on a five-year temporary basis.  We could have 
proposed all o f the amendments on a permanent basis.  A permanent rule would provide more 
certainty to issuers and might encourage additional use of the proposed amendments, particularly 
if the initial set-up costs for such compensation programs are high.  As noted above, however, 

62 
there are uncertainties surrounding the nature of these companies’ business models, and the gig 
economy continues to evolve.  Moreover, data shows that platform workers, on average, may 
have different motivations than traditional employees for undertaking work.  Specifically, as 
discussed above, platform workers appear to be driven mainly by an effort to supplement basic 
sources of income when additional income is needed.  As such, platform workers are likely to 
differ fro m tradit ional emplo yees in their time horizon for such work.  Due to these uncertainties, 
it is challenging to predict how issuers affected by the rule would use securities for 
compensatory purposes and how plat form workers receiving such compensation would perceive 
its value.   
Adopting the amendments on a temporary basis would allow the Commission to assess 
their effectiveness and make any necessary adjustments before implementing a permanent rule.  
Specifically, the information furnished by issuers that choose to rely on the proposed 
amendments would serve to inform the Commission on any potential future adjustments.  For 
example, information collected would inform the Commission on the extent to which gig 
economy companies issue compensatory securities and how they structure such compensat ion 
across the various online platforms based on their facts and circumstances.  Such informat ion 
could be used to assess whether and how the proposed amendments should be extended or made   
permanent. 
The proposed amendments’ scope is limited to a part of the gig economy.  We could have 
proposed amendments that apply to all gig economy issuers and corresponding workers.  Such an 
alternat ive would have allowed addit ional gig economy companies, for example online platforms 
that facilitate the sale of goods, to compensate their platform workers with securit ies.  Under 
such alternative, a broader set of gig economy companies would be able to issue securities as 
compensation to platform workers, with the expected benefits as described above for gig 
economy companies with plat form workers who provide services.  The different nature of 
platform workers as compared to tradit ional employees introduces some uncertainty as to the 

63 
effects of the proposed amendments, as discussed above.  Thus, proposing the amendments with 
an expanded scope would likely carry increased uncertainty as to the amendments’ economic 
impact. 
Further, we could have proposed different limits, including no limits, on the amount of 
compensatory securit ies that may be offered to individual platform workers.  The proposed rule 
would limit equit y-based compensation to 15 percent of the total compensation provided on a 12-
mo nth basis and no more than $75,000 over a 36-mo nth period.  The proposed limits could have 
been higher or lower, or could apply to longer or shorter periods, allowing affected issuers to 
include different amounts of securities in co mpensation arrangements.  We are unable to evaluate 
with precisio n whether a higher or lower cap or a longer or shorter period would be preferable in 
comparison to the proposed amendments’ requirements, due mostly to the lack of data and also 
due to uncertainty as to how affected issuers may use the new form of compensation available to 
them.  In general, allowing for greater amounts of equit y-based co mpensat ion would provide 
companies with additional flexibility to structure compensation arrangements that might provide 
stronger incentives, a potentially increased ability to compete for talent, and more flexibility in 
terms of internal capital-allocation options.  Going further, we could have proposed no individual 
limit on the amount of compensatory securities that may be offered to individual platform 
workers.  However, as discussed above, due in part to the nature of equit y-based co mpensat ion 
and in part due to the characteristics of platform workers, equity-based co mpensat ion may be a 
more costly way to compensate and provide incentives.  Accordingly, it is unclear to what extent 
issuers would take advantage of the ability to issue greater amounts of securit ies-based 
compensat ion.  Limiting issuers to lower amounts of securit ies-based compensation, on the other 
hand, may not provide adequate flexibility to affected issuers to incorporate equity-based 
compensat ion into compensat ion arrangements, thus limiting the potential benefits of the 
proposed amendments.  

64 
The proposed changes to Rule 701 would require the issuer to take reasonable steps to 
prohibit the transferability of securities issued to platform workers pursuant to the exemption, 
except for transfers to the issuer or by operation of law, while the proposed changes to Form S-8 
would not include such a requirement.  As discussed above, the transferability restrict ion is likely 
to affect the perceived value of compensatory securities offered pursuant to revised Rule 701 and 
as a consequence weaken the magnitude of expected benefits from the proposed amendments to 
Rule 701.  We could have proposed an extended holding period in lieu of an outright restrict ion 
on transfer, or eliminate the transfer restrict ions altogether.  Eliminating the transfer restriction 
would provide issuers issuing shares pursuant to Rule 701 and registrants registering the issuance 
of shares on Form S-8 with the same expected benefits in terms of their ability to attract and 
retain platform workers.  Introducing a defined holding period would provide some certainty as 
to when these securities become transferable and potentially increase their value for platform 
workers.  However, doing so could increase the risk of an informal market developing for such 
securities, which given the opaque information environment of non-reporting issuers, could lead 
to adverse consequences for platform workers and other investors.  
Securities offered to platform workers under the proposed amendment to Rule 701 would 
be aggregated with securities offered to employees under the current Rule 701 exemption in 
order to determine whether the issuer is required to deliver certain disclosure under Rule 701(e), 
and whether the overall cap on compensatory securities offerings has been met under Rule 
701(d).  Alternatively, we could have proposed a separate cap for compensatory securities 
offered to platform workers.  Such alternative would increase the amount of securities that could 
be issued to platform workers for issuers with a mix of tradit ional employees and platform 
workers, leading to potentially greater benefits for these issuers.  However, it is possible that 
such an alternative could adversely affect issuers that employ traditional workers as compared to 
issuers that employ both traditional and platform workers. 

65 
The proposed amendments to Rule 12g5-1 would extend the exclusion from the 
definit ion o f securit ies “held of record,” and corresponding safe harbor, to securities held by 
platform workers who receive them pursuant to a compensation plan under the proposed 
amendments to Rule 701.  Absent such proposed amendments, platform workers holding 
compensatory securities of non-reporting issuers would be considered holders of record.  We 
believe that this would weaken the expected economic benefits from the proposed amendments 
to Rule 701.  Under such an alternative, gig economy issuers may be disinclined to issue 
compensatory securities to their platform workers to avoid being subject to Exchange Act 
reporting requirements and the associated compliance costs.  The proposed amendments to Rule 
12g5-1 are not temporary.  We could have proposed these amendments on a five-year temporary 
basis.  Such alternative would result in platform workers holding compensatory securities 
becoming holders of record at the end of the five-year period if the exemption were not 
extended.  We believe that under such alternative, gig economy issuers would be disinclined to 
issue compensatory securities to their platform workers to avoid being subject to Exchange Act 
reporting requirements and the associated compliance costs, at the expiration of the five-year 
period. 
Request for Comment  
We request comment on all aspects of our economic analysis, including the potential 
costs and benefits of the proposed amendments and alternatives thereto, and whether the 
proposed amendments, if adopted, would promote efficiency, co mpet it ion, and capital format ion 
or have an impact or burden on competition.  Commenters are requested to provide empirical 
data, estimation methodologies, and other factual support for their views, in particular, on costs 
and benefits estimates.  
In particular, we seek comment with respect to the following questions: Are there any 
costs and benefits that are not identified or are misidentified in the above analysis?  Are there 
any effects on efficiency, competition, and capital formation that are not identified or are 

66 
misidentified in the above analysis?  Should we consider any of the alternative approaches 
outlined above instead of the proposed rules?  Which approach and why?  Are there any other 
alternative approaches that we should consider?  If so, what are they and what would be the 
associated costs or benefits of these alternative approaches? 
V. PAPERWORK REDUCTION ACT 
 A.  Summary of the Collection of Information 
Certain provisions of our rules and forms that would be affected by the proposed 
amendments contain “collection of information” requirements within the meaning of the 
Paperwork Reduction Act of 1995 (“PRA”).
141
  The Commission is submitting the proposal to 
the Office of Management and Budget (“OMB”) for review in accordance with the PRA.
142
  The 
hours and costs associated with preparing and filing the forms and reports constitute reporting 
and cost burdens imposed by each collection of information.  An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of informat ion requirement 
unless it displays a currently valid OMB control number.  Compliance with the informat ion 
collections is mandatory.  Responses to the information collections are not kept confidential and 
there is no mandatory retention period for the information disclosed.  The titles for the affected 
collections of information are: 
• “Form S-8” (OMB Control No. 3235-0066); and 
• “Rule 701” (OMB Control No. 3235-0522). 
We adopted Form S-8   and Rule 701 pursuant to the Securities Act.  Form S-8   sets forth 
the disclosure requirements for a registration statement for securities to be offered by a registrant 
under an emplo yee benefit plan to its emplo yees, or emplo yees of a subsidiary or parent 
company, to help such investors make informed investment decisions.  Rule 701 provides an 
                                                
141
  See 44 U.S.C. 3501 et seq. 
 
142
   44 U.S.C. 3507(d) and 5 CFR 1320.11. 
 

67 
exemption from registration for offers and sales of securities pursuant to certain compensatory 
benefit plans and contracts relating to compensation.  Issuers conducting compensatory benefit 
plan offerings in excess of $10 million in reliance on Rule 701 during any consecutive 12-month 
period are required to provide plan participants with certain disclosures, including financial 
statement disclosures.
143
  This disclosure constitutes a collection of information.  A description 
of the proposed rule amendments, including the need for the information and its proposed use, as 
well as a description of the likely respondents, can be found in Section II above, and a discussion 
of the economic effects of the proposed amendments can be found in Section IV above. 
 B. Summary of the Proposed Amendments’ Effects on the Collections of   
  Information 
 
The following table summarizes the estimated effects of the proposed amendments on the 
paperwork burdens associated with the affected collections of informat ion. 
PRA Table 1.  Estimated Paperwork Burden Effects of the Proposed Amendments 
                                                
143
  See 17 CFR 230.701(e). 
Collection 
of 
Information 
Proposed Amendment   Expected Estimated PRA 
Effect of Proposed 
Amendment 
Current No. of 
Average Annual 
Responses 
Estimated 
Increase in No. 
of Average 
Annual 
Respondents
1 
Form S-8 
 
 
 
 
 
 
 
Rule 701 
 
• Would temporarily expand 
the scope of Form S-8 to 
include issuances to a 
registrant’s platform 
workers in addition to its 
employees. 
 
• Issuers would be required to 
furnish certain information 
every six months. 
 
 
 
• Would temporarily expand 
the scope of Rule 701 to 
exempt issuances to an 
issuer’s platform workers in 
addition to its employees. 
 
• Expected to increase the 
average annual number of 
Form S-8s filed during the 
temporary 4-year period. 
 
 
• Expected to increase PRA 
burden by 2 hours per 
affected responde  nt annually 
(i.e., 1 hour for each semi-
annual response).  
 
• Expected to increase 
average annual number of 
issuers required to provide 
Rule 701(e) disclosure 
because offers and sales to 
platform workers would be 
integrated with offers and 
sales to employees for 
• 2,140 
 
 
 
 
 
• 0 
 
 
 
 
 
• 800 
 
 
 
• 17 
 
 
 
 
 
• 17 
 
 
 
 
 
• 6 
 
 
 
 
 
 

68 
  
1 
These estimates are based on the Farrell study, which identified 106 companies making payments to online 
platform workers providing services during 2012-2018.  See supra Section IV.A, note 119 and accompanying 
text. The staff updated this study’s findings using an assumed growth rate of 15 percent for such companies in 
2019, which yielded an estimate of 122 companies making payments to platform workers as of calendar year-
end 2019.  Upon a review of Commission filings, the staff estimated that 17 of those companies are public, and 
105 private.  The staff further estimated that 5 percent of those private companies (six companies) would likely 
exceed the $10,000,000 threshold for aggregate annual securities offerings to its employees and platform 
workers and would be required to provide the disclosure pursuant to Rule 701(e).  In making this estimate, the 
staff relied on the PRA estimates in Release No. 33-10520, which increased the Rule 701(e) disclosure 
threshold from $5,000,000 to $10,000,000. 
2  
We estimate a greater increase in the PRA burden for Rule 701(h)’s furnished disclosure provision because it 
would solicit more information compared to the similar proposed provision for Form S-8.
    
  
 C. Incremental and Aggregate Burden and Cost Estimates for the Proposed  
  Amendments 
Below we estimate the incremental and aggregate increase in paperwork burden as a 
result of the proposed amendments.  These estimates represent the average burden for all issuers, 
both large and small.  In deriving our estimates, we recognize that the burdens will likely vary 
among individual issuers based on a number of factors, including the nature of their business.  
For purposes of the PRA, the burden is to be allocated between internal burden hours and outside 
professional costs.  The table below sets forth the percentage estimates we typically use for the 
burden allocation for each affected collection of information.  We also estimate that the average 
cost of retaining outside professionals is $400 per hour.
144
 
                                                
 144
   We recognize that the costs of retaining outside professionals may vary depending on the nature of the 
professional services, but for purposes of this PRA analysis, we estimate that such costs would be an average of 
$400 per hour. This estimate is based on consultations with several registrants, law firms, and other persons 
who regularly assist registrants in preparing and filing reports with the Commission. 
 
 
 
 
 
 
 
• Issuers would be required to 
furnish certain information 
every six months. 
purpose of determining 
whether an issuer has 
exceeded the $10 million 
threshold under Rule 701(e). 
 
• Expected to increase PRA 
burden by 3 hours per 
affected respondent 
annually (i.e., 1.5 hours for 
each semi-annual 
response).
2
 
 
 
 
 
• 0 
  
 
 
 
 
 
 
• 105 
Collection of 
Information 
 
Internal Outside Professionals 

69 
PRA 
Table 
2.  
Standard Estimated Burden Allocation for Specified Collections of  
                         Information 
 
 
 
 
 
We estimate that the proposed amendments would change both the frequency of 
responses to, and the burden per response of, the existing collections of information.  The burden 
increase estimates were calculated by multiplying the estimated increased number of responses 
by the increased estimated average amount of time it would take to prepare and review the 
disclosure required under the affected collection of information.  The table below illustrates the 
incremental change to the annual compliance burden of the affected collection of information, in 
hours and in costs. 
PRA Table 3.  Calculation of the Incremental Change in Burden Estimates of Current 
Responses Resulting from the Proposed Amendments 
Form S-8 
Rule 701 
50% 
25% 
50% 
75% 
Collection of 
Information 
Number of 
Estimated 
Affected 
Respondents 
 
 
 
 
(A) 
Burden 
Hour 
Annual 
Increase 
per  
Affected 
Respondent 
 
(B)
 
 
Increase in 
Burden Hours 
for Affected 
Respondents 
 
 
 
 
(C) = (A) x (B) 
 
Increase in 
Internal 
Burden 
Hours for 
Affected 
Respondents 
 
 
(D) = (C) x 
0.5  or 0.25 
Increase in 
Professional Hours 
for Affected 
Respondents 
 
 
 
 
(E) = (C) x 0.5 
            or 0.75 
Increase in Professional 
Costs for Affected 
Respondents 
 
 
 
 
 
         (F) = (E) x $400 
 
S-8  
(including 
furnished 
disclosure)  
 
17 
 
29
1
 
 
493 
  
246.5 
  
246.5 
 
$98,600 
Rule 701(e) + 
Rule 701(h) 
furnished 
disclosure 
6 
 
5
2
 
 
30 7.5 22.5 $9,000 
Rule 701  
(only 
furnished 
disclosure) 
99 3 297 74.25 222.75 $89,100 
Rule 701 
(total) 
105  327 81.75 245.25 $98,100 

70 
1 
Based on the current OMB inventory of 27 annual burden hours per response + 1 burden hour for 
  each semi-annual required furnished disclosure (2 additional annual burden hours) = an increase of 29 burden   
  hours per response. 
2 
Based on the current OMB inventory of 2 annual burden hours per response + 1.5 burden hours for each semi- 
  annual required furnished disclosure (3 additional annual burden hours) = an increase of 5 burden hours per   
  response.     
 
  The table below illustrates the program change expected to result from the proposed rule 
amendments together with the total requested change in reporting burden and costs. 
 
PRA Table 4.  Requested Paperwork Burden under the Proposed Amendments 
 
1 
Rounded to nearest whole number.
 
2 
Thus, the estimated change in internal burden would result in an annual internal burden per response of  
  2.13 hours, which is a slight increase in the current annual internal burden of 2 hours.  482/.25 = 1,928; 1,928/905  
   = 2.13. 
 
 D. Request for Comment 
 
 We request comment in order to: 
• Evaluate whether the proposed collection of information is necessary for the proper 
performance of the functions of the agency, including whether the information would 
have practical utility;  
• Evaluate the accuracy of our estimate of the burden of the proposed collection of 
information;  
Collection 
of 
Informa-
tion 
Current Burden 
 
Program Change Requested Change in Burden 
 
Current  
  Annual 
Responses  
 
 
(A) 
Current 
Burden 
Hours 
 
 
(B) 
Current Cost 
Burden  
 
 
 
(C) 
Number of 
Affected 
Responses 
 
 
(D) 
 
Change in 
Issuer 
Hours 
 
 
(E )  
 
 
 
 
Change in 
Professional  
Costs  
 
 
(F) 
 
 
 
Requested
Annual 
Responses 
 
 
(G) 
Requested 
Burden 
Hours
1 
 
 
(H) = (B) 
+ (E)
 
Cost 
Burden 
 
 
 
(I) = (C) 
+ (F) 
 
S-8 
 
 
2,140 
 
28,890 
 
 
 
 
$11,556,000 
 
 
 
 
17 
 
 
 
 
246.5 
 
 
 
 
$98,600 
 
 
 
 
2,157 
 
 
 
 
29,137
 
 
 
 
 
$11,654,600 
Rule 701 
 
 
800 
 
400 
 
$480,000 
 
105 
 
81.75 
 
$98,100 
 
905 
 
482
2 
 
$578,100 

71 
• Determine whether there are ways to enhance the quality, utility, and clarity of the 
information to be collected;  
• Evaluate whether there are ways to minimize the burden of the collection of information 
on those who are to respond, including through the use of automated collection 
techniques or other forms of information technology; and  
• Evaluate whether the proposed amendments would have any effects on any other 
collections of information not previously identified in this section.
145
 
 Any member of the public may direct to us any comments about the accuracy of these 
burden estimates and any suggestions for reducing these burdens.  Persons submitting comments 
on the collection of information requirements should direct the comments to the Office of 
Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, 
Office of Information and Regulatory Affairs, Washington, DC 20503, and should send a copy to 
Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090, with reference to File No. S7-19-20.  Requests for materials 
submitted to OMB by the Commission with regard to these collections of information should be 
in writing, refer to File No. S7-19-20, and be submitted to the Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549-2736. OMB is 
required to make a decision concerning the collection of information between 30 and 60 days 
after publication of this release. Consequently, a comment to OMB is best assured of having its 
full effect if OMB receives it within 30 days of publication. 
VI. INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS 
This Init ial Regulatory Flexibility Act Analysis (“IRFA”) has been prepared, and made 
available for public comment, in accordance with the Regulatory Flexibility Act (“RFA”).
146
  It 
relates to the proposed amendments to Securities Act Rule 701 and Form S-8 to permit the offer 
                                                
145
   We request comment pursuant to 44 U.S.C. 3506(c)(2)(B). 
146
   5 U.S.C. 601 et seq. 

72 
and sale of securities to internet platform workers, subject to specified conditions, for a 
temporary, five-year period.  The Commission also is proposing to amend Exchange Act Rule 
12g5-1   to exclude from the definition of “held of record” securities held by platform workers 
who received them pursuant to a compensation plan under proposed Rule 701(h) and to provide 
a safe harbor for issuers in connection with such exclusion.  Neither the proposed exclusion nor 
the corresponding safe harbor would be temporary.  As required by the RFA, this IRFA 
describes the impact of these proposed amendments on small ent it ies.
147
  
 A. Reasons for, and Objectives of, the Proposed Action 
 The proposed amendments would expand the scope of Rule 701 and Form S-8 to address 
recent changes in the workforce caused by the rise of the “gig economy” by permitting the 
issuance of securities to an issuer’s platform workers, in addition to its employees, for 
compensatory purposes.  The proposed amendments would include conditions designed to limit 
the possibility of the changes to Rule 701 and Form S-8 resulting in offers and sales for capital-
raising purposes.  The proposed amendments to Rule 701 and Form S-8   would be temporary to 
enable the Commission to assess whether issuances of securities to platform workers are being 
made for legitimate compensatory purposes, and not for capital-raising purposes, and whether 
such issuances have the expected beneficial effects for issuers in the “gig economy” and their 
investors.   
The proposed amendments to Exchange Act Rule 12g5-1 would extend the exclusion 
from the definition of “held of record” and safe harbor, for purposes of Section 12(g), which 
currently applies to securities held by persons who received them pursuant to an employee 
compensation plan, to securities held by platform workers pursuant to a compensation plan under 
proposed Rule 701(h).  The proposed amendments to Rule 12g5-1, which would not be 
temporary, are intended to remove a potential disincentive to the issuance of securities as 
                                                
147
   5 U.S.C. 603(a).  
 

73 
compensation to platform workers and to avoid favoring issuers that do not have platform 
workers over issuers that have them.  The reasons for, and objectives of, all o f the proposed 
amendments are discussed in more detail in Sections II.A. through II.F., above. 
 B. Legal Basis 
 We are proposing the amendments contained in this release under the authority set forth 
in Sections 7, 10, and 19(a) of the Securities Act, as amended, and Sections 3(b), 12, 13, 15, 
23(a), and 36 of the Exchange Act, as amended. 
 C. Small Entities Subject to the Proposed Rules 
 The proposed changes would affect some issuers that are small entities.  The RFA defines 
“small entity” to mean “small business,” “small organization,” or “small governmental 
jurisdiction.”
148
  For purposes of the RFA, under 17 CFR 240.0-10(a), an issuer, other than an 
investment company, is a “small business” or “small organization” if it had total assets of $5 
million or less on the last day of its most recent fiscal year and, under 17 CFR 230.157, is also 
engaged or proposing to engage in an offering of securities that does not exceed $5 million.   
The proposed amendments would apply only to issuers whose platform workers provide 
services; they would not apply to issuers whose platform workers are providing goods.  We 
estimate that there are only a limited number of companies with platforms providing services that 
would be affected by the proposed rules.
149
  Although it is possible that the proposed amendment 
to Form S-8 could cause a small ent it y to file a Form S-8 for the issuance of securities to its 
platform workers, based upon staff review of Commission filings during 2018-2019, and due to 
the resulting burden and expense, we do not believe that this outcome is likely.
150
  There is, 
however, a lack of information concerning the assets of potentially affected private companies, 
and as such, it is difficult to estimate with certainty the number of private issuers that qualify as 
                                                
148
   5 U.S.C. 601(6). 
149
   Based upon a review of Commission filings and other relevant data, the staff estimated that the proposed rules 
would affect 122 companies, 17 of which are public and 105 of which are private.  See supra Section V.B.  
150
   None of the 17 Forms S-8 filed by issuers with service-providing platforms were small entities. 
 

74 
small entities that would be eligible to rely on the proposed amendments to Rule 701 and Rule 
12g5-1   or that would choose to become public companies and then rely on the proposed 
amendments to Form S-8.    We therefore are soliciting comment on the number of small entities 
that would be affected by the proposed amendments. 
 D. Reporting, Recordkeeping, and Other Compliance Requirements 
 As noted above, the purpose of the proposed amendments is to permit the issuance of 
securities for compensatory purposes under Rule 701 and Form S-8 to a new category of worker, 
the “platform worker.”  By expanding the scope of Rule 701 to include issuances of unregistered 
securit ies to a non-reporting issuer’s platform workers, the proposed amendments likely would 
result in cost savings for such an issuer, which would otherwise have to incur the costs of 
registering the securities, absent another exemption from registration, and thereby become an 
Exchange Act reporting issuer.  In addition, by extending the current exclusion and safe harbor 
under Exchange Act Rule 12g5-1 to securities held by platform workers who received them 
pursuant to a compensation plan under the proposed Rule 701 amendment, a non-reporting issuer 
would benefit by not being required to count those platform workers as record holders for the 
purpose of determining its Section 12(g) registration obligations.   
We believe that the proposed amendments to Rule 701 and Rule 12g5-1 could be of 
particular benefit to small entities, which may be financially constrained, by enabling them to 
issue securities as compensation, instead of cash, within the proposed limits.  This could help 
small entities attract potential workers and enhance their competitive position. 
In contrast, we do not believe that the compliance costs of the proposed Rule 701 
amendment would be significant.  The most significant compliance burden under current Rule 
701 is the financial disclosure requirement under Rule 701(e) for issuers that exceed the $10 
million threshold during a 12-month period.  Due to the $10 million threshold, this requirement 

75 
would not apply to small entities.
151
  Moreover, although under the proposed rules, an issuer 
offering securities to its platform workers pursuant to the amended Rule 701 would be required 
to furnish certain information every six months, we do not expect the resulting compliance 
burden to be significant.
152
 
 The proposed amendment to Form S-8 would benefit public companies with platforms 
offering services by permitting them to issue registered securities to their platform workers in 
addit ion to their emplo yees, which could enhance their compet it ive posit ion vis-à-vis companies 
that only have employees.  The proposed amendments likely would result in the filing of 
addit ional Form S-8 registration statements to cover offers and sales to such workers.  Those 
registrants would incur the compliance burden and costs typically associated with preparing and 
filing Form S-8.  In addit ion, because we are proposing a requirement to furnish information 
every six months for Form S-8 issuers, similar to the proposal for Rule 701 issuers, those 
registrants would incur the compliance burden and costs associated with furnishing the required 
information, which we similarly estimate would not be significant.
153
  Although it is possible that 
the proposed amendment to Form S-8 could cause a small entit y to file a Form S-8 for the 
issuance of securities to its platform workers, based upon staff review of Commission filings 
during 2018-2019, and due to the resulting burden and expense, we do not believe that this 
outcome is likely.
154
  Nevertheless, we are soliciting comment on the costs and benefits of the 
                                                
151
  See 17 CFR 230.701(d), which limits the aggregate sales price or amount of securities sold under Rule 701  
during any consecutive 12-month period to the greatest of $1,000,000, 15 percent of the total assets of the 
issuer, or 15 percent of the outstanding amount of the class of securities being offered and sold in reliance on 
Rule 701.  The purpose of the Rule 701(d) caps is to help curb non-compensatory sales in reliance on the rule.  
For example, applying the asset cap, a small entity would only be able to offer 15 percent of $5,000,000, or 
$750,000 during a consecutive 12-month period.  Although in a companion rulemaking, the Commission is 
proposing to increase the asset limitation to 25 percent, under this increased limit, if adopted, a small entity 
would still be able to offer only 25 percent of $5,000,000, or $1,250,000.  While the Commission is also 
proposing to raise the dollar cap, the new cap would only increase to $2,000,000.  See Release No. 33-10891 at 
Section II.B. 
152
   We estimate that the compliance burden associated with furnishing the required information under the proposed 
Rule 701 amendment would be 1.5 hours for each semi-annual disclosure per issuer, or a total of 3 hours per 
issuer on an annual basis.  See supra Section V.B. 
153
   We estimate that the compliance burden associated with furnishing the required information under the proposed 
Form S-8  amendment would be 1.0   hours for each semi-annual disclosure per issuer, or a total of 2 hours per 
issuer on an annual basis.  See supra Section V.B. 
154
  See supra note 150. 

76 
proposed amendments for small entities. 
 Compliance with the proposed amendments would require the use of professional skills, 
including legal skills, both to help ensure that an issuer has met the proposed conditions under 
Rule 701 designed to prevent the issuance of securities for a capital-raising purpose, and to 
enable a registrant to meet the requirements of Form S-8.  We discuss the economic impact, 
including the estimated compliance burdens and costs, of the proposed amendments to all 
issuers, including small entities, in greater detail in Sections IV and V above. 
 E. Duplicative, Overlapping, or Conflicting Federal Rules 
We believe that the proposed amendments would not duplicate, overlap, or conflict with 
other Federal rules. 
 F. Significant Alternatives 
The RFA directs us to consider alternatives that would accomplish our stated objectives, 
while minimizing any significant economic impact on small entities.  In connection with the 
proposed amendments, we considered the following alternatives: 
• Establishing different compliance or reporting requirements that take into account the 
resources available to small entities; 
• Clarifying, consolidating, or simplifying compliance and reporting requirements under 
the rules for small ent it ies; 
• Using performance rather than design standards; and 
• Exempting small entities from all or part of the requirements. 
The proposed amendments to Rule 701 and Form S-8 would permit the issuance of 
securities to platform workers subject to specified conditions.  Although an issuer, including a 
small entity, would incur some compliance costs to ensure that it has met those conditions, 
issuers proceeding under the proposed amendment to Rule 701 would largely benefit due to the 
savings derived from not having to register the securities.  In addition, we expect the increase in 
Form S-8 compliance costs to be limited because, although the proposed amendment to Form S-

77 
8 would likely result in more registration statements on that form being filed, we believe that the 
proposed amendment would only slightly increase the actual burden of preparing and filing each 
Form S-8.  We also believe that it is unlikely that the proposed amendment would result in a 
small entity filing a Form S-8.  We are not proposing an amendment to reduce the costs of 
preparing and filing a Form S-8 because we believe the requirements that result in those costs are 
necessary to protect investors.  We also are not proposing to exempt small entities from the costs 
associated with the proposed requirement to furnish information on a semi-annual basis because 
we believe that requirement is necessary to assess fully the impact of the temporary rules.  
Accordingly, we do not believe it is necessary to establish different compliance or reporting 
requirements for small ent it ies or to exempt small ent it ies fro m all or part of the proposed 
amendments. 
Finally, with respect to using performance rather than design standards, the proposed 
amendments generally contain elements similar to performance standards.  For example, the 
proposed definition of platform worker would include the condition that the issuer operates the 
platform for the provision of services pursuant to a written contract or agreement between the 
issuer and the platform worker under which the issuer controls the use of the platform.  Issuer 
control would be demonstrated by the issuer being able to establish the amount of the fees 
charged for using the platform and the terms and conditions by which the platform worker 
receives payment for the services provided through the platform.  In addit ion, the issuer must 
have the authority to accept and remove the internet platform workers providing services through 
the platform.  However, the proposed amendments would not require that a specific fee be 
charged or that a specific payment mechanism be utilized.  The proposed amendments would 
also not limit what services an issuer could facilitate through its platform or how participating 
workers could provide the services. 
Request for Comment 

78 
We encourage the submission of comments with respect to any aspect of this IRFA.  In 
particular, we request comments regarding: 
• How the proposed rule and form amendments can achieve their objective while lowering 
the burden on small entities; 
• The number of small entity companies that may be affected by the proposed rule and 
form amendments; 
• The existence or nature of the potential effects of the proposed amendments on small 
entity companies discussed in the analysis;  
• How to quantify the effects of the proposed amendments; and 
• Whether there are any federal rules that duplicate, overlap, or conflict with the proposed 
amendments. 
Commenters are asked to describe the nature of any effect and provide empirical data 
supporting the extent of that effect.  Comments will be considered in the preparation of the Final 
Regulatory Flexibility Analysis, if the proposed rules are adopted, and will be placed in the same 
public file as comments on the proposed rules themselves. 
VII. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT 
  For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 
(“SBREFA”),
155
 the Commission must advise OMB as to whether the proposed amendments 
constitute a “major” rule.  Under SBREFA, a rule is considered “major” where, if   adopted, it 
results in or is likely to result in:  
• An annual effect on the U.S. economy of $100 million or more;  
• A major increase in costs or prices for consumers or individual industries; or  
• Significant adverse effects on competition, investment, or innovation.  
                                                
155
   5 U.S.C. 801 et seq. 

79 
We request comment on whether our proposal would be a “major rule” for purposes of 
SBREFA.  In particular, we request comment and empirical data on:  
• The potential effect on the U.S. economy on an annual basis;  
• Any potential increase in costs or prices for consumers or individual industries; and  
• Any potential effect on competition, investment, or innovation. 
VIII.   STATUTORY AUTHORITY  
The amendments contained in this release are being proposed under the authority set 
forth in Sections 7, 10, and 19(a) of the Securities Act, as amended, and Sections 3(b), 12, 13, 
15, 23(a), and 36 of the Exchange Act. 
List of Subjects in 17 CFR Parts 230, 239, and 240 
 Reporting and recordkeeping requirements, Securities. 
TEXT OF THE PROPOSED AMENDMENTS 
For the reasons set out in the preamble, the Commission is proposing to amend t itle 17, 
chapter II of the Code of Federal Regulations as follows: 
PART 230 – GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933 
 1. The authority citation for part 230 continues to read, in part, as follows: 
 Authority:  15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 
78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 
80a29, 80a-30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126 Stat. 313 (2012), 
unless otherwise noted. 
*   * * * * 
 Sections 230.400 to 230.499 issued under secs. 6, 8, 10, 19, 48 Stat. 78, 79, 81, and 85, as 
amended (15 U.S.C. 77f, 77h, 77j, 77s). 
* * * * * 
 2. Amend § 230.428 by adding paragraph (d) to read as follows: 

80 
§ 230.428  Documents constituting a section 10(a) prospectus for Form S-8 registration 
statement; requirements relating to offerings of securities registered on Form S-8. 
*   * * * * 
 (d)(1) Where securities are to be offered to platform workers pursuant to a registration 
statement on Form S-8 (§ 239.16b(c)), the documents and other information identified in 
paragraph (a) of this section shall, taken together, constitute a Section 10(a) prospectus for 
offerings to plat form workers pursuant to a written compensation plan, contract, or agreement.  
The document retention requirements in paragraph (a)(2) of this section and the delivery, 
updating, and related procedural requirements in paragraph (b) of this section shall also apply to 
such offerings to platform workers. 
 (2) This paragraph (d) will expire on the same date that 17 CFR 239.16b(c) will expire 
pursuant to 17 CFR 239.16b(c)(4).  
3. Amend § 230.701 by adding Note 1 to paragraph (c) and adding paragraph (h) to read 
as follows: 
§ 230.701  Exemption for offers and sales of securities pursuant to certain compensatory 
benefit plans and contracts relating to compensation. 
* * * * * 
 (c) * * * 
 Note 1 to paragraph (c): Refer to § 230.701(h) for the exemption under § 230.701 
applicable to offers and sales of securities to platform workers.  Platform worker is defined in § 
230.701(h)(2). 
* * * * * 
(h)(1) Transactions with platform workers. (i) In addition to the transactions exempted by 
paragraph (c) of this section, this section exempts offers and sales of securities (including plan 
interests and guarantees pursuant to paragraph (d)(2)(ii) of this section) under a written 
compensatory benefit plan (or written compensation contract) established by the issuer, its 

81 
parents, its subsidiaries, or subsidiaries of the issuer’s parent, for the participation of platform 
workers as defined in paragraph (h)(2) of this section.  As used in this section, the term “platform 
worker” includes former platform workers, executors, administrators, or beneficiaries of the 
estates of deceased platform workers, guardians or members of a committee for incompetent 
former platform workers, or similar persons duly authorized by law to administer the estate or 
assets of former platform workers.  This section exempts offers and sales to former platform 
workers only if such workers met the conditions of paragraph (h) of this sect ion at the time the 
securities were offered or during a period of service ending within 12 months preceding the 
termination of service for which the securities were issued.  This section also exempts offers and 
sales to former platform workers of an acquired entity of securities issued in substitution or 
exchange for securities issued to such workers by the acquired entity on a compensatory basis 
while such persons were providing services to the acquired ent ity. 
(ii) The exemption for offers and sales of securities to platform workers under this section 
is temporary and will expire pursuant to paragraph (h)(6) of this section, except that, following 
the expiration date specified in paragraph (h)(6) of this section, an issuer may continue to rely on 
the exemption in this paragraph (h) for the sale of securities underlying options, warrants, or 
rights previously issued in an exempt transaction pursuant to this paragraph (h). 
(2) Definition of platform worker.  A platform worker is a natural person or an entity 
specified in paragraph (h)(2)(iii) of this section, who is unaffiliated with the issuer and meets the 
fo llo wing condit io ns: 
 (i)   The worker provides bona fide services to the issuer (or the issuer’s parents, the 
issuer’s subsidiaries or subsidiaries of the issuer's parent) or to third-party end-users, and such 
services benefit the issuer.  Selling or transferring permanent ownership of discrete, tangible 
goods would not constitute services for purposes of this section;   
 (ii) The services are provided pursuant to a written contract or agreement between the 
issuer and the worker and are provided through an internet-based platform or other widespread, 

82 
technology-based marketplace platform or system that the issuer operates and controls, as 
demonstrated by the following:  
 (A) The issuer provides access to the platform and establishes the principal terms of 
service for using the platform; 
(B) The issuer establishes the terms and conditions by which the platform worker 
receives payment for the services provided through the platform; and  
 (C) The issuer can accept and remove the platform worker. 
 (iii) A plat form worker may be an ent it y if: 
(A) Substantially all of its activities involve the performance of bona fide services that 
meet the requirements of paragraphs (h)(2) and (h)(3) of this section; and 
(B) The ownership interest of the entity is wholly and directly held by the 
natural person performing the services pursuant to paragraph (h) of this section through the 
entity.  
 (3) Additional requirements for issuances to platform workers.  Offers and sales of 
securit ies to platform workers are eligible for an exemption under this section if the following, 
additional requirements are met: 
 (i) The issuance is pursuant to a compensatory arrangement, as evidenced by a written 
compensation plan, contract, or agreement, and is not for services that are in connection with the 
offer or sale of securities in a capital-raising transaction, or services that directly or indirectly 
promote or maintain a market for the issuer's securities;  
 (ii) No more than 15 percent of the value of compensation received by a platform worker 
from the issuer for services provided during a consecutive 12-month period, and no more than 
$75,000 of the value of compensation received by the platform worker from the issuer during a 
consecutive 36-month period, shall consist of securities, with such value determined at the time 
the securities are granted; 

83 
 (iii) The amount and terms of any securities issued to a platform worker may not be 
subject to individual bargaining or the worker’s ability to elect between payment in securities or 
cash; and 
 (iv) The issuer must take reasonable steps to prohibit the transfer of the securit ies issued 
to a plat form worker pursuant to this exemption, other than a transfer to the issuer or by 
operation of law, except that 90 days after the issuer becomes subject to the reporting 
requirements of Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or 78o(d)), securities 
issued under this section may be resold pursuant to paragraph (g)(3) of this section.  
 (4) Requirement to furnish certain information.  An issuer using the exemption under this 
section for the issuance of securities to plat form workers is required to furnish the following 
information to the Commission at six-month intervals commencing six months after the first 
such issuance: 
 (i) The criteria used to determine eligibility for securities awards to platform workers, 
whether they are the same as for other compensatory transactions and whether those criteria, 
including revisions to the criteria, are communicated to workers in advance as an incentive; 
 (ii)  The type and terms of securities issued to platform workers during each six-month 
interval, and whether they are the same as for other compensatory transactions by the issuer 
during that interval; 
 (iii) The reasonable steps taken to prohibit the transfer of the securities sold pursuant to 
this paragraph (h); 
(iv) The percentage of overall outstanding securities that the amount issued cumulatively 
under this paragraph (h) represents;  
(v) During each six-mo nth interval, the number of platform workers, the number of non-
platform workers, the number of platform workers receiving securities pursuant to this paragraph 
(h), and the number of non-platform workers who received securities pursuant to § 230.701; and 

84 
(vi) The number and dollar amount of securities issued to platform workers in each six-
month interval, both in absolute amounts and as a percentage of the issuer’s total exempt sales 
under § 230.701. 
Instruction to § 230.701(h)(4).  An issuer should furnish the required informat ion 
specified in this paragraph in the manner designated by the Division of Corporation Finance for 
this purpose. 
(5) Request for confidential treatment.  An issuer may request confidential treatment 
under § 200.83 for information furnished pursuant to paragraph (h)(3) of this section.  Written 
requests for confidential treatment under § 200.83 relating to the furnished materials may be 
submitted either in paper format or electronically.   
 (6)   Expiration of temporary exemptive rule.  Except as provided in paragraph (h)(1)(ii) of 
this section, the exemption for the issuance of securities to platform workers pursuant to this 
paragraph (h) applies only to offers or sales of securities occurring prior to five years following 
the date of the section’s effectiveness.   
 (7) This paragraph (h) will expire five years from the date of effectiveness of § 
230.701(h).   
PART 239 – FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933  
 4. The general authority citation for part 239 continues to read as follows:  
 Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77sss, 78c, 78l, 78m, 
78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-
13, 80a-24, 80a-26, 80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat. 312, 
unless otherwise noted.  
* * * * * 
 5.  Amend § 239.16b by adding “or other compensatory plans” at the end of the tit le and 
adding paragraphs (a)(3) and (c) to read as follows:  

85 
§ 239.16b  Form S-8, for registration under the Securities Act of 1933 of securities to be 
offered to employees pursuant to employee benefit plans or other compensatory plans. 
 (a)  * * * 
 (3) Securities of the registrant to be offered to marketplace plat form workers pursuant to  
§ 239.16b(c). 
*   * * * * 
 (c) Issuances to platform workers.  (1) A registrant may register on Form S-8 securities to 
be offered or sold to platform workers, as defined by § 230.701(h), for the temporary period set 
forth in § 239.16b(c)(4), only if: 
 (i) The issuance is pursuant to a compensatory arrangement, as evidenced by a written 
compensat ion plan, contract or agreement, and is not for services that are in connection with the 
offer or sale of securities in a capital-raising transaction or that directly or indirectly promote or 
maintain a market for the issuer's securities;  
(ii) No more than 15 percent of the value of compensation received by a platform worker 
from the issuer for services provided during a consecutive 12-month period shall consist of 
securities, with such value determined at the time the securities are granted, with the remainder 
of compensation received by the platform worker from the issuer paid in cash, and no more than 
$75,000 of such compensation received from the issuer during a consecutive 36-month period 
shall consist of securities, with such value determined at the time the securities are granted; and 
(iii) The amount and terms of any securities issued to a platform worker may not be 
subject to individual bargaining or the worker’s ability to elect between payment in securities or 
cash. 
(2) A registrant using Form S-8 for the issuance of securities to plat form workers is 
required to furnish the fo llowing informat ion in the manner designated by the Division of 
Corporation Finance for this purpose at six-month intervals commencing six months after the 
first such issuance: 

86 
(i) The criteria used to determine eligibility for securities awards to platform workers, 
whether they are the same as the criteria for other compensatory transactions, and whether those 
criteria, including revisions to the criteria, are communicated to workers in advance as an 
incentive; 
(ii) The type and terms of securities issued to platform workers during each six-month 
interval and whether they are the same as for other compensatory transactions by the registrant 
during that interval; 
(iii) The percentage of overall outstanding securities that the amount issued cumulatively 
to plat form workers under this section represents;  
(iv) During each six-mo nth interval, the number of platform workers, the number of non-
platform workers, the number of platform workers receiving securities registered on Form S-8, 
and the number of non-platform workers who received securities registered on Form S-8; 
(v) The number of platform workers, in an absolute amount and as a percentage of the 
total number of platform workers, employees, and other persons eligible to receive securities on 
Form S-8; and 
(vi) The number and dollar amount of securities issued to platform workers, both in 
absolute amounts and as a percentage of the issuer’s total sales on Form S-8 during each six-
mo nth interval. 
(3) A registrant may request confidential treatment under § 200.83 for information 
furnished pursuant to this section.  Written requests for confidential treatment under § 200.83 
relating to the furnished materials may be submitted either in paper format or electronically. 
(4) This paragraph (c) applies only to offers or issuances of securities occurring prior to 
five years from the date of the section’s effectiveness. 
(5) This paragraph (c) will expire five years from the date of effectiveness of § 
239.16b(c). 
 6.  Amend Form S-8 (referenced in § 239.16b) by: 

87 
 a.  Redesignating paragraph (b) of General Instruction A.1. as paragraph (c); 
b.  Adding paragraph (b) of General Instruction A.1.; 
c.  Revising paragraph 1 of General Instruction G. (“Updating”); 
d.  Revising the Note immediately following the heading “Part I - INFORMATION 
REQUIRED IN THE SECTION 10(a) PROSPECTUS;”     
e.  Revising Item 2 of Part I; and 
f.  Revising the “Signatures” section for “the Plan” by replacing the parenthetical “or 
other persons who administer the employee benefit plan” with “or other persons who administer 
the plan” in the first sentence. 
The additions and revisions read as follows: 
Note: The text of Form S-8 does not, and this amendment will not, appear in the 
Code of Federal Regulations.  
UNITED STATES  
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549  
 
FORM S-8  
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933  
 
* * * * * 
GENERAL INSTRUCTIONS 
A.   Rule as to Use of Form S-8 
 1.  * * * 
(a) * * * 
(b)(1) Securities of the registrant to be offered to plat form workers pursuant to a written 
compensation plan, contract, or agreement.  The term “platform worker” is defined by Rule 
701(h)(2) (§ 230.701(h)(2)).  As used in this form, the term “plan” includes a written 
compensation plan, contract, or agreement for the issuance of securities to platform workers.   

88 
(2) Form S-8 is available for the issuance of securities to plat form workers only if, pursuant 
to § 239.16b(c): 
(i) The issuance is pursuant to a compensatory arrangement, as evidenced by a written 
compensation plan, contract, or agreement, and is not for services that are in connection with the 
offer or sale of securities in a capital-raising transaction, or services that directly or indirectly 
promote or maintain a market for the issuer's securities; 
(ii) No more than 15 percent of the value of compensation received by a platform worker 
from the issuer for services provided during a consecutive 12-month period shall consist of 
securit ies, with such value determined at the time the securities are granted, with the remainder 
of compensation received by the platform worker from the issuer paid in cash, and no more than 
$75,000 of such compensation received from the issuer during a consecutive 36-month period 
shall consist of securities, with such value determined at the time the securities are granted;  
(iii) The amount and terms of any securities issued to a platform worker may not be subject 
to individual bargaining or the worker’s ability to elect between payment in securities or cash; 
and  
(iv) The offers or sales of securities occur prior to five years from the date of the 
effectiveness of § 239.16b(c)].  On that date, § 239.16b(c) will expire and will no longer be 
effective. 
Note: The purpose of § 239.16b(c) is to permit the issuance of securities to platform workers 
for a compensatory purpose.  This section is not available for plans or schemes to circumvent 
this purpose, such as to raise capital.  This section also is not available to any transaction that is 
in technical compliance with § 239.16b(c) but is part of a plan or scheme to evade the 
compensatory purpose of this section.   
(3) A registrant using Form S-8 for the issuance of securities to plat form workers is required 
to furnish the informat ion specified in § 239.16b(c)(3) in the manner designated by the Division 

89 
of Corporation Finance for this purpose at six-month intervals commencing six months after the 
first issuance of securit ies to platform workers on this form.  
Note:  A registrant may request confidential treatment under § 200.83 for information 
furnished pursuant to § 239.16b(c)(3).  Written requests for confidential treatment under § 
200.83 relating to the furnished materials may be submitted either in paper format or 
electronically. 
(4)  The term “platform worker” includes: 
(i)    Former platform workers, only if such workers provided services pursuant to  
§ 239.16b(c) of this chapter at the time the securities were offered or during a period of service 
ending within 12 months preceding the termination of service for which the securities were 
issued; 
(ii) Former platform workers of an entity acquired by the issuer who may receive securit ies 
registered on this form in  substitution or exchange for securities issued to them by the acquired 
entity on a compensatory basis while such persons were providing services to the acquired ent ity; 
and 
(iii)  Executors, administrators, or beneficiaries of the estates of deceased platform workers, 
guardians or members of a committee for incompetent former platform workers, or similar 
persons duly authorized by law to administer the estate or assets of former platform workers. 
(5)  The inclusion of individuals described in paragraph (4) of General Instruction A.1.(b) in 
the term “platform worker” is only to permit registration on Form S-8 of the exercise of stock 
options issued to platform workers pursuant to a plan, and the subsequent sale of the securit ies, if 
these exercises and sales are permitted under the terms of the plan. 
* * * * * 
G. Updating 
 Updating of information constituting the Section 10(a) prospectus pursuant to Rule 
428(a) (§230.428(a)) during the offering of the securities shall be accomplished as follows: 

90 
 1.  Plan information specified by Item 1 of Form S-8 required to be sent or given to 
emplo yees or plat form workers shall be updated as specified in Rule 428(b)(l) (§230.428(b)(l)) 
or Rule 428(d)(1) (§230.428(d)(1)).  Such information need not be filed with the Commission. 
* * * * * 
Part I 
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS 
Note: The document(s) containing the information specified in this Part I will be 
sent or given to employees or platform workers as specified by Rules 428(b)(1) and 428(d) 
(§§   230.428(b)(1) and 428(d)).  Such documents need not be filed with the Commission 
either as part of this registration statement or as prospectuses or prospectus supplements 
pursuant to Rule 424 (§230.424).  These documents and the documents incorporated by 
reference in the registration statement pursuant to Item 3 of Part II of this Form, taken 
together, constitute a prospectus that meets the requirements of Section 10(a) of the 
Securities Act.  See Rules 428(b)(1) and 428(d) (§§ 230.428(b)(1) and 428(d)). 
* * * * * 
Item 2.  Registrant Information and Participant Plan Annual Informat ion 
 The registrant shall provide a written statement to participants advising them of the 
availability without charge, upon written or oral request, of the documents incorporated by 
reference in Item 3 of Part II of the registration statement, and stating that these documents are 
incorporated by reference in the Section 10(a) prospectus.  The statement also shall indicate the 
availability without charge, upon written or oral request, of other documents required to be 
delivered to employees pursuant to Rule 428(b) (§230.428(b)), and to platform workers pursuant 
to Rule 428(d).  The statement shall include the address (giving title or department) and 
telephone number to which the request is to be directed. 
*   * * * * 

91 
PART 240 – GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE 
ACT OF 1934 
7.    The general authorit y citation for part 240 continues to read as follows:  
 Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 
77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 
78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 80a-20, 80a-23, 
80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 
5221(e)(3); 18 U.S.C. 1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106, 
secs. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted. 
*  *  *  *  * 
 8.  Amend § 240.12g5-1 by revising paragraph (a)(8) to read as follows:  
§ 240.12g5-1    Definition of securities “held of record”. 
 (a)  * * * 
 (8)(i)  For purposes of determining whether an issuer is required to register a class of 
equity securities with the Commission pursuant to Section 12(g)(1) of the Act (15 U.S.C.  
78l(g)(1)), an issuer may exclude securities:   
(A)  Held by persons who received the securities pursuant to an employee compensation 
plan, or a compensation plan for platform workers pursuant to § 230.701(h) of this chapter, in 
transactions exempt from, or not subject to, the registration requirements of Section 5 of the 
Securities Act of 1933 (15 U.S.C. 77e); and  
 (B)  Held by persons who received the securities in a transaction exempt from, or not 
subject to, the registration requirements of Section 5 of the Securities Act (15 U.S.C. 77e) from 
the issuer, a predecessor of the issuer, or an acquired company in substitution or exchange for 
excludable securities under paragraph (a)(8)(i)(A) of this section, as long as the persons were 
eligible to receive securities pursuant to § 230.701 of this chapter at the time the excludable 
securities were originally issued to them.  

92 
 (ii)  As a non-exclusive safe harbor under this paragraph (a)(8):   
(A)  An issuer may deem a person to have received the securities: 
(1)   Pursuant to an emplo yee compensation plan if such plan and the person who received 
the securities pursuant to the plan met the plan and participant conditions of § 230.701(c) of this 
chapter; or  
(2) Pursuant to a compensation plan for platform workers if such plan and the person who 
received the securities pursuant to the plan met the plan and participant conditions of  
§ 230.701(h) of this chapter.  
(B) An issuer may, solely for the purposes of Section 12(g) of the Act (15 U.S.C.  
78l(g)(1)), deem the securities to have been issued in a transaction exempt from, or not subject 
to, the registration requirements of Section 5 of the Securities Act (15 U.S.C. 77e) if the issuer 
had a reasonable belief at the time of the issuance that the securities were issued in such a 
transaction.   
 Note 1 to paragraph (a)(8)(ii): Section 230.701(h) applies only to offers or sales of 
securities occurring prior to five years following the date of effectiveness of § 230.701(h).  On 
that date, § 230.701(h) will expire and will no longer be effective. 
* * * * * 
By the Commission. 
Dated: November 24, 2020. 
Vanessa A. Countryman, 
Secretary. 

Conformed to Federal Register version 

SECURITIES AND EXCHANGE COMMISSION 

17 CFR 230, 239, and 240 

[Release Nos. 33-10892; 34-90948; File No. S7-19-20]  

RIN 3235-AM79 

Temporary Rules to Include Certain “Platform Workers” in Compensatory Offerings 

under Rule 701 and Form S-8 

AGENCY: Securities and Exchange Commission. 

ACTION: Proposed rule. 

SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing for 

public comment amendments to the exemption from registration under the rules of the Securities 

Act of 1933 (“Securities Act”) for securities issued by non-reporting companies pursuant to 

compensatory arrangements and to Form S-8, the registration statement for offerings by 

reporting companies pursuant to employee benefit plans. The amendments would establish a 

temporary provision under Securities Act rules that, on a trial basis, would permit a non-

reporting issuer to offer and sell securities for a compensatory purpose to an expanded group of 

workers without having to register the offers and sales under the Securities Act, as long as 

certain conditions are met. Specifically, the proposed amendments would permit the issuer to 

offer and sell securities to those workers who provide services available through the issuer’s 

internet-based marketplace platform or through another widespread, technology-based 

marketplace platform or system (“platform workers”). The amendments would similarly, on a 

trial basis, permit a reporting issuer to include such workers in compensatory offerings registered 

on Form S-8. These proposed rule amendments would expire, absent further action by the 

Commission, five years from the date of their effectiveness. We are also proposing to amend the 

rules under the Securities Exchange Act of 1934 (“Exchange Act”). The amendment would 

extend the exclusion from the definition of “held of record” and corresponding safe harbor, 



2 

which currently applies to securities held by persons who received them pursuant to an employee 

compensation plan, to securities held by persons who received them pursuant to a compensation 

plan for platform workers under the proposed Securities Act rule amendment. The proposed 

exclusion and safe harbor for securities issued to platform workers under Exchange Act rules 

would not be temporary.  

DATES: Comments should be received on or before February 9, 2021. 

ADDRESSES: Comments may be submitted by any of the following methods: 

Electronic comments:  

• Use the Commission’s internet comment form 

(https://www.sec.gov/rules/submitcomments.htm). 

Paper comments: 

• Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange 

Commission, 100 F Street NE, Washington, DC 20549-1090. 

All submissions should refer to File Number S7-19-20. To help us process and review 

your comments more efficiently, please use only one method. We will post all comments on our 

internet website (https://www.sec.gov/rules/proposed.shtml). Comments are also available for 

website viewing and printing in our Public Reference Room, 100 F Street NE, Washington, DC 

20549 on official business days between the hours of 10 a.m. and 3 p.m. All comments received 

will be posted without change. Persons submitting comments are cautioned that we do not redact 

or edit personal identifying information from comment submissions. You should submit only 

information that you wish to make available publicly. 

We or the staff may add studies, memoranda, or other substantive items to the comment 

file during this rulemaking. A notification of the inclusion in the comment file of any such 

materials will be made available on our website. To ensure direct electronic receipt of such 



3 

notifications, sign up through the “Stay Connected” option at www.sec.gov to receive 

notifications by email. 

FOR FURTHER INFORMATION CONTACT: Elliot Staffin, Office of Rulemaking, at (202) 

551-3430, in the Division of Corporation Finance, U.S. Securities and Exchange Commission, 

100 F Street NE, Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: We are proposing to amend 17 CFR 230.428 (“Rule 

428”), 17 CFR 230.701 (“Rule 701”), and 17 CFR 239.16b (“Form S-8”) under the Securities 

Act,1 and 17 CFR 240.12g5-1 (“Rule 12g5-1”) under the Exchange Act.2 

Table of Contents 
 
I. INTRODUCTION  

A. Rule 701, Form S-8, and the Concept Release  

B. Summary of the Proposed Amendments  

II. DESCRIPTION OF THE PROPOSED AMENDMENTS  

A. Proposed Inclusion and Definition of “Platform Worker” under Rule 701 and Form S-8  

B. Additional Requirements for Issuances to Platform Workers under Rule 701 and Form S-8  

C. Integration of Proposed Rule 701(h) With the Existing Rule 701 Exemption  

D. Integration with Exchange Act Rule 12g5-1  

E. Considerations Specific to Form S-8  

F. Requirement to Furnish Certain Information 

G. Expiration of the Temporary Rules Authorizing Issuances to Platform Workers Under Rule 

701 and Form S-8  

III. GENERAL REQUEST FOR COMMENTS  

IV. ECONOMIC ANALYSIS  

A.  Economic Baseline  

                                                
1  15 U.S.C. 77a et seq. 
2  15 U.S.C. 78a et seq. 



4 

1. Overview of the Gig Economy  

2. Characteristics of Gig Economy Workers  

3. The Online Platform Economy  

B. Broad Economic Considerations  

C. Expected Economic Benefits and Costs  

1. Expected Economic Benefits  

2. Expected Economic Costs 

D. Effects on Efficiency, Competition, and Capital Formation  

E. Reasonable Alternatives  

V. PAPERWORK REDUCTION ACT  

A.  Summary of the Collection of Information  

B. Summary of the Proposed Amendments’ Effects on the Collections of Information  

C. Incremental and Aggregate Burden and Cost Estimates for the Proposed Amendments  

D. Request for Comment  

VI. INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS  

A. Reasons for, and Objectives of, the Proposed Action  

B. Legal Basis  

C. Small Entities Subject to the Proposed Rules 

D. Reporting, Recordkeeping, and Other Compliance Requirements  

E. Duplicative, Overlapping, or Conflicting Federal Rules  

F. Significant Alternatives  

VII. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT  

VIII. STATUTORY AUTHORITY 

I. INTRODUCTION 

A. Rule 701, Form S-8, and the Concept Release 



5 

Title 17, section 230.701 (“Rule 701”) provides an exemption from the registration 

requirements of Securities Act Section 53 for offers and sales of securities by non-reporting 

companies4 to their employees, officers, directors, trustees, consultants, or advisors5 under 

written compensatory benefit plans6 or written agreements relating to compensation.7 The rule 

reflects the Commission’s long-standing position that offers and sales of securities for 

compensatory purposes raise different issues, and therefore should be treated differently, from 

offers and sales that raise capital for the issuer of the securities.8  

For example, when first proposing Rule 701, the Commission recognized that employee 

equity incentive arrangements are “a potentially important tool to attract, compensate and 

motivate employees.”9 It further expressed the concern that private, smaller companies were 

                                                
3  15 U.S.C. 77e. 
4  Only issuers that are not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act (15 

U.S.C. 78m and 78o(d)) and are not investment companies registered or required to be registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) are eligible to use Rule 701.  See 17 CFR 
230.701(b). 

5  When the Commission first proposed Rule 701, it initially limited the exemption to the issuer’s employees, 
directors, trustees or officers (or those of its parents or subsidiaries).  See Regulation D Revisions; Exemption 
for Certain Employee Benefit Plans, Release No. 33-6683 [52 FR 3015 (Jan. 30, 1987)] (“Rule 701 Proposing 
Release”).  The Commission specifically excluded consultants and “independent agents” due to a concern that 
including them could lead to an exemption broader than the intended compensatory purpose.  See, e.g., 
Employee Benefit Plans and Compensation Contracts, Release No. 33-6726 (July 24, 1987) [52 FR 29033 
(Aug. 5, 1987)] (“Rule 701 Reproposing Release”).  Eventually, however, when adopting Rule 701, the 
Commission included issuances to consultants and advisors within the rule’s scope.  The Commission noted 
comments pointing out that securities issuances to such persons could be for compensatory and non-capital-
raising purposes and determined that there was no meaningful basis for distinguishing issuances to them and to 
employees.  See Compensatory Benefit Plans and Contracts, Release No. 33-6768 [53 FR 12918-02 (Apr. 20, 
1988)] (“Rule 701 Adopting Release”).  In 1999, the Commission amended Rule 701, consistent with 
amendments to Form S-8, to prevent the misuse of that form for capital-raising transactions. See Rule 701—
Exempt Offerings Pursuant to Compensatory Arrangements, Release No. 33-7645 (Feb. 25, 1999) [64 FR 
11095 (Mar. 8, 1999)] (“1999 Rule 701 Adopting Release”).  Specifically, the Commission modified the 
definition of consultants and advisors to require that they be natural persons, provide bona fide services, and the 
services not be in connection with the offer or sale of securities in a capital-raising transaction and not directly 
or indirectly promote or maintain a market for the issuer’s securities.  See id. 

6  17 CFR 230.701(c)(2) defines a “compensatory benefit plan” as “any purchase, savings, option, bonus, stock 
appreciation, profit sharing, thrift, incentive, deferred compensation, pension or similar plan.”  

7  See 17 CFR 230.701(c).  The exemption also extends to offers and sales of securities under written 
compensatory plans or contracts established by the issuer’s parent or the issuer’s or parent’s majority-owned 
subsidiaries.  See id.  The Commission has also indicated that a person in a de facto employment relationship 
with the issuer, such as a nonemployee providing services that traditionally are performed by an employee, with 
compensation paid for those services being the primary source of the person’s earned income, would qualify as 
an eligible person under the exemption.  See 1999 Rule 701 Adopting Release, supra note 5. 

8  See Rule 701 Reproposing Release, supra note 5, at 29033 (stating that “[t]he Commission historically has 
recognized that when transactions of this nature are primarily compensatory and incentive oriented, some 
accommodation should be made under the Securities Act”). 

9  See Rule 701 Proposing Release, supra note 5, at 3020.  



6 

forgoing this potentially valuable means of compensation because of the costs of complying with 

Securities Act registration requirements.10 The Commission also has expressly addressed the role 

that equity compensation may play in the employment relationship by indicating that using 

equity as a component of compensation may align the incentives of employees with the success 

of the enterprise, facilitate recruitment and retention, and preserve cash for the issuer’s 

operations.11 

Form S-8 is the simplified form for the registration of securities transactions involving an 

issuance to a registrant’s employees in a compensatory or incentive context and for a non-

capital-raising purpose.12 For purposes of Form S-8, the term “employee” includes consultants 

and advisors as long as they are natural persons and provide bona fide services to the registrant 

not in connection with a capital-raising transaction or promoting or maintaining a market for the 

registrant’s securities.13 Form S-8 provides for an abbreviated disclosure format, allows for 

updating through forward incorporation by reference of Exchange Act reports, and is effective 

immediately upon filing.14 It also requires the issuer to provide disclosure to employees and 

                                                
10  See id.; see also 1999 Rule 701 Adopting Release, supra note 5, at 11095 (stating that when adopting Rule 701, 

“we determined that it would be an unreasonable burden to require these private companies, many of which are 
small businesses, to incur the expenses and disclosure obligations of public companies when their only public 
securities sales were to employees,” and further noting that “these sales are for compensatory and incentive 
purposes, rather than for capital-raising”). 

11  See Executive Compensation and Related Person Disclosure, Release No. 33-8732A (Aug. 29, 2006) [71 FR 
53158 (Sept. 6, 2006)] (“2006 Executive Compensation Adopting Release”) (stating that unlike salary and 
bonus compensation, stock option compensation does not require the payment of cash by the registrant, and 
therefore can be particularly attractive to registrants for which cash is a scarce resource; noting that stock option 
compensation may also provide an incentive for employees to work to increase the registrant’s stock price; and 
additionally indicating that some registrants may be able to use stock option compensation to help retain 
employees, because an employee with unvested in-the-money options forfeits his potential value if he leaves the 
registrant’s employ.).   

12   See Registration of Securities on Form S-8, Release No. 33-7646 (Feb. 25, 1999) [64 FR 11103 (Mar. 8, 1999)] 
(“1999 Form S-8 Adopting Release”).  

13   See Form S-8, General Instruction A.1.(a)(1).  See also 1999 Form S-8 Adopting Release (stating that issuers 
may continue to use securities registered on Form S-8 to compensate persons who have a de facto employment 
relationship with them.  Such a relationship may exist where a person not employed by a registrant provides the 
registrant with bona fide services that traditionally are performed by an employee, and the compensation paid 
by the registrant for those services is the primary source of the person’s earned income.). 

14  See Registration and Reporting Requirements for Employee Benefit Plans, Release No. 33-6867 (June 6, 1990) 
[55 FR 23909 (June 13, 1990)] (“1990 Form S-8 Adopting Release”).  



7 

others receiving securities in the offering. In addition, the full spectrum of investor protections 

associated with registration under the Securities Act applies to the transaction. 

In July 2018, the Commission published a concept release to solicit comment on whether 

and how best to modernize the exemption under Rule 701 and to update Form S-8.15 In the 

release, the Commission requested comment on how to address, consistent with investor 

protection, the significant evolution that has taken place in the types of compensatory offerings 

issuers make and the composition of the workforce since the Commission last substantively 

amended this rule and form.16 Regarding workforce changes, the Commission focused on the 

new types of work relationships between companies and individuals that have emerged in the so-

called “gig economy.”17  

These new types of work relationships have arisen in large part due to the internet and 

reductions in the costs of communication and information processing. They typically involve an 

individual’s use of an internet “platform” provided by a company (the “platform provider”) to 

find a particular type of work, or “gig” (i.e., task or job). The work could involve the individual 

providing services to end users, such as ride-sharing, food delivery, household repairs, dog-

                                                
15  See Concept Release on Compensatory Securities Offerings and Sales, Release No. 33-10521 (July 18, 2018) 

[83 FR 34958 (July 24, 2018)] (“Concept Release”).  Unless otherwise indicated, comments cited in this release 
are to the public comments on the Concept Release, which are available at https://www.sec.gov/comments/s7-
18-18/s71818.htm. 

  
16  See id.  While the Commission amended Rule 701 in 2018 to implement the Congressional mandate to raise the 

Rule 701(e) disclosure threshold from $5 million to $10 million, see Release No. 33-10520 (Jul. 18, 2018)  
 [83 FR 34940 (Jul. 24, 2018)], the last substantive amendment of Rule 701 prior to then was in 1999.  See 1999 

Rule 701 Adopting Release supra note 5.  The Commission last substantively amended Form S-8 in 2005.  See 
Release No. 33-8587 (Jul. 15, 2005) [70 FR 42234 (Jul. 21, 2005)].17  See id., at Section I.B.  Other 
names for the “gig economy” include the “on-demand economy” and the “sharing economy.”  See, e.g., Alex 
Kirven, “Comment: Whose Gig Is It Anyway? Technological Change, Workplace Control and Supervision, and 
Workers’ Rights in the Gig Economy, 89 U. Colo. L. Rev. 249, 253 (Winter 2018), available at 
http://lawreview.colorado.edu/wp-content/uploads/2018/05/Kirven-Whose-Gig-Is-It-Anyway-Technological-
Change-Workplace-Control-and-Supervision-and-Workers-Rights-in-the-Gig-Economy.pdf. 

17  See id., at Section I.B.  Other names for the “gig economy” include the “on-demand economy” and the “sharing 
economy.”  See, e.g., Alex Kirven, “Comment: Whose Gig Is It Anyway? Technological Change, Workplace 
Control and Supervision, and Workers’ Rights in the Gig Economy, 89 U. Colo. L. Rev. 249, 253 (Winter 
2018), available at http://lawreview.colorado.edu/wp-content/uploads/2018/05/Kirven-Whose-Gig-Is-It-
Anyway-Technological-Change-Workplace-Control-and-Supervision-and-Workers-Rights-in-the-Gig-
Economy.pdf. 



8 

sitting, or tech support, or using the platform to sell goods or lease property to third parties.18 

Other new work relationships may involve individuals using the platform to perform tasks or 

services for the platform provider itself.19  

A significant characteristic of these new work relationships is that the individual worker 

may have greater flexibility in determining when and how much he or she works than in a 

traditional employment relationship where those determinations are typically made by the issuer. 

In addition, these new work relationships can be, and often are, on a short-term, part-time, or 

freelance basis. Another significant characteristic is that an individual who provides services or 

goods through these platforms may have similar relationships with multiple companies through 

which the individual may engage in the same or different business activities. Given the 

characteristics of these new work relationships, the individual workers might not be employees, 

consultants, advisors, or de-facto employees20 eligible to receive securities in compensatory 

arrangements under Rule 701. 

Numerous commenters on the Concept Release who addressed issues relating to “gig 

economy” workers supported including them within the scope of Rule 701 and Form S-8.21  

Several noted that they did not believe or were uncertain that “gig economy” workers would fall 

within Rule 701’s current categories of employees, consultants, or advisors, and recommended 

adding a new category of worker to include them.22 

                                                
18  See id. 
19  See, e.g., Working the Crowd: Employment and Labor Law in the Crowdsourcing Industry, 32 Berkeley J. Emp. 

& Lab. L. 143 (2011) (providing examples of crowdsourcing, such as a platform provider’s use of multiple 
workers to tag photographs according to their content, or to build the back-end of a platform provider’s 
interactive web site). 

20     See supra note 7. 
21  See the letters from Airbnb, Inc. (Sept. 21, 2018) (“Airbnb”), the American Bar Association, Business Law 

Section (Nov. 28, 2018) (“ABA”), Center for Capital Markets Competitiveness, U.S. Chamber of Commerce 
(Sept. 24, 2018) (“Chamber”), Davis Polk & Wardwell, LLP (“Davis Polk”), Indigo Ag, Inc. (Jul. 8, 2019) 
(“Indigo”), Postmates (Oct. 17, 2018), Brian Sament (Oct. 14, 2018) (“Sament”), Sullivan & Cromwell LLP 
(Sept. 24, 2018) (“Sullivan’), and Uber Technologies, Inc. (Oct. 11, 2018) (“Uber”). 

22  See, e.g., letters from ABA, Chamber, Indigo, and Postmates.   



9 

The new work relationships of the gig economy have become increasingly significant to 

the broader U.S. economy.23 They also raise some of the same considerations that led the 

Commission to adopt Rule 701. For example, “gig economy” issuers may have the same 

compensatory and incentive motivations to offer equity compensation to individuals participating 

in the companies’ platform-based businesses. Permitting gig economy issuers to utilize the Rule 

701 exemption on a temporary basis would allow the Commission to assess the appropriateness 

of the exemption for these new work relationships and thus should help inform the 

Commission’s ongoing efforts to modernize its rules in light of changing economic and market 

conditions. 

For the above reasons, we propose to include a new category of worker, the “platform 

worker,” within the scope of Rule 701 and Form S-8.24 As we stated in the Concept Release, any 

such expansion of Rule 701 and Form S-8 must be consistent with the Commission’s mandate to 

protect investors.25 It should not facilitate offers and sales of unregistered securities under the 

guise of being compensatory when in fact they are undertaken for capital-raising purposes. 

Therefore, we are proposing to expand Rule 701 and the use of Form S-8 to facilitate 

compensatory transactions with platform workers while also proposing conditions designed to 

limit the possibility that the rule changes could result in offers and sales for capital-raising 

purposes.26   

                                                
23  See, e.g., The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015, Lawrence F. 

Katz and Alan B.Krueger, National Bureau of Economic Research, available at 
http://www.nber.org/papers/w22667 (finding a substantial rise in the incidence of alternative work 
arrangements for U.S. workers from 2005 to 2015, and defining alternative work arrangements as including 
temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers); 
see also Contingent Workforce, U.S. Government Accountability Office, GAO-15-168R (2015), available at 
https://www.gao.gov/assets/670/669766.pdf (finding that, while the size of the U.S. contingent workforce varies 
by definition and data source, using an expansive definition of alternative work arrangements, 40.4% of the 
U.S. employed labor force in 2010 was in an alternative work arrangement).     

24  See proposed Rule 701(h) and proposed 17 CFR 239.16b(c).  As explained below, the proposed expanded scope 
of Rule 701 and Form S-8 would be temporary while we examine whether to adopt the rules or similar rules on 
a more permanent basis.   

25  See Concept Release, supra note 15, at Section II.A.  
26  See, e.g., proposed Rule 701(h)(3) and proposed 17 CFR 239.16b(c)(1).   



10 

We are also proposing these changes on a temporary basis27 to allow us to assess whether 

unregistered issuances of securities to platform workers under expanded Rule 701, or issuances 

registered on expanded Form S-8, are being made for appropriate compensatory purposes and 

not for capital-raising purposes.  Similarly, we intend to assess whether such issuances have the 

expected beneficial effects for issuers in the “gig economy,” their platform workers, and 

ultimately their investors and whether such issuances have resulted in any unintended 

consequences.  This assessment, in turn, should help us determine whether to modify or expand 

the scope of Rule 701 and Form S-8 on a permanent basis. 

We welcome feedback and encourage interested parties to submit comments on any or all 

aspects of the proposed rule amendments.  When commenting, it would be most helpful if you 

include the reasoning behind your position or recommendation. 

            B. Summary of the Proposed Amendments 

   We propose to amend Rule 701 by adding a temporary rule provision that, for five years, 

would enable issuers to use Rule 701 to compensate certain “platform workers,” subject to 

specified conditions.  Under the amendments, an issuer would be able to use the Rule 701 

exemption to offer and sell its securities on a compensatory basis to platform workers who, 

pursuant to a written contract or agreement, provide bona fide services by means of an internet-

based platform or other widespread, technology-based marketplace platform or system provided 

by the issuer if:  

• The issuer operates and controls the platform, as demonstrated by its ability to provide 

access to the platform, to establish the principal terms of service for using the platform 

and terms and conditions by which the platform worker receives payment for the services 

provided through the platform, and to accept and remove platform workers participating 

in the platform; 

                                                
27  See infra Section II.G. 



11 

• The issuance of securities to participating platform workers is pursuant to a compensatory 

arrangement, as evidenced by a written compensation plan, contract, or agreement, and is 

not for services that are in connection with the offer or sale of securities in a capital-

raising transaction, or services that directly or indirectly promote or maintain a market for 

the issuer’s securities; 

• No more than 15 percent of the value of compensation received by a participating worker 

from the issuer for services provided by means of the platform during a 12-month period, 

and no more than $75,000 of such compensation received from the issuer during a 36-

month period, shall consist of securities, with such value determined at the time the 

securities are granted; 

• The amount and terms of any securities issued to a platform worker may not be subject to 

individual bargaining or the worker’s ability to elect between payment in securities or 

cash; and 

• The issuer must take reasonable steps to prohibit the transfer of the securities issued to a 

platform worker pursuant to this exemption, other than a transfer to the issuer or by 

operation of law.28 

The proposed amendments also would permit an Exchange Act reporting issuer to 

register the offer and sale of its securities to its platform workers using Form S-8.  The same 

conditions proposed for Rule 701 issuances would apply to issuances to platform workers that 

are registered on Form S-8, except for the proposed transferability restriction.  Like the proposed 

amendments to Rule 701, the proposed Form S-8 amendments would be temporary and would 

expire, absent further Commission action, on the same date as the Rule 701 amendments. 

In order to help in our evaluation of the proposed expanded scope of Rule 701 and Form 

S-8, we are also proposing that any issuer that issues securities to platform workers would be 

                                                
28  An issuer using proposed Rule 701(h) would also be able to continue to use Rule 701 for transactions to persons 

eligible under 17 CFR 230.701(c). 



12 

required to furnish information to the Commission at six-month intervals (each, an “interval”), 

regarding: 

1. The criteria used to determine eligibility for awards, whether those criteria are the same 

as for other compensatory transactions, and whether those criteria, including any 

revisions to the criteria, are communicated to platform workers in advance as an 

incentive; 

2. The type and terms of securities issued and whether they are the same as for other 

compensatory transactions by the issuer during that interval; 

3. If pursuant to Rule 701, the reasonable steps taken to prohibit the transfer of the securities 

sold pursuant to this temporary rule; 

4. The percentage of overall outstanding securities that the amount issued cumulatively 

under this temporary rule represents;  

5. During the interval, the number of platform workers, the number of non-platform 

workers, the number of platform workers who received securities pursuant to the 

temporary rule, and the number of non-platform workers who received securities 

pursuant to the issuer’s Rule 701 or Form S-8 issuances;  

6. Both in absolute amounts and as a percentage of the issuer’s total Rule 701 or Form S-8 

issuances during the interval: 

a. The aggregate number of securities issued to platform workers; and 

b. The aggregate dollar amount of securities issued to platform workers.  

II. DESCRIPTION OF THE PROPOSED AMENDMENTS 

A. Proposed Inclusion and Definition of “Platform Worker” under Rule 701 
and Form S-8 

We propose to amend Rule 701 and Form S-8 to permit an issuer on a temporary basis to 

offer and sell securities to certain platform workers.  Under the proposed definition of “platform 



13 

worker,”29 eligible workers would be those persons unaffiliated with the issuer who meet two 

conditions.  First, the worker must provide bona fide services through or by means of the issuer’s 

internet-based or other widespread, technology-based marketplace platform or system 

(“platform”).  Workers providing services to third-party end-users would qualify, as long as the 

issuer benefits from such services (e.g., by receiving a fee for the worker’s use of the platform or 

a percentage of the compensation received from the end-user for the worker’s services).30  

Consistent with the treatment of persons eligible for the current exemption under 17 CFR 

230.701(c) (“Rule 701(c)”), platform workers providing services to the issuer, or the issuer’s 

parents, subsidiaries,31 or subsidiaries of the issuer’s parent, would also qualify.32  Second, the 

services must be provided pursuant to a written contract or agreement between the issuer and the 

platform worker33 and must be provided through a platform-based marketplace (or other 

widespread, technology-based marketplace platform or system) that the issuer operates and 

controls.34   

Commenters who supported expanding the scope of Rule 701 and Form S-8 to include 

offers and sales of securities to platform workers stated that updating Rule 701 and Form S-8 to 

                                                
29   See proposed Rule 701(h)(1); see also proposed 17 CFR 239.16b(c) and proposed amended General Instruction 

A.1.(b)(1) to Form S-8, which reference the proposed definition of “platform worker” under proposed Rule 
701(h)(1). 

30  See proposed new Rule 701(h)(2)(i) (the first prong of the proposed definition of platform worker); see also 
proposed 17 CFR 239.16b(c)(1) and proposed amended General Instruction A.1.(b)(1) to Form S-8.  As 
explained below in Section II.B., the services may not be in connection with the offer or sale of securities in a 
capital-raising transaction. 

31  In a companion rulemaking, we are proposing to expand the scope of coverage of the Rule 701 exemption, 
which currently includes compensatory issuances to employees of an issuer’s or its parent’s majority-owned 
subsidiaries, to include compensatory issuances to employees of all of an issuer’s or its parent’s subsidiaries.  
See Release No. 33-10891 (Nov. 24, 2020), at Section II.C.3 (proposing to amend Rule 701(c)).  Our proposed 
inclusion of platform workers of an issuer’s subsidiaries, without regard to whether they are majority-owned, 
would be consistent with the proposed amendment of Rule 701(c).  Like this proposed amendment, the meaning 
of “subsidiary” under Rule 701(h) would be governed by the general definition of subsidiary for purposes of the 
Securities Act.  Under that definition, a “subsidiary” of a specified person is an affiliate controlled by such 
person directly or indirectly through one or more intermediaries.  See 17 CFR 230.405. 

32   See proposed Rule 701(h)(2)(i). 
33  For the purpose of Rule 701(h), the term “written contract or agreement” would include an electronic, internet-

based contract or agreement.  We believe that a similar interpretation applies to the term “written compensation 
contract” in Rule 701(c).  Because the proposed Rule 701(h) definition of “platform worker” would also be used 
in Form S-8, the same meaning of “written contract or agreement” would apply in that context.  See proposed 
General Instruction A.1.(b)(1) of Form S-8; see also proposed 17 CFR 239.16b(c)(1).  

34   See proposed Rule 701(h)(2)(ii). 



14 

include such workers is necessary to keep pace with evolutions in the economy and the labor 

market.35  One commenter indicated that such an update would be consistent with the goals of 

the Jumpstart Our Business Startups Act (“JOBS” Act) to spur entrepreneurship and support the 

business startups and private companies that are vital to the U.S. economy, and that increased 

alignment of incentives between gig economy companies and participating platform workers 

would benefit both.36   

Some commenters emphasized the potential benefits to platform workers of expanding 

Rule 701.  Commenters stated that expanding eligibility for Rule 701 issuances would help 

democratize share ownership and wealth by allowing the many ordinary Americans participating 

in the gig economy to make significant strides toward greater wealth and financial security.37   

Other commenters noted the potential benefits to the platform providers of expanding 

Rule 701.  One commenter indicated that enabling privately held companies to grant equity 

compensation to platform workers performing services would enable those platforms to attract 

and retain talent.38  Another commenter stated that the ability to grant equity compensation to 

platform workers would significantly enhance the growth and expansion of new economy 

companies and help level the playing field between private companies and public companies 

participating in the new economy.39   

Some commenters, however, opposed the expansion of the scope of Rule 701 and Form 

S-8 to include offers and sales of securities to platform workers because of their belief that the 

Commission lacks the expertise to assess accurately changes in the labor market, and due to their 

                                                
35  See, e.g., letter from Chamber; see also letter from Airbnb. 
36  See letter from Airbnb.  
37   See letter from Sament; see also letter from Airbnb. 
38  See letter from Postmates. 
39  See letter from Indigo.  



15 

concern that such regulatory changes to Rule 701 and Form S-8 would encourage companies to 

misclassify employees and undermine American workers.40 

We agree with commenters that expanding the scope of Rule 701 and Form S-8 to 

include offers and sales of securities to platform workers participating in an issuer’s platform-

based marketplace could benefit the issuer and its investors, including those platform workers 

that are new equity holders.  We are mindful, however, that the gig economy is evolving.  We are 

therefore making the rule amendments temporary so that we can reassess their impact as these 

markets develop.41   

Although we understand that the development of the gig economy raises a number of 

issues under labor, tax, and other regulatory regimes, our proposed amendments to Rule 701 and 

Form S-8 to include these workers solely reflect considerations relevant to the U.S. Federal 

securities laws.  The proposed amendments are not meant, and should not be construed, to 

address issues raised under any other regulatory regimes.  We express no opinion on whether or 

not these “gig economy” or platform workers would be considered “employees” for purposes of 

other laws or regulations.     

The proposed amendments would require an eligible platform worker to be a natural 

person or an entity meeting specified conditions.  We recognize that the “gig economy” is a 

                                                
40  See letter from Sen. Sherrod Brown (Mar. 7, 2019); see also letter from National Employment Law Project 

(Mar. 4, 2019) (“NELP”) (“Expanding the rule has the potential to further muddy the waters on ‘gig’ workers’ 
employment status and even legitimize their independent contractor status at a time when this issue is being 
examined by legislatures, courts, and agencies with expertise on employment status.”); and letter from 
Chairwoman Maxine Waters (Apr. 1, 2020) (opposing “weakening Rule 701 of the Securities Act of 1933 to 
allow companies to compensate certain non-traditional employees with equity compensation in lieu of a 
traditional paycheck and without important investor protections”).  But see, e.g., infra Section II.B for a 
discussion of certain investor protection conditions; and letter from Rep. Patrick McHenry (Mar. 30, 2020) 
(requesting that any recipient of funds under the Coronavirus, Aid, Relief, and Economic Security (CARES) 
Act be encouraged to provide equity compensation to its entire workforce, including non-traditional workers). 

41  The proposed amendments provide, however, that, following the expiration of temporary Rule 701(h), an issuer 
may continue to rely on the Rule 701(h) exemption for the sale of securities underlying options, warrants, or 
rights previously issued in an exempt transaction pursuant to Rule 701(h).  See proposed Rule 701(h)(1)(ii) and 
infra Section II.G.  We believe this provision is necessary in order to remove a potential disincentive to the use 
of the proposed exemption to issue options to platform workers.  The Commission has taken a similar approach 
regarding securities sold by an issuer after it has become public that were initially offered pursuant to Rule 701.  
See 17 CFR 230.701(b)(2).     



16 

fluid, developing market in which participating workers may be organized in various ways.  In 

this regard, we note that some commenters recommended that platform workers should not be 

subject to a natural person requirement to participate in Rule 701 offerings.42  We recognize that 

some platform workers may form limited liability companies or similar legal entities for a variety 

of reasons, such as tax planning and personal liability protection.  In order to accommodate such 

workers and provide additional flexibility for an evolving market, the proposed rules provide that 

a platform worker may be an entity as long as substantially all of its activities involve the 

performance of bona fide services that meet the requirements of proposed Rule 701(h), and the 

ownership interest of the entity is wholly and directly held by the natural person performing the 

services pursuant to the proposed rule.  This proposed approach would be similar to the 

Commission’s recognition of personal services businesses as corporate alter egos of natural 

persons with respect to the ability to participate in Form S-8 offerings under existing employee, 

consultant, and advisor categories, where such businesses are wholly-owned by (or jointly owned 

with the spouse of) the natural person who provides services to the issuer.43  

We also recognize that the “gig economy” is a multi-faceted economic phenomenon and 

that, in some cases, participants may sell goods or conduct other activities—beyond providing 

services—by means of platforms.  Some commenters recommended expanding the Rule 701 

exemption to include any activity where there is an issuer  providing a technology-based 

                                                
42  See letters from Chamber and Davis Polk.  In the companion rulemaking, we are proposing to eliminate the 

“natural person” requirement in connection with Rule 701 eligibility for consultants and advisors by extending 
such eligibility to service-providing entities meeting specified conditions (e.g., limits on the number of persons 
owning an entity and requiring a certain percentage of those persons to provide services).  See Release No. 33-
10891 at Section II.C.1.  We are also proposing a similar change regarding consultant and advisor eligibility 
under Form S-8.  See Release No. 33-10891 at Section II.C.2.  

  
43  See 1999 Form S-8 Adopting Release at Section II.A.1 (“We agree with commenters that it should not matter if 

the consulting contract is with an entity or a natural person, as long as the securities registered are issued to the 
natural persons working for the consulting entity who provide bona fide services to the issuer. Where the 
securities are issued to these persons, contracting with a consulting entity would not abuse Form S-8. We have 
revised the amendments to eliminate the proposed requirement that issuers contract only with natural persons, 
while retaining the requirement that the securities must be issued to natural persons.”); see also letter from 
Davis Polk.         



17 

marketplace platform as long as the activity does not include capital-raising of the type currently 

prohibited by Rule 701.44  Nevertheless, we are limiting this initial expansion of Rule 701 and 

Form S-8 eligibility to participants who provide bona fide services not in connection with 

capital-raising or with promoting or maintaining a market for the issuer’s securities.  The 

proposed expansion would not cover the use of a platform for the sale or transfer of permanent 

ownership of discrete, tangible goods.45  We view the expansion of Rule 701 and Form S-8 to 

include platform workers who provide services, subject to the above limitations, as an 

incremental evolutionary step that is consistent with the compensatory function of Rule 701 and 

Form S-8 while limiting the potential for abuse.  Depending on the results of the initial expanded 

use of Rule 701 and Form S-8, if adopted, the Commission could consider expanding eligibility 

to other activities, such as selling goods or other non-service-providing activities in the future. 

The proposed definition of platform worker would also include the condition that the 

issuer operates the platform for the provision of services pursuant to a written contract or 

agreement46 between the issuer and the platform worker under which the issuer controls the use 

of the internet platform. We believe that this “issuer control” condition would help maintain an 

appropriate compensatory nexus between the issuer and participating platform workers.47 

The appropriate nexus would be demonstrated by meeting three express requirements.  

First, the issuer must be able to provide access to the platform and establish the principal terms 

                                                
44  See, e.g., letter from ABA; see also letter from Sullivan (stating that to encompass the new types of alternative 

work arrangements, Rule 701 (and Form S-8) should encompass those individuals providing services to or on 
behalf of an issuer or making or distributing the products sold or provided to the issuer’s consumers). 

45  See proposed Rule 701(h)(2)(i).  For example, a platform that provided for the permanent transfer of real estate 
in fee simple, as opposed to the temporary rental of real estate, would not constitute bona fide services within 
the meaning of the rule. 

46  The Commission has similarly included a “written contract or agreement” requirement as a condition of using 
the Rule 701 exemption to help ensure that an issuance of securities is being undertaken for a compensatory 
purpose.  See the Rule 701 Adopting Release, supra note 5, at 12919 (justifying the inclusion of issuances to 
consultants or advisors under Rule 701 in part because of the condition requiring a written plan or contract). 

47  Although one commenter stated that “it is not necessary for a revised Rule 701 to micromanage the level of 
control” over a worker, see letter from Chamber, we agree with another commenter that indicated that some 
level of control by an issuer over the use of its platform would help ensure that the issuance of securities to 
workers participating in its marketplace platform under an expanded Rule 701 is compensatory only.  See letter 
from Airbnb. 



18 

of service for using the platform.  Second, the issuer must be able to establish terms and 

conditions by which the platform worker receives payment for the services provided through the 

platform.  This could include an ability to establish the amount of the fees charged for using the 

platform.  Such fees may include any fee charged to the participating worker for the use of the 

platform as well as any fee or percentage of payment charged to an end-user for the services 

provided by the worker.  If there are no end-users, and multiple workers provide services directly 

to the issuer via the platform, the issuer must be able to determine the amount and method of 

payment for such services.  Third, the issuer must have the authority to accept and remove the 

platform workers providing services through the platform.   

We believe that these three requirements are necessary and appropriate to demonstrate 

the requisite nexus for purposes of an expanded Rule 701 and Form S-8.  A written contract or 

agreement providing the issuer with control over the platform’s terms of use, including payment 

terms, would evidence that the issuance of securities to the worker is for compensatory and 

incentive purposes relating to the services being provided.  In addition, requiring that the issuer 

control who may provide services through its platform would help prevent participating workers 

from using the platform primarily for non-compensatory purposes.  The proposed conditions 

would not, however, limit what services an issuer could facilitate through its platform or how 

participating workers could provide the services. 

Rule 701 currently exempts offers and sales of securities to former employees, directors, 

general partners, trustees, officers, consultants, and advisors only if such persons were employed 

by or providing services to the issuer at the time the securities were offered.48  The proposed 

amendment to Rule 701 would similarly exempt offers and sales to former platform workers if 

such workers met the conditions of § 230.701(h) at the time the securities were offered.49   

                                                
48  See Rule 701(c). 
49  See proposed Rule 701(h)(1)(i). 



19 

In a companion rulemaking, at the suggestion of commenters, we are proposing to 

expand the eligibility of former employees under Rule 701 to include post-resignation or 

termination offers and sales to: 

• Persons who were employed by or providing services to an issuer during a performance 

period ending within 12 months preceding resignation or termination of their 

employment or service for which the securities were issued; and 

• Former employees of an acquired entity, as long as the securities are being issued in 

substitution or exchange for securities that were issued to the former employees of the 

acquired entity on a compensatory basis while such persons were employed by or 

providing services to the acquired entity.50 

In the interest of providing consistent treatment, we are similarly proposing to include 

under Rule 701 offers and sales to former platform workers who met the conditions of  

§ 230.701(h) during a period of service ending within 12 months preceding the termination of 

service for which the securities were issued.51  We believe that exempting post-termination 

grants of securities to former platform workers that are made in respect of prior service during 

the specified 12-month period would benefit both issuers and platform workers by facilitating 

compensatory transactions.  Moreover, because we believe that expanding the use of Form S-8 to 

former platform workers would be consistent with the compensatory purposes of Form S-8, we 

are similarly proposing to amend Form S-8 to include securities issued to former platform 

workers, including post-termination grants made in respect of prior service during the 12 months 

preceding the cessation of service.52 

For similar reasons, we also are proposing to include in the exemption under Rule 701(h), 

and to allow the registration on Form S-8 of, securities issued to former platform workers of an 

                                                
50   See Release No. 33-10891 at Section II.C.2. 
51  See proposed Rule 701(h)(1)(i).   
52  See proposed General Instruction A.1.(b)(4)(i) of Form S-8. 



20 

acquired entity in substitution or exchange for securities that were issued to the former platform 

workers of the acquired entity on a compensatory basis while such workers were providing bona 

fide services to the acquired entity.53  Those persons would be able to participate in the acquiring 

issuer’s plan with respect to equity awards granted in connection with the acquisition to replace 

awards issued by the acquired entity while such workers provided services to the acquired 

entity.54 

In addition to former employees, Form S-8 currently includes under its scope executors, 

administrators, or beneficiaries of the estates of deceased employees, guardians or members of a 

committee for incompetent former employees, or similar persons duly authorized by law to 

administer the estate or assets of former employees.55  We are proposing a similar provision 

under Rule 701 and Form S-8 for the estates of deceased platform workers and the 

representatives of incompetent former platform workers.56  Although the proposed changes to 

Rule 701 to include platform workers would be temporary rules, we believe that this proposed 

provision could prove useful to the administration of the estate of a deceased platform worker or 

the representation of an incompetent former platform worker, particularly because, under the 

proposed rules, sales of securities underlying options issued pursuant to the temporary rules may 

occur following the rules’ expiration. 

Request for Comment 

                                                
53  See proposed Rule 701(h)(1)(i); see also proposed General Instruction A.1.(b)(4)(ii) of Form S-8.  Such 

treatment would be consistent with the expanded scope of Form S-8 proposed in the companion rulemaking.  
See Release No. 33-10891 at Section III.D.1. 

54  The companion release includes other proposed amendments pertaining to business combinations that could be 
applicable to issuances to platform workers if adopted.  For example, we are proposing to amend Rule 701(e) to 
address the disclosure delivery obligations regarding acquired entity derivative securities that the acquiring 
issuer assumes in a business combination transaction.  Another proposed amendment would clarify that, in 
determining whether the amount of securities the acquiring issuer sold during any consecutive 12-month period 
exceeds $10 million under Rule 701(e) [17 CFR 230.701(e)], the acquiring issuer would consider only the 
securities that it sold in reliance on Rule 701 during that period, and would not be required to include any 
securities sold by the acquired entity pursuant to the rule during the same 12-month period.  See Release No. 
33-10891 at Section II.A.6.  

55  See General Instruction A.1.(a)(3) of Form S-8.  In the companion release, we are proposing to amend Rule 701 
to include a similar provision for the executors, administrators, or beneficiaries of the estates of deceased 
employees who may receive securities underlying options previously issued to former employees pursuant to 
Rule 701.  See Release No. 33-10891 at Section II.C.2.   

56  See proposed General Instruction A.1.(b)(4)(iii) to Form S-8 and proposed Rule 701(h)(1)(i).21 

1. Should we expand the scope of Rule 701 and Form S-8 to include offers and sales of 

securities to platform workers unaffiliated with the issuer who provide bona fide services 

to an issuer by means of the issuer’s internet-based platform, or through other widespread 

technology-based marketplace platforms, as proposed?  Should the expansion of Rule 

701 and Form S-8 also include services provided by such workers to the issuer’s parents, 

majority-owned subsidiaries, or majority-owned subsidiaries of the issuer's parent, as 

proposed?   

2. Is there a basis for treating platform workers differently than any other non-employees 

not covered under the current exemption?  Does the use of an internet-based platform 

establish a sufficient basis for treating those workers differently than non-employees in a 

different context? 

3. Should we also expand the scope of Rule 701 and Form S-8 to include offers and sales of 

securities to platform workers unaffiliated with the issuer who provide bona fide services 

to third-party end-users by means of the issuer’s internet-based marketplace platform, or 

through other widespread technology-based marketplace platforms or systems, and from 

which the issuer benefits, as proposed?  

4. Should we define or provide examples of a “widespread, technology-based marketplace 

platform or system” (other than an internet-based marketplace platform) that would fall 

within the scope of the proposed amendments?  If so, how should we define that term, or 

what examples should we include? 

5. Is the term “services” sufficiently clear?  Should we define it differently?  If so, what 

should the definition be?  Should we provide additional specific guidance concerning 

what activities constitute “services” for purposes of the proposed expansion of Rule 701 

and Form S-8?   

6. Should we limit issuances under Rule 701(h) or an expanded Form S-8 to platform 

workers who are unaffiliated with the issuer, as proposed?  If so, should we provide a 



22 

definition of or additional guidance concerning the meaning of “unaffiliated with the 

issuer”?  For example, should we define “unaffiliated” as a person who is not an 

“affiliate” as defined by 17 CFR 230.405?  Should we instead specify the types of 

persons that would satisfy the “unaffiliated” provision?  For example, should 

“unaffiliated” mean persons who are not an issuer’s employees, officers, directors, 

advisors, or consultants, or certain family members of such persons?  If so, which family 

members would be treated as affiliates of the issuer and therefore be ineligible to receive 

securities under the proposed amendments to Rule 701 and Form S-8?    

7. Should we limit the use of the expanded Rule 701 and Form S-8 only to workers who 

provide bona fide services through an issuer’s marketplace platform, as proposed?  Or 

should we consider other alternatives?  For example: 

a. Should we permit an issuer to offer or sell securities to workers who engage in other 

platform-based activities, such as selling goods?  If so, should we limit the types of 

goods?  For example, should we only permit an issuer to offer or sell securities to 

workers who engage in selling of unique or value-added goods and not workers who 

merely use a platform to resell goods?   

b.  If we were to permit an issuer to offer or sell securities to workers who engage in 

other platform-based activities, such as selling goods, what characteristics or factors 

would help ensure that the nexus between the issuer and worker is compensatory and 

the issuance of securities is not in connection with capital-raising or for speculative 

purposes?  For example, should we require that the worker meets minimum annual or 

aggregate sales thresholds or that the worker has been engaged in performing 

platform-based activities for the issuer for a minimum period of time before she is 

eligible to receive shares under expanded Rule 701 and Form S-8.   Should we only 

permit securities that do not have capital-raising features, such as restricted stock 



23 

units, to be issued to platform workers for platform-based activities that involve the 

sale of goods?   

c. Should we include offers and sales of securities to workers having other types of new 

work relationships?  If so, which types of new work relationships should we include, 

and what characteristics or factors would help ensure that the nexus between the 

issuer and worker is compensatory and the issuance of securities is not in connection 

with capital-raising?  Are there new work relationships that are not provided through 

an internet-based or other widespread, technology-based marketplace platform or 

system that we should include in the exemption? 

8. Should we require that a platform worker be a natural person or an entity meeting 

specified criteria to be able to receive securities pursuant to an expanded Rule 701 or 

Form S-8, as proposed?  Should we instead require a platform worker to be a natural 

person?  Do a significant number of platform workers currently operate through a 

business entity?  If so, would a natural person requirement impact the extent to which 

they would continue to perform as platform workers or continue to do so through a 

business entity?  Should we limit the types of business entities through which a platform 

worker would be able to operate?  Should we permit an entity to be a platform worker, as 

proposed, if substantially all of its activities involve the performance of bona fide 

services that meet the requirements of proposed Rule 701(h), and the ownership interest 

of the entity is wholly and directly held by the natural person performing the services 

pursuant to the proposed rule?  Are there different or additional eligibility conditions that 

we should adopt to allow platform workers to perform services as entities pursuant to the 

temporary rules?  For example, should we permit more than one natural person to own 

the entity through which the services are being performed by the platform worker?  If so, 

should we limit the number of natural persons that may own the entity or require that a 

co-owner be the spouse or other family member?  Should we condition allowing more 



24 

than one natural person to own the entity by requiring each owner to perform the services 

of a platform worker?     

9. Should we require that an issuer operating a platform control the platform as a condition 

to using the Rule 701 exemption and Form S-8 registration for issuances of securities to 

workers providing services through the platform, as proposed?  Should we permit the use 

of the exemption for issuances to such workers if an issuer’s affiliate controls the 

platform? 

10. Should we require that services be provided pursuant to a written contract or agreement, 

as proposed?  If so, should we include an express provision that the term “written 

contract or agreement” includes an electronic, internet-based contract or agreement?  

Should we provide the same provision for the term “written compensation contract” in 

Rule 701(c)?  

11. Are the proposed conditions demonstrating control of the platform appropriate?  Should 

we require that an issuer satisfy all of the specified conditions?  Should we only require 

that an issuer have the ability to determine terms of use, including payment terms?  

Should we instead only require that an issuer have the ability to accept and remove the 

workers providing services through its platform?   

12. Are there other conditions, in addition to or in lieu of the proposed conditions, that we 

should adopt?    

13. Instead of, or in addition to, an issuer control requirement, are there other issuer 

eligibility conditions that we should adopt to help ensure that the issuance of securities to 

platform workers is for a compensatory purpose?  For example, when the issuer’s 

platform is used to provide services to end-users, should we require that an issuer earn a 

substantial amount of its annual revenues from fees or other payments resulting from 

platform workers using the issuer’s platform?  Would such a condition make it less likely 

that the issuance of securities to those workers would be for a capital-raising purpose? 



25 

14. Should we expand the scope of Rule 701 and Form S-8 to include offers and sales of 

securities to former platform workers, including former platform workers of an entity 

acquired by an issuer, as proposed?  Should such expansion include securities issued to 

former platform workers, including post-termination grants made in respect of prior 

service during the 12 months following the cessation of service, as proposed?  Should we 

include under Form S-8 issuances to executors, administrators, or beneficiaries of the 

estates of deceased platform workers, or other persons similar to those included for 

deceased or incompetent former employees, as proposed?  Should we amend Rule 701 to 

include a similar provision for the estates of deceased employees or deceased platform 

workers and representatives of incompetent former employees or incompetent former 

platform workers, as proposed? 

15. Would state blue-sky laws affect the operation of the proposed temporary platform 

worker exemption?  If so, how?  Are there changes we should consider to address state 

law issues?  For example, should we provide for the preemption of state securities law 

registration requirements for offers made pursuant to Rule 701(h)?  Are there other state 

law implications that would be relevant to consider in connection with the proposed 

amendments?  For example, would the proposed temporary platform worker exemption 

have any implications regarding the enforceability of state laws pertaining to non-

competition arrangements?  Would the proposed exemption result in an increase in the 

use of non-compete provisions regarding issuers’ arrangements with platform workers?  

Would the proposed exemption affect the ability of issuers under state law to provide 

additional benefits to platform workers, such as minimum wage guarantees, healthcare 

stipends, and occupational auto insurance?   

B. Additional Requirements for Issuances to Platform Workers under Rule 701 
and Form S-8 



26 

We are proposing four additional requirements with which an issuer must comply in 

order to use the exemption for issuances to platform workers under Rule 701.57  In addition, we 

are proposing that the first three of these conditions would also apply to issuances to platform 

workers registered on Form S-8.58 

Because of certain structural differences between platform-based work relationships and 

traditional employer-employee relationships, we are mindful that compensatory offerings in this 

context may be more susceptible to misuse.  For example, a traditional employer-employee work 

relationship will involve some degree of interpersonal interactions between the issuer and the 

employee by which the former supervises and monitors the work and conduct of the latter.  In 

contrast, there may be no or very few interpersonal interactions in the issuer-platform worker 

relationship.  In addition, platform workers frequently work for multiple companies and may 

have exclusive control over their work schedules, including how often and for how long they will 

work.  These short-term and/or intermittent work relationships across multiple issuers may 

increase the likelihood that workers would establish a work relationship with a platform as a 

means of realizing an investment opportunity with the issuer or that issuers would use the 

proposed provisions to engage in capital-raising activities.  The additional requirements we are 

proposing are designed to work together to help ensure that issuances made to platform workers 

pursuant to revised Rule 701 are for compensatory purposes while reducing any opportunity for a 

platform worker to use her relationship with the issuer to engage in speculative activity.59 

The first condition is that the issuance must be pursuant to a compensatory arrangement 

that is evidenced by a written compensation plan, contract, or agreement between the issuer and 

the platform worker.60  The compensatory arrangement may not be for services in connection 

                                                
57  See proposed Rule 701(h)(3). 
58  See proposed 17 CFR 239.16b(c)(1) and proposed General Instruction A.1(b)(2)(i) through (iii) to Form S-8.  
  
59  One commenter specifically recommended imposing additional restrictions regarding the issuance of securities 

to platform workers beyond those typically applicable to equity issuances under Rule 701 because of the third-
party, contractual relationship between the issuer and platform worker.  See letter from Airbnb. 

60  See proposed Rule 701(h)(3)(i). 



27 

with the offer or sale of securities in a capital-raising transaction or services that directly or 

indirectly promote or maintain a market for the issuer’s securities.  Thus, an issuer may not rely 

on the exemption to issue securities to a platform worker for compensation for performing 

services analogous to those of an underwriter or promoter or otherwise made in connection with 

a capital-raising transaction.  An issuer also may not rely on the exemption to issue securities to a 

platform worker as part of a plan or scheme to evade the compensatory purpose of Rule 701 or 

otherwise evade the registration requirements of the Securities Act.61  This condition is based on 

the requirements under Rule 701 and Form S-8 currently applicable to consultants and 

advisors,62 which were designed to prevent abuse of the rules as conduits for unregistered 

securities distributions to the general public and for securities issuances to stock promoters.63   

Second, as proposed, no more than 15 percent of the value of compensation received by a 

platform worker from the issuer for services provided during a consecutive 12-month period, and 

no more than $75,000 of such compensation received from the issuer during a consecutive 36-

month period, may consist of securities issued pursuant to Rule 701 or a registration statement on 

Form S-8.64  The issuer would be required to determine the value of such securities as of the time 

the securities are granted.65  For the purpose of assessing compliance with these limits, an issuer 

                                                
61  See Preliminary Note 5 to Rule 701, which would remain applicable to issuances under proposed Rule 

701(h).We are also proposing to add a similar note in proposed General Instruction A.1(b)(2) to Form S-8.  
 

62   See Rule 701(c)(1)(ii) and (iii) [17 CFR 230.701(c)(1)(ii) and (iii)], and General Instruction A.1(a)(1)(ii) and 
(iii) to Form S-8. 

63   See 1999 Rule 701 Adopting Release, supra note 5, at Section II.D., and 1999 Form S-8 Adopting Release (“ at 
Sections I.A. and II.A.  A number of commenters that addressed expanding our rules to encompass “gig 
economy” workers generally supported such a condition.  See, e.g., letters from ABA, Airbnb, Chamber, and 
Uber. 

64    For example, if a platform worker received $1,000 in total compensation during a 12-month period from Issuer 
X for services provided to or for the benefit of Issuer X, no more than $150 of that compensation could consist 
of securities.  These proposed annual limits on the amount of securities a platform worker could receive as 
compensation from an issuer are in addition to the limits on the aggregate sales price or amount of securities 
that an issuer can sell in reliance on Rule 701 during any consecutive 12-month period.  See 17 CFR 
230.701(d).  As discussed below, the Rule 701(d) limits would continue to apply, and an issuer would be 
required to aggregate issuances to platform workers with all other issuances under Rule 701 during a 12-month 
period for the purpose of complying with Rule 701(d).  See infra Section II.C. 

65   See proposed Rule 701(h)(3)(ii).   



28 

would be able to use any reasonable, recognized valuation methodology66 as long as the 

methodology is consistently applied during the same 12-month or 36-month period.67   

This proposed cap on the amount of compensation that a platform worker may receive as 

securities from the issuer is designed to limit an issuer’s incentive and ability to use the new 

exemptive rule as a conduit for a public distribution of its securities, contrary to the 

compensatory purpose of Rule 701 and Form S-8.68  In addition, we believe the proposed cap 

would reduce any incentive for platform workers to use the exemption primarily for realizing 

speculative investment opportunities and would limit the risk that issuances would be for capital-

raising or other non-compensatory purposes.69     

Third, we are proposing that the amount and terms of any securities issued to a platform 

worker may not be subject to individual bargaining.  Similarly, as proposed, platform workers 

would not be permitted to elect between payment in securities or cash.70  We believe this 

proposed requirement would also reduce any incentive for platform workers to use the 

exemption as a means of realizing speculative investment opportunities rather than receiving the 

securities as a compensatory grant.71 

                                                
66  We expect that issuers would use the same valuation methods that they currently use to make valuations for 

compensatory issuances under Rule 701(c). 
67  In this regard, an issuer’s use of multiple, different valuation methodologies during the same period could raise 

concerns that the issuer was doing so as part of a plan or scheme to evade the compensatory purpose of Rule 
701. 

68  Some commenters supported imposing a limitation on the amount of equity compensation a “gig economy” 
worker could receive to prevent abuses under an expanded Rule 701 and Form S-8.  See letters from ABA and 
Airbnb. 

69  The Commission has historically expressed concern about the potential for abuse in the area of issuances of 
securities for compensation.  See, e.g., 1999 Rule 701 Adopting Release, 64 FR at 11098; see also Rule 701 
Reproposing Release, 52 FR at 29034.  

70  See proposed Rule 701(h)(3)(iii). 
71   One commenter recommended the adoption of this type of condition in order to prevent abuses from occurring 

under any expanded rules.  See letter from Airbnb.  This proposed condition is also consistent with the “no sale” 
position taken by the staff that, where securities are awarded to employees at no direct cost through broad-based 
bonus plans, there has been no sale, and therefore no public distribution of the securities, since employees do 
not individually bargain to contribute cash or other tangible or definable consideration to such plans.  See 
Changes to Exchange Act Registration Requirements to Implement Title V and Title VI of the JOBS Act, Release 
No. 33-10075 (May 3, 2016) [81 FR 28689 (May 10, 2016)]. 



29 

 The preceding three conditions would apply equally to securities issuances to platform 

workers under both Rule 701 and Form S-8.72  For purposes of Rule 701, however, we are 

proposing a fourth condition that would require the issuer to take reasonable steps to prohibit the 

transferability of securities issued to platform workers pursuant to the exemption except for 

transfers to the issuer or by operation of law.73  Such reasonable steps could include the 

placement of special legends on the securities to be issued to platform workers or appropriate 

instructions to transfer agents that would provide adequate notice of the transfer prohibition to 

platform workers.  The purpose of this provision is to help ensure that the shares are obtained for 

compensatory and not speculative purposes.  Specifically, it would prevent the development of a 

market in such securities until after the issuer becomes subject to the reporting requirements of 

Section 13 or 15(d) of the Exchange Act, which would in turn greatly reduce, if not eliminate, 

any incentive for a worker to seek out securities issued pursuant to Rule 701 for speculative 

purposes.   

Currently, all securities issued pursuant to Rule 701 are “restricted securities,” and any 

resales must comply with Securities Act registration requirements or qualify for an exemption 

therefrom.74  As proposed, the additional transferability prohibition on Rule 701 securities issued 

to platform workers would preclude any transfers, except transfers back to the issuer or by 

operation of law.75  Transfers by operation of law would include, for example, transfers pursuant 

to the laws of descent and distribution and domestic relations orders in divorces.  One 

commenter recommended the adoption of enhanced transfer restrictions for securities issued to 

gig economy workers beyond those applicable to equity currently issuable pursuant to Rule 701 

because of the third-party contractual relationship between gig economy participants and gig 

                                                
72  See proposed 17 CFR 239.16b(c)(1) and proposed General Instruction A.1.(a)(3) to Form S-8.  
73  See proposed Rule 701(h)(3)(iv). 
74   See 17 CFR 230.701(g)(1) and (2). 
75  See proposed Rule 701(h)(3)(iv). 



30 

economy companies.76  As noted earlier, we agree that applying enhanced transfer restrictions is 

appropriate in light of the more remote contractual relationship between an issuer and its 

platform workers, compared to the relationship with its employees.77  As with other securities 

issued pursuant to Rule 701, however, ninety days after the issuer becomes subject to Exchange 

Act reporting requirements, securities issued to platform workers would become available for 

resale under 17 CFR 230.701(g)(3).78   

We are not proposing similar transfer restrictions for securities issued to platform 

workers pursuant to a Form S-8 registration statement.  Securities Act and Exchange Act 

protections for such securities would already exist, making the use of the issued securities for 

speculative purposes by a platform worker less likely.79 

Request for Comment  

16. Would the proposed conditions for issuances to platform workers under Rule 701 or 

Form S-8 help ensure that the issuances are for a compensatory purpose?  Should we 

adopt only some of the conditions?  If so, which ones?  For example, should we require 

only that the issuance be pursuant to a compensatory arrangement for services not in 

connection with the offer or sale of securities in a capital-raising transaction? 

17. Should we impose a cap on the amount of compensation that a platform worker may 

receive as securities from the issuer on an annual basis under Rule 701 and Form S-8 to 

limit the potential that the issuance to platform workers would be used for capital-raising 

or speculative purposes, as proposed?  If so, should we require that no more than 15 

percent of the value of compensation received by a platform worker from the issuer for 

                                                
76   Letter from Airbnb. 
77  See supra note 59 and accompanying text. 
78  See proposed Rule 701(h)(3)(iv).  Following that 90-day period, persons who are not affiliates may resell Rule 

701 securities in reliance on 17 CFR 230.144 without compliance with the current public information 
requirements under 17 CFR 230.144(c) and holding period requirements under 17 CFR 230.144(d), and 
affiliates may resell such securities without compliance with the holding period requirements. 

79  For example, to be eligible to use Form S-8, the issuer must be a reporting issuer and must have filed all reports 
and other materials required to be filed during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports and materials). 



31 

services provided during a 12-month period be in securities, as proposed?  Should the 

annual cap be less than or greater than 15 percent of the compensation received by the 

platform worker during a 12-month period?  Should the annual cap apply only to 

issuances under Rule 701 rather than both Rule 701 and Form S-8?  Should the annual 

cap apply only to issuances under Form S-8? 

18. Should we impose a cap on the amount of compensation that a platform worker may 

receive as securities from the issuer during a 36-month period (under Rule 701 and 

registered on Form S-8) to limit the potential that the issuance to platform workers would 

be used for capital-raising or speculative purposes, as proposed?  Should we require that 

no more than $75,000 of such compensation received from the issuer during a 36-month 

period may consist of securities, as proposed?  Should this cap be less than or greater 

than $75,000, and/or apply to a shorter or longer period than 36 months?  For example, 

should we limit the amount of securities a platform worker may receive as compensation 

from an issuer to no more than $50,000 for a consecutive 24-month period?  Instead of, 

or in addition to, the 36-month cap, should there be an aggregate limit on the dollar 

amount of securities that a platform worker may ever receive from an issuer?  If so, what 

should that cap be?  Should the $75,000 cap apply only to issuances under Rule 701?  

Should the $75,000 limitation apply only for as long as the issuer is not subject to the 

reporting requirements of Section 13 or 15(d) of the Exchange Act?  Should the $75,000 

cap apply only to issuances registered on Form S-8?   

19. Should we impose only the proposed 12-month cap or only the proposed 36-month cap, 

but not both?  Should we not impose any cap on the amount of compensation that a 

platform worker may receive as securities in light of other proposed conditions?  Should 

either cap apply to limit the total amount of compensation issued as securities to platform 

workers by an issuer as well as an issuer’s affiliates, or should either cap apply 

individually to each issuer or issuer’s affiliate? 



32 

20. For purposes of the 12- and 36-month caps on the amount of compensation that a 

platform worker may receive as securities from the issuer, should the value of 

compensation be measured at the time the securities are granted, as proposed?  For the 

same purposes, should an issuer be able to use any reasonable, recognized valuation 

methodology for purposes of determining the fair market value of the securities issued to 

platform workers under Rule 701?  Should an issuer be able to change the valuation 

methodology used for purposes of the proposed caps as long as the change is motivated 

by bona fide reasons unrelated to the proposed exemption for platform workers? 

21. Should we specify in Rule 701 and Form S-8 that the issuer must use the same valuation 

method that it currently uses to make valuations for compensatory issuances under Rule 

701(c), if applicable, and apply the methodology consistently during the same period?   

22. Should we require that the amount and terms of any securities issued to a platform 

worker may not be subject to individual bargaining or the worker’s ability to elect 

between payment in securities or cash, as proposed?  If a platform worker is unable to 

negotiate the amount and terms of securities to be issued as compensation, should that 

worker be able to elect to receive payment only in cash?  

23. For issuances pursuant to the Rule 701 exemption, should we require the issuer to take 

reasonable steps to prohibit the transfer of securities issued to platform workers, other 

than to the issuer or by operation of law, as proposed?  Should we limit the prohibition on 

transferability to a specific period, e.g., for two or three years?  Should we mandate the 

specific steps that an issuer must take to prohibit the transfer of such securities?  If so, 

what should those steps be?  For example, should we require that issuers put special 

legends on the securities issued to platform workers, or should we require that issuers 

provide appropriate instructions to transfer agents concerning the transfer prohibition on 

shares issued to platform workers?  Are there other reasonable steps that we should 

require an issuer to take in connection with the proposed prohibition on transferability to 



33 

help ensure that the shares issued to platform workers are for compensatory and not 

speculative purposes? 

24. Instead of requiring an issuer to take reasonable steps to prohibit the transfer of securities 

issued to platform workers, should we instead allow platform workers to resell their 

securities using an applicable exemption or safe harbor?  For example, should platform 

workers be allowed to resell their securities pursuant to Rule 144?  Alternatively, in Rule 

701(h), should we require a different holding period than is in Rule 144, such as a two-

year holding period, or is any holding period insufficient to mitigate concerns about 

misuse of the temporary exemption?  Are there other transfer restrictions that would be 

more appropriate in this context? 

25. Should we apply the proposed conditions only to securities that have capital-raising 

features (e.g., stock options) and not to securities that do not have such features (e.g., 

restricted stock units)?  If so, which of the proposed conditions should not apply to such 

securities?  

26. Should we limit the type of securities that can be issued to platform workers under Rule 

701 or on Form S-8?  For example, should we limit issuances to equity securities and 

securities convertible into or exchangeable for equity securities?   

27. Are there other conditions in addition to, or instead of, the proposed conditions that we 

should adopt to help ensure that issuances to platform workers under Rule 701 or 

registered on Form S-8 are undertaken for compensatory and not capital-raising or 

speculative purposes?  For example, should we require that a platform worker provide 

services through an issuer’s platform (or other widespread, technology-based marketplace 

platform or system) for a certain period of time before the worker is eligible to receive 

securities from the issuer?  If so, should the minimum period be six months, one year, or 

some other period?  Should we require that the platform worker provide services for a 

continuous period of time?  Should we require that the securities issued to a platform 



34 

worker not vest until after a particular period of time?  If so, should the vesting period be 

six months, one year, or some other period after the grant of securities? 

28. Do the additional conditions for issuances to platform workers provide adequate investor 

protections for platform workers who receive shares pursuant to Rule 701 or registered 

on Form S-8?  If not, what additional conditions or measures would be appropriate to 

provide an acceptable level of investor protection?   

C. Integration of Proposed Rule 701(h) With the Existing Rule 701 Exemption 

Title 17, section 230.701(d) (“Rule 701(d)”) imposes limits on the aggregate sales price 

or amount of securities that an issuer can sell in reliance on the rule during any consecutive 12-

month period.80  In addition, 17 CFR 230.701(e) (“Rule 701(e)”) provides that if the aggregate 

sales price or amount of securities sold during any consecutive 12-month period exceeds $10 

million, the issuer must deliver certain disclosure to investors a reasonable period of time before 

the date of sale.81 

 Proposed Rule 701(h) would not create a separate and independent ceiling on the amount 

of securities that could be offered or sold under Rule 701.  Rather, platform workers would be an 

additional class of persons temporarily eligible under Rule 701(c) to participate in the issuer’s 

Rule 701 offers and sales, and would be subject to the same Rule 701(d) limitations on the total 

amount of securities that an issuer may sell.  In this regard, the securities sold to platform 

workers would be aggregated with all other securities sold by the issuer to persons meeting 

existing Rule 701(c) eligibility conditions for purposes of applying the Rule 701(d) ceiling.   

                                                
80   See 17 CFR 230.701(d)(2), which imposes alternative caps on the aggregate sales price or amount of securities 

sold under the rule during a consecutive 12-month period.  In the companion Rule 701/Form S-8 release, we are 
proposing to raise: the cap under 17 CFR 230.701(d)(2)(i) permitting issuance from $1 million to $2 million, to 
reflect inflation; and the cap under 17 CFR 230.701(d)(2)(ii) from 15% to 25% of the issuer’s total assets, to 
reflect that start-up companies may be more dependent upon human capital than fixed assets.  See Release No. 
33-10891 at Section II.B. 

81   In the companion release, we are proposing to require that Rule 701(e) enhanced disclosure be provided only 
for those sales that exceed the rule’s $10 million threshold.  See Release No. 33-10891 at Section II.A.1.  If 
adopted, this provision would be applicable to all Rule 701-exempt issuances, including those granted to 
platform workers. 



35 

We believe that it is appropriate to apply the same ceiling to all Rule 701 exempt 

offerings rather than to provide a separate ceiling for offers to persons eligible to receive 

securities under the temporary provision.  If we were to provide separate ceilings, issuers with 

technology-based marketplace platforms would be able to sell securities in excess of the amount 

they are permitted to sell to traditional workers, while issuers that rely only on traditional 

employment would be limited to the ceiling imposed under Rule 701(d).  We believe it is better 

to propose an approach that treats all issuers equally, rather than one that favors issuers 

conducting their businesses through platforms as defined by the proposed rule.   

Similarly, an issuer that offered and sold securities to platform workers pursuant to 

proposed Rule 701(h) would be subject to the same Rule 701(e) disclosure requirements.  Those 

securities would be aggregated with all other securities offered and sold by the issuer to persons 

meeting existing Rule 701(c) eligibility conditions for purposes of applying the $10 million 

disclosure threshold in Rule 701(e).82 

Request for Comment 

29. Should we require that the securities sold to platform workers be aggregated with all 

other securities sold by the issuer to persons meeting existing Rule 701(c) eligibility 

conditions for purposes of applying the Rule 701(d) ceiling, as proposed?  Should we 

instead impose a separate and independent ceiling on the amount of securities that an 

issuer could sell to platform workers during any consecutive 12-month period?  If so, 

what should the ceiling be? 

30. Should we require that the securities issued to platform workers be aggregated with all 

other securities sold by the issuer to persons meeting existing Rule 701(c) eligibility 

                                                
82   In the companion release, we are proposing amendments to the disclosure requirements under Rule 701(e) that, 

if adopted, would be applicable to issuances to platform workers under proposed Rule 701(h).  For example, we 
are proposing to conform the age of financial statement requirement in Rule 701(e) to the corresponding 
requirement in Part F/S of Form 1-A.  See Release No. 33-10891 at Section II.A.2.  In addition, we are 
proposing to allow issuers to provide alternative valuation information, similar to that required under Internal 
Revenue Code Section 409A, in lieu of financial statements, for purposes of Rule 701(e) disclosure.  See id. at 
Section II.A.4. 



36 

conditions for purposes of applying the Rule 701(e) disclosure threshold, as proposed?  

Should we instead impose a separate disclosure threshold for issuances to platform 

workers?  If so, what should that threshold be?   

D. Integration with Exchange Act Rule 12g5-1 

For purposes of determining whether an issuer is required to register a class of equity 

securities with the Commission pursuant to Section 12(g)(1) of the Exchange Act,83 17 CFR 

240.12g5-1 (“Rule 12g5-1”) permits the exclusion of certain securities.84 Specifically, 17 CFR 

240.12g5-1(a)(8)(i)(A) permits the exclusion of securities held by persons who received the 

securities pursuant to an employee compensation plan in transactions exempt from, or not subject 

to, the registration requirements of Securities Act Section 5.  Title 17, section 240.12g5-

1(a)(8)(i)(B) permits the exclusion of securities held by persons who received the securities in a 

transaction exempt from, or not subject to, the registration requirements of Securities Act 

Section 5 from the issuer, a predecessor of the issuer or an acquired company in substitution or 

exchange for securities received pursuant to a compensatory plan in transactions exempt from, or 

not subject to, the registration requirements of Securities Act Section 5, as long as the persons 

were eligible to receive securities pursuant to Rule 701(c) at the time the excludable securities 

were originally issued to them.  In addition, Rule 12g5-1 provides a non-exclusive safe harbor by 

which an issuer may deem a person to have received the securities pursuant to an employee 

                                                
83  15 U.S.C. 78l(g)(1).  Section 12(g)(1) requires, among other things, that an issuer with assets exceeding 

$10,000,000 and a class of equity securities held of record by either 2,000 persons, or 500 persons who are not 
accredited investors, register such class of securities with the Commission. 

84  See 17 CFR 240.12g5-1(a)(8).  The Commission adopted this provision of Rule 12g5-1 pursuant to Section 503 
of the JOBS Act, which instructed the Commission to amend the definition of “held of record” to exclude 
securities held by persons who received them pursuant to an “employee compensation plan” in transactions 
exempted from the registration requirements of Section 5 of the Securities Act.  Section 503 also instructed the 
Commission to adopt a safe harbor that issuers can use when determining whether holders of their securities 
received them pursuant to an employee compensation plan in transactions exempted from the registration 
requirements of Section 5 of the Securities Act.  The Commission adopted the term “employee compensation 
plan” and left it undefined so that “issuers will have appropriate flexibility to make a principles based 
determination about securities received as employee compensation when determining their holders of record 
under Section 12(g)(5).”  See  Release No. 33-10075.    

 



37 

compensation plan if such plan and the person who received the securities pursuant to the plan 

met the plan and participant conditions of Rule 701(c).85     

We are proposing similar treatment for issuances to platform workers under proposed 

Rule 701(h).86  We believe that these proposed amendments to Rule 12g5-1 are appropriate 

because they would remove a potential disincentive to an issuer’s offer and sale of securities as 

compensation to platform workers and would avoid favoring companies that do not have 

platform workers over companies that have them.  Specifically, the proposed revisions would 

eliminate the requirement for an issuer to count platform workers who receive shares pursuant to 

a compensation plan87 under Rule 701(h) as record holders for the purpose of determining its 

Section 12(g) registration obligations.88  In addition, similar to the existing exclusion in 17 CFR 

240.12g5-1(a)(8)(i)(B), the proposed amendment would exclude securities received in a 

transaction exempt from, or not subject to, the registration requirements of Securities Act Section 

5 in substitution or exchange for securities received pursuant to Rule 701, as long as the persons 

were eligible to receive the securities when they were originally issued to them.89  Finally, the 

proposed amendments would extend the safe harbor in 17 CFR 240.12g5-1(a)(8)(ii), for 

securities received in a Rule 701(c) offering, to compensatory issuances to platform workers 

pursuant to Rule 701(h).90   

                                                
85  See 17 CFR 240.12g5-1(a)(8)(ii)(A). 
86  Two commenters supported excluding platform workers from the definition of record holder under Rule 12g5-

1.  See letters from Airbnb and Davis Polk. 
87  Similar to the current Rule 12g5-1 exclusion for securities issued pursuant to an employee compensation plan, 

we propose to use and leave undefined the term “compensation plan” to provide issuers with the appropriate 
flexibility to make a principles based determination about securities issued as compensation to their platform 
workers when determining their holders of record under Section 12(g)(5).  Not defining a “compensation plan” 
for platform workers would also avoid unnecessary complexity and potential conflict with existing terms, such 
as “compensatory benefit plan.”  See Release No. 33-10075, 81 FR at 28694. 

88  See proposed Exchange Act Rule 12g5-1(a)(8)(i)(A). 
89  See proposed Exchange Act Rule 12g5-1(a)(8)(i)(B).   
90  See proposed Exchange Act Rule 12g5-1(a)(8)(ii)(A)(2).  The Rule 12g5-1 safe harbor would continue to 

provide that an issuer may, solely for the purposes of Exchange Act Section 12(g), deem the securities to have 
been issued in a transaction exempt from, or not subject to, the registration requirements of Securities Act 
Section 5 if the issuer had a reasonable belief at the time of the issuance that the securities were issued in such a 
transaction.  See 17 CFR 240.12g5-1(a)(8)(ii)(B). 



38 

The proposed amendments to Rule 12g5-1 would also include a note to remind issuers of 

the temporary nature of Rule 701(h).91  Upon expiration of Rule 701(h), without further 

Commission action, an issuer would no longer be able to issue additional Rule 701-exempt 

securities to its platform workers.  Importantly, however, we are not proposing the Rule 12g5-1 

exclusion and safe harbor for securities issued to platform workers on a temporary basis.  

Therefore, an issuer could continue to rely on the exclusion and safe harbor subsequent to Rule 

701(h)’s expiration date. 

Request for Comment 

31. Should we permit an issuer to exclude platform workers to which it has issued securities 

under Rule 701(h) from the definition of “holders of record” for the purpose of 

determining its registration obligations under Section 12(g), as proposed? 

32. Should we extend the Rule 12g5-1 safe harbor to cover issuances to platform workers 

under Rule 701(h) pursuant to a compensation plan, as proposed? 

33. Should we leave “compensation plan” for platform workers undefined, as proposed?  If 

not, how should we define a “compensation plan” for platform workers? 

E. Considerations Specific to Form S-8 

 Form S-8 provides a number of accommodations to registrants that seek to register the 

offer and sale of securities to their employees, consultants, and advisors.92  For example, to 

satisfy the Securities Act prospectus delivery requirements set forth in Rule 428, the form 

requires only abbreviated disclosure and permits the delivery of regularly prepared materials 

advising employees and other eligible persons about employee benefit plans, together with a 

statement of availability of documents containing registrant information.93  Form S-8 also 

permits the incorporation by reference of a registrant’s Exchange Act reports without regard to 

                                                
91  See proposed Note 1 to paragraph (a)(8)(ii) of Rule 12g5-1. 
92  See 1999 Form S-8 Adopting Release, supra note 12, at 11103; see also 1990 Form S-8 Adopting Release, 

supra n. 14. 
93  See Form S-8, Part I, Item 2.  



39 

the length of the issuer’s reporting history or the aggregate market value of its securities held by 

the non-affiliated public (its “public float”).94  The Commission has justified this differing 

treatment for Form S-8 offerings because of their compensatory, incentivizing, and non-capital-

raising purpose.95     

 We propose to amend Form S-8 so that the accommodations available to registrants 

currently offering securities on that form to employees and other covered persons would 

generally be available to registrants offering securities to platform workers.  We also propose to 

amend Rule 428 so that its prospectus content, delivery, updating, and related procedural 

requirements are applicable to offerings to platform workers pursuant to a written compensation 

plan, contract, or agreement.  Thus, a registrant registering an offering of securities to platform 

workers on Form S-8 would be able to deliver a Section 10(a) prospectus consisting of plan or 

compensation contract information, a statement of availability of registrant information, and 

other documents required of current Form S-8 registrants, and follow the same Form S-8 

procedural requirements.96  We believe that the proposed conditions designed to help ensure that 

an offering to such workers is for a compensatory purpose justify extending the same treatment 

to issuers seeking to register an offering of securities to platform workers on Form S-8. 

 Many of the substantive plan disclosure requirements for Form S-8 pertain to tax 

qualified defined contribution plans.  We believe, however, that issuers that elect to register an 

offering of securities on Form S-8 for issuance to platform workers would do so to incentivize 

those workers in the short-term by offering options and restricted stock units, rather than 

pursuant to a defined contribution plan for the purpose of retirement savings.  Accordingly, we 

are not proposing amendments to those items of Form S-8 that pertain to defined contribution 

plans to include platform workers.   

                                                
94  See Form S-8, Part II, Item 3. 
95  See, e.g., 1999 Form S-8 Adopting Release, supra note 12, at 11103.  The Commission has also justified the 

abbreviated disclosure format of Form S-8 because of “employees’ familiarity with the issuer’s business 
through the employment relationship.”  Id. 

96   See proposed Rule 428(d). 



40 

Request for Comment 

34. Platform workers may not be as familiar with the registrant’s operations as employees 

and other persons currently eligible to receive securities under Form S-8 may be.  As 

such, should registrants offering securities to platform workers be subject to different 

information content, prospectus delivery, or other procedural requirements than those 

applicable to current Form S-8 registrants?  If so, what additional requirements under 

Form S-8 or Rule 428 or what different or additional disclosure requirements should 

apply to offerings to platform workers?   

35. Are there circumstances in which registrants would issue securities to platform workers 

pursuant to defined contribution plans?  If so, should we amend those items of Form S-8 

that pertain to defined contribution plans to include platform workers? 

F. Requirement to Furnish Certain Information 

As explained in detail below, the proposed expansion of Rule 701 and Form S-8 to 

include securities issuances to platform workers would be temporary.97  Related to this, we are 

also proposing a requirement that an issuer furnish certain information to the Commission.  If the 

proposed amendments are adopted, we plan to use this information to assist us in evaluating the 

expanded use of Rule 701 and Form S-8, in order to help determine whether to permit such use 

on a permanent basis and under the same or different conditions.  The information should 

provide insight into how, and to what extent, the exemptions are being used, as well as the extent 

and type of benefits provided to issuers, platform workers, and other investors.  This would 

enable us to assess the utility of the issuances of securities to platform workers under Rule 701 or 

Form S-8 and to assess whether the proposed conditions have achieved their purpose of helping 

to prevent non-compensatory issuances.  Although the proposed rule would require issuers to 

furnish certain information, furnishing the identified information would not be a condition to rely 

                                                
97  See infra Section II.G.41 

on Rule 701 or Form S-8.  Thus, a failure to furnish the information would not result in the loss 

of the proposed exemption in Rule 701 or Form S-8 eligibility for issuances to platform 

employees.  The information would, however, be important for determining whether the 

exemptions should expire, be extended, or be made permanent. 

The required information would be furnished, rather than filed, and therefore would not 

be subject to potential liability under Section 18 of the Exchange Act.98  The information would 

be intended only for the Commission’s use and would be non-public.  It would not be furnished 

through the Commission’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.  

Rather, it would be furnished in a non-public manner designated by the Division of Corporation 

Finance for this purpose, for example, electronically by email or by some other means of 

electronic communication. 

As proposed, the issuer would be required to provide the following information 

concerning its issuances to platform workers to the Commission at six-month intervals 

commencing six months after the first such issuance: 

1. The criteria used to determine eligibility for securities awards to platform workers, 

whether they are the same as for other compensatory transactions, and whether those 

criteria, including any revisions to such criteria, are communicated to workers in advance 

as an incentive; 

2. The type and terms of securities issued to platform workers during the prior six months, 

and whether they are the same as for other securities issued in compensatory transactions 

by the issuer during that interval; 

3. If issuing securities pursuant to Rule 701(h), the steps taken to ensure that the securities 

sold are non-transferable; 

                                                
98  15 U.S.C. 78r. 



42 

4. The percentage of overall outstanding securities that the amount issued to platform 

workers cumulatively under Rule 701(h) or pursuant to a registration statement on Form 

S-8 (pursuant to § 239.16b(c)), as applicable, represents;  

5. During the interval, the number of platform workers, the number of non-platform 

workers, the number of platform workers receiving securities pursuant to the temporary 

rule, and the number of non-platform workers who received securities pursuant to the 

issuer’s Rule 701 or Form S-8 sales; and 

6. The number and dollar amount of securities issued to platform workers under Rule 701 or 

pursuant to a registration statement on Form S-8, both in absolute amounts and as a 

percentage of the issuer’s total sales under Rule 701 or total sales pursuant to a 

registration statement on Form S-8, as applicable during the interval.99 

 We recognize that some non-reporting issuers may view certain information concerning 

compensation practices for platform workers as privileged or confidential.  For that reason, the 

proposed rules would provide that to the extent that the issuer treats such information as 

privileged or confidential, it may submit a confidential treatment request pursuant to 17 CFR 

200.83100 for the furnished information.101 

Request for Comment  

36. Should the temporary rules require an issuer to furnish certain information to the 

Commission if it seeks to register issuances to platform workers on Form S-8, as 

proposed?  If so, should an issuer be required to furnish the information at six-month 

                                                
99  See proposed Rule 701(h)(4) and proposed 17 CFR 239.16b(c)(3).  The amounts calculated as a percentage 

should compare the amount of securities issued to platform workers under Rule 701 or Form S-8 with the total 
amount of securities issued to all workers (both platform and non-platform) and other covered persons under 
Rule 701 or on Form S-8. 

100  Under Rule 83, an issuer can request that the non-public information not be disclosed pursuant to a request 
under the Freedom of Information Act (“FOIA”).  Written requests for confidential treatment under Rule 83 
relating to the furnished materials may be submitted either in paper format or electronically.  If there are no 
FOIA requests, the information will remain non-public for 10 years.  After 10 years, the confidential treatment 
request will expire unless an issuer requests and is granted an extension.  In the event of a FOIA request, the 
Commission may require the issuer to provide substantiation of its confidential treatment request. 

101  See proposed Rule 701(h)(5) and proposed 17 CFR 239.16b(c)(4).  
 



43 

intervals, as proposed?  Should the issuer be required to furnish the information annually 

or on another periodic basis?  If so, which periodic basis would be appropriate? 

37. Should the same reporting interval apply to issuances of securities both under Rule 701 

and pursuant to a registration statement on Form S-8? 

38. Is the proposed information appropriate for the purpose for which it is being sought?  

Should issuers be required to furnish less information or other information in addition to, 

or instead of, the proposed information? 

39. What method should the Commission require issuers to use to furnish the information 

required?  For example, should the information be furnished electronically via email for 

this purpose?  Should the Commission provide a form for this purpose? 

  Are there other steps that the Commission should take to facilitate the reporting 

requirement? 

40. Should we require that an issuer notify the Commission that it intends to make offers or 

sales to platform workers pursuant to the exemption in proposed Rule 701(h)?  If so, 

when and how should issuers be required to provide such notice? 

G. Expiration of the Temporary Rules Authorizing Issuances to Platform 
Workers Under Rule 701 and Form S-8 

With limited exceptions, we propose to make this exemptive rule temporary in order to 

have an opportunity to evaluate the appropriateness of extending the Rule 701 exemption to 

issuances to workers in this relatively new type of work arrangement, including whether such 

issuances are being made for compensatory, incentive, and non-capital-raising purposes.102  

Moreover, given the rapid pace of technological change, particularly in the area of the internet 

and platform software, and the evolving nature of the platform worker labor market, making the 

                                                
102  As previously discussed, the exemption would continue to be available to issuers for the post-expiration 

issuance of securities underlying options previously issued in an exempt transaction pursuant to Rule 701(h).  
See supra note 41 and accompanying text.  In addition, as previously noted, an issuer could continue to rely on 
the Rule 12g5-1 exclusion and safe harbor for securities issued to its platform workers prior to the expiration of 
Rule 701(h) and continue to exclude those workers as record holders subsequent to Rule 701(h)’s expiration 
date.  See supra Section II.D.   



44 

expanded Rule 701 exemption temporary would also provide us with the opportunity, subject to 

public notice and comment, to implement amendments to this area of the exemptive framework 

in light of such technological and labor market changes.   

As proposed, Rule 701(h) would apply only to offers and sales of securities occurring 

within five years following the date of the rule’s effectiveness.  On that date, Rule 701(h) would 

expire and no longer be effective.103  Prior to the expiration date, the Commission may decide to 

let the exemption expire, extend the temporary exemption, or adopt the exemption on a 

permanent basis.  If the Commission extends the exemption or adopts it on a permanent basis, it 

may also consider whether any revisions to the rule are appropriate.  We believe that five years is 

an appropriate period for the temporary exemption.  On the one hand, it would provide issuers 

with sufficient time to develop and conduct successful securities offerings to platform workers, 

the demand for which initially may not be readily apparent.  On the other hand, the limited 

period would allow the Commission to evaluate the temporary exemption and make necessary 

adjustments in response to technological, labor market, or other changes. 

The rule authorizing the temporary use of Form S-8 for issuances to platform workers (17 

CFR 239.16b(c)) would also expire five years from the date of that rule’s effectiveness, which 

we expect would be the same date as the expiration date for Rule 701(h).  Rule 428(d), the 

temporary rule authorizing the application of the same streamlined disclosure, prospectus 

delivery, and related procedural requirements to issuances to platform workers as those currently 

applicable to other Form S-8 issuances, would expire on the same date as 17 CFR 239.16b(c). 

Request for Comment 

41. Should we adopt each of proposed Rule 701(h), the proposed amendment to Form S-8 

(17 CFR 239.16b(c)), and proposed Rule 428(d) as temporary rules, as proposed?  If we 

do, should the rules expire five years from the date of their effectiveness, as proposed?  

                                                
103  In the event that the Commission determines to let the exemption expire, we anticipate addressing any transition 

or related issues at that time. 



45 

Should the rules expire on a different date (e.g., one, two, three, or four years from the 

date of effectiveness)? 

42. Should we permit an issuer, following expiration of Rule 701(h), to issue securities 

underlying options, warrants, or rights that were previously issued to platform workers in 

an exempt transaction pursuant to Rule 701(h), as proposed? 

43. Should we make the expiration date for the temporary Form S-8 provisions different from 

the expiration date for issuances under Rule 701(h)?  If so, should the effective period of 

the Form S-8 provisions be longer or shorter than the effective period of Rule 701(h)? 

44. Should the proposed extension of Rule 701 and Form S-8 to platform workers expire 

absent further Commission action, as proposed?  Are there any transition or related issues 

(e.g., related to transfer restrictions) that we should address in connection with the 

proposed expiration of the temporary rules?  

45. Rather than making the rules temporary,104 should we adopt any of the proposed rules on 

a permanent basis? If so, which ones?   

III. GENERAL REQUEST FOR COMMENTS 

We request and encourage any interested person to submit comments on any aspect of the 

proposed amendments, other matters that might have an impact on the proposed amendments, 

and any suggestions for additional changes. With respect to any comments, we note that they are 

of greatest assistance to our rulemaking initiative if accompanied by supporting data and analysis 

of the issues addressed in those comments and by alternatives to our proposals where 

appropriate. 

IV. ECONOMIC ANALYSIS 

The Commission is proposing amendments to Rule 701 to establish a temporary 

provision that, on a trial basis, would expand the scope of the rule to include a new category of 

worker, the platform worker, to whom an issuer would offer and sell securities, under certain 

                                                
104  But see supra note 102. 



46 

conditions, without registration under the Securities Act.  Similarly, the Commission is 

proposing amendments to permit an Exchange Act reporting issuer to register offers and sales to 

platform workers on Form S-8.105  The Commission is proposing these amendments on a 

temporary basis for a five-year period.  Permitting gig economy issuers to utilize the Rule 701 

exemption on a temporary basis would allow the Commission to assess the appropriateness of 

the exemption for these new work relationships and thus should help inform the Commission’s 

ongoing efforts to modernize its rules in light of changing economic and market conditions.  In 

connection with the proposed amendments, issuers that offer and sell securities to platform 

workers would be required to furnish certain information to the Commission at six-month 

intervals to assist in evaluating the proposed expanded scope of Rule 701 and Form S-8.  The 

Commission also is proposing to amend Rule 12g5-1 under the Exchange Act to extend the 

exclusion from the definition of “held of record” and corresponding safe harbor, for securities 

issued to platform workers.  

We are mindful of the costs imposed by and the benefits obtained from our rules and 

amendments.106  The discussion below summarizes information about the gig economy in 

general, various attributes of platform workers and specific information about the online 

platform economy.  We then discuss the potential economic effects of the proposed amendments.  

These include the likely benefits and costs, effects on efficiency, competition, and capital 

formation, and reasonable alternatives.  We attempt to quantify these economic effects whenever 

                                                
105  Unlike the proposed amendment to Rule 701, the proposed amendment to Form S-8 does not include a transfer 

prohibition.  We discuss the anticipated economic effects of this difference below. 
106  Section 2(b) of the Securities Act [15 U.S.C. 77b(b)] and Section 3(f) of the Exchange Act [15 U.S.C. 78c(f)]  

requires the Commission, when engaging in rulemaking where it is required to consider or determine whether 
an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, 
whether the action will promote efficiency, competition and capital formation.  Further, Section 23(a)(2) of the 
Exchange Act [15 U.S.C. 78w(a)(2)] requires the Commission, when making rules under the Exchange Act, to 
consider the impact that the rules would have on competition, and prohibits the Commission from adopting any 
rule that would impose a burden on competition not necessary or appropriate in furtherance of the Exchange 
Act. 



47 

possible; however, due to data limitations, we are not able to quantify many of the economic 

effects. 

 A.  Economic Baseline 

 The baseline for the economic analysis consists of the current regulatory requirements 

applicable to issuers issuing securities to their employees as part of their compensation 

arrangements.  Non-reporting issuers are able to rely on Rule 701 to offer compensatory 

securities to their employees.  Registrants are able to register the offer and sale of compensatory 

securities to their employees on Form S-8.  As discussed above, these provisions currently are 

not available for platform workers because of their non-traditional employment status.  Thus, the 

affected parties for the proposed amendments would consist of online platform-based businesses 

wishing to offer securities as compensation, their platform workers, and any companies with 

which these businesses compete in the labor market. 

  1. Overview of the Gig Economy 

Numerous recent studies document an evolution and expansion of the gig economy over 

time.  These studies examine various aspects of the nature of non-traditional (or alternative) 

work arrangements and corresponding trends in this area.  The findings across these studies may 

vary for multiple reasons.  For example, there is no general consensus on the definition/scope of 

the gig economy, or its various constituents.107  Consequently, the results of these studies may 

vary because they use different definitions of the gig economy.  Moreover, various sources of 

data are utilized to study the field.  The three main sources of data used in these studies are 

government surveys such as the Current Population Survey,108 administrative data such as IRS 

                                                
107  Katherine Abraham, John Haltiwanger, Kristin Sandusky, and James Spletzer, The Rise of the Gig Economy: 

Fact or Fiction, 109 AEA PAPERS & PROCEEDINGS 357 (2019) (the “2019 Abraham Study”). 
108  The Current Population Survey (CPS) is conducted on a monthly basis by the United States Census Bureau on 

behalf of the Bureau of Labor and Statistics. The CPS may include supplementary questions/topics on a non-
periodic basis.  In 2005 and again in 2017 the supplementary questions focused on contingent workers. See, 
e.g., U.S. Bureau of Labor Statistics, Electronically mediated work: new questions in the Contingent Worker 
Supplement, MONTHLY LAB. REV. (Sept. 2018) (the “2017 Contingent Worker Supplement”), 
https://www.bls.gov/opub/mlr/2018/article/electronically-mediated-work-new-questions-in-the-contingent-
worker-supplement.htm. 



48 

filings, and private sector data.  Due to the differing nature of the data analyzed, different types 

of errors or biases in the data may affect the findings of these studies.109  We discuss some of the 

main findings of this literature below and then focus on data and statistics from studies using 

definitions of gig economy that are more likely to be relevant to the scope of the proposed 

amendments to Rule 701 and Form S-8. 

A 2019 study,110 using a broad definition of alternative work arrangements,111 finds a 

significant increase in alternative work arrangements over the 2005–2015 period.  It estimates 

that about 15.8 percent of survey participants engaged in some form of alternative work 

arrangement in 2015 as compared to 10.7 percent in 2005.112  It also finds that workers providing 

services through an online intermediary accounted for 0.5 percent of all workers in 2015.113 

The 2019 Abraham Study reports self-employment rates increasing from 13 percent in 

2004 to 15 percent in 2016, based on published Census Bureau statistics on non-employer 

businesses.114  The largest increase in non-employers between 2010 and 2016 took place in the 

Ground Passenger Transportation sector,115 which grew by almost 300 percent (651,000 drivers) 

                                                
109  See, e.g., Katherine Abraham, John Haltiwagner, Kristin Sandusky, and James Spletzer, Measuring the gig 

economy: Current Knowledge and Open Issues (Nat’l Bureau of Econ. Research Working Paper 24950, 2018) 
(the “2018 Abraham Study”).  The 2018 Abraham Study finds that there has been a growing discrepancy 
between the level of self-employment as measured in core household surveys versus the level of self-
employment as measured in administrative data.  The study concludes that examining integrated data sets that 
combine survey, administrative, and private data are likely to improve the measurement of self-employment 
activity. 

  
110  Lawrence Katz & Alan Krueger, The Rise and Nature Of Alternative Work Arrangements in the United States, 

1995-2015, 72 ILR REV. 382 (2019) (the “Katz Study”). 
111  The definition of alternative work arrangements used in the Katz Study includes temporary help agency 

workers, on-call workers, contract workers, and independent contractors or freelancers. 
112  The 2005 results in the Katz Study were based on data from the 2005 Contingent Worker Supplement and the 

2015 results in the Katz Study were based on a survey conducted by RAND-Princeton as part of the RAND 
American Life Panel (the “Rand-Princeton Survey”). 

113  The Katz Study does not discuss 2005 online platform participation rates. 
114  A non-employer business is defined by the Census Bureau as one that has no paid employees, has annual 

business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income 
taxes.  Most non-employers are self-employed individuals operating very small, unincorporated businesses, 
which may or may not be the owner’s principal source of income.  
https://www.census.gov/quickfacts/fact/note/US/NES010217 

115  This sector corresponds to North American Industry Classification System (NAICS) code 485. 



49 

during the period.116  The study also finds positive growth in non-employers for the following 

sectors:  NAICS 488 (Support Activities for Transportation), NAICS 611 (Educational Services), 

NAICS 448 (Clothing and Clothing Accessories Stores), and NAICS 446 (Health and Personal 

Care Stores), although to a much less extent as compared to the growth observed in the Ground 

Passenger Transportation sector. 

The 2017 Contingent Worker Supplement estimated that there were about 1.6 million 

electronically mediated workers in the United States,117 accounting for one percent of total 

employment. 

The Federal Reserve 2018 Survey of Household Economics and Decision Making (the 

“2018 SHED Survey”)118 finds that 30 percent of adults engaged in gig economy related work, 

including both the provision of services and the sale of goods, and using both online and offline 

methods, in 2018.  The survey also finds that three percent of adults surveyed participated in gig 

economy work enabled by the internet or a mobile app to connect to customers.  

Another study uses private data to examine various characteristics and trends of a 

subsection of the gig economy, namely the online platform economy and its participants.119  It 

analyzed a sample comprised of 39 million unique checking accounts over the October 2012 – 

March 2018 period120 and found a significant increase in the number of families receiving 

                                                
116  See also Jonathan Hall & Alan Krueger, An Analysis of the Labor Market for Uber’s Driver-Partners in the 

United States, 71 ILR Review 705 (2018) (the “Hall Study”). The Hall Study finds that the number of Uber 
drivers increased from a base of zero in 2012 to 460,000 active drivers by the end of 2015. 

117   The 2017 Contingent Worker Supplement defines electronically mediated work as an employment arrangement 
where workers: (1) use a platform provider’s website or mobile app to connect to clients or customers and 
obtain short jobs, projects, or tasks; (2) are paid by or through the platform provider that owns the website or 
mobile app, (3) choose when and whether to work, (4) may do these short jobs, projects, or tasks in person or 
online. 

118  The Federal Reserve has conducted the Survey of Household Economics and Decision Making on an annual 
basis starting in 2013. 

119  Diana Farrell, Fiona Greig & Amar Hamoudi, The Online Platform Economy in 2018: Drivers, Workers, 
Sellers, and Lessors, JPMorgan Chase Institute, (2018) (the “Farrell Study”). 

120  The study applies multiple filters to select the accounts in the final sample.  These filters are described in the 
Appendix of the study.  



50 

income from providing goods and services using online platforms.121  For example, in 2013, less 

than 0.5 percent of the sample checking accounts received income from work performed through 

an online platform, whereas that number increased to 1.6 percent in 2018.122  The study further 

breaks down income sources from online platform utilization into four categories: (1) 

transportation, (2) non-transport work (includes services such as dog walking and home repair), 

(3) selling of goods, and (4) leasing.123  As of March 2018, online platform workers in categories 

(1) and (2) constituted approximately 65 percent of the workers in all four categories.  Over the 

2013–2018 period, the transportation services category has shown the most significant growth, 

increasing from less than 10 percent of online platform workers in 2013 to approximately 60 

percent of online platform workers in 2018.   

  2. Characteristics of Gig Economy Workers 

 In this section, we summarize findings from studies and surveys on the gig economy with 

respect to the characteristics of participants in such work arrangements.  In general, multiple 

sources lead to the conclusion that, although the frequency of participation varies, the average 

gig economy worker engages in such work periodically throughout the year.  In addition, the 

average gig economy worker seems to participate in such work in order to supplement her basic 

source of income and is relatively younger in age than traditional employees. 

The 2018 SHED Survey finds that the majority of gig economy workers tend to engage in 

such work to generate income in addition to their primary source of income.  For example, the 

                                                
121  In order for an online platform to be included in the Farrell Study, it had to meet the following criteria: (1) the 

platform connects independent suppliers to customers, (2) the platform mediates the flow of payment from 
customer to supplier, (3) the platform empowers participants to enter and leave the market whenever they want.  
The study identified 128 online platforms based on the three criteria above.  We believe the definition of gig 
economy applied in this study most closely resembles the definition of online platform workers used in the 
proposed amendments to Rule 701 and Form S-8. 

 
122  The Farrell Study also notes that as of March 2018, about 4.5% of accounts examined received income from an 

online platform at some point over the prior year. 
123  Companies identified in categories (1) and (2) in the Farrell Study are likely to have a significant overlap with 

the companies that are likely to be included in the proposed expansion of Rule 701 and Form S-8, given the 
overlap between the provided definition of these categories and the scope of the proposed amendments. 
Specifically, categories (1) and (2) represent companies that are online platforms specializing in connecting 
customers with independent suppliers for the provision of services.  Some of the companies in the Farrell 
Study’s leasing category may also fall within our proposed definition of services.   



51 

survey finds that about 37 percent of gig economy workers indicated that they engage in such 

work to supplement their income, whereas 18 percent indicated that their primary source of 

income comes from gig-related work.  In addition, only 30 percent of gig economy workers 

responded that they earn income from such activities in all or most months of the year.  With 

respect to participation rates involving the use of a website or mobile app to connect to 

customers, the survey documents five percent of individuals between the ages of 18 and 29 using 

such methods to find customers, whereas one percent of individuals aged 60 or older used such 

method to find work.  The 2018 SHED Survey also documents that individuals younger in age 

tend to be more active in gig-related work.  Overall participation rates ranged from 37 percent 

for individuals between the ages of 18 and 29 to 21 percent for individuals 60 year old or older.  

The Farrell Study finds that among individuals or families participating in the gig 

economy through online platforms, more than 60 percent derived earnings from online platform 

related work between one and three months out of the year.  About 10 percent of workers 

received payments due to online platform related work between 10 and 12 months of the year.  

For transportation platforms specifically, 12.5 percent of individuals generated income between 

10 and 12 months of the year.  These statistics indicate that the majority of online platform 

workers generated income from the use of these online platforms periodically throughout the 

year. 

The Hall Study analyzes the labor market for Uber drivers in the United States based on a 

survey of Uber drivers in 2014 and 2015.  Among other findings, the study documents that more 

than half of Uber drivers who started on the platform in the first half of 2013 remained active a 

year after starting, and one-third were still active two years after starting.  In general, the study 

finds that the majority of Uber drivers use the platform because they value the flexibility to 

choose when to work and the ability to generate additional income when needed. 

  3. The Online Platform Economy 



52 

As discussed above, we observe that there is a trend of increased activity under all 

definitions of the “gig economy,” although the extent of that increase varies across the data 

analyzed in various studies.  Concerning online platform work specifically, the trends are 

relatively clear in that there has been a significant expansion of both online platforms and 

individuals using these online platforms to generate income in the last few years.  Moreover, the 

majority of users of such platforms use them to supplement their income when needed and value 

the flexibility of the working hours that the platform work offers. 

The Rand-Princeton Survey estimates that about 0.5 percent of the workforce in 2015 

used an online platform to connect to customers.  The 2017 Contingent Worker Supplement 

estimates that 1.6 million workers, or approximately one percent of the workforce, used an 

online platform to connect to customers and provide services.  The Farrell Study estimates that 

about one percent of the 37 million checking accounts examined received income from the use of 

an online platform to connect with customers to provide services, with a growth rate from 2016 

to 2018 of 100 percent.  Finally, the 2018 SHED Survey documents that three percent of adults 

surveyed participated in gig work enabled by the internet or a mobile app to connect to 

customers, a percentage that includes both the provision of services and the sale of goods.  

Among all sectors examined, the passenger transportation services sector is the only sector where 

all available evidence suggests a dramatic increase in the use of online platforms as an 

intermediary for such work.124 

 B. Broad Economic Considerations 

  Below, we discuss broad economic considerations derived from the academic literature 

focusing on non-executive employee incentive-based pay and identify certain limitations of the 

applicability of such literature to platform providers and platform workers due to their differing 

characteristics relative to traditional employees. 

                                                
124  See 2019 Abraham Study, supra note 107. 



53 

In general, economic theory suggests that variable pay, including equity-based pay,125 

can serve as a mechanism to align the incentives of agents with those of principals and can lead 

to enhanced agent performance.126  Academic literature that examines compensation 

arrangements of Chief Executive Officers (CEOs), in general, finds a positive correlation 

between various forms of variable pay and future outcomes, such as issuer performance, when 

such forms of variable pay are used appropriately.127  There is also academic literature that 

examines non-executive employee compensation arrangements.  Although this stream of 

literature highlights the potential incentive alignment effect that equity-based pay may have on 

employees, it also highlights other important considerations that may drive issuers to use such 

compensatory benefit plans.  Specifically, it finds that issuers may use non-executive employee 

compensation arrangements to attract and retain talent.  Thus, we expect that the proposed 

amendments likely would enhance the ability of affected issuers to compete in the labor market.  

This benefit likely would be more important if these issuers compete with traditional issuers for 

the same pool of workers, particularly for workers with specialized skills. 

Academic literature also finds that issuers with non-executive employee option plans use 

funds that would otherwise be used to compensate employees in other areas of the issuer.  We 

expect affected issuers would be able to improve their allocation of capital as a consequence of 

the proposed rules.  The latter may be particularly important for issuers that are financially 

constrained. 

Although academic theory and findings concerning the economic effects of the use of 

equity-based pay may apply to both traditional employees and platform workers up to a certain 

                                                
125   Although the scope of the proposed rules is broader than “equity-based” compensation, we believe that most, if 

not all, issuances under Rule 701(h) will be equity-based securities. 
126  Academic literature usually considers the agency relationship between investors or issuer owners (principals) 

and issuer management (agents).  Within the issuer, agency relationships can also exist between management 
(principal) and non-management employees (agents).  See, e.g., Michael Jensen & William Meckling, Theory of 
the Firm: Managerial Behavior, Agency Costs, and Ownership Structure, 3 J. FIN. ECON. 305 (1976). 

127  Under certain circumstances, inappropriate structures of compensation contracts may lead to undesirable 
outcomes, such as inappropriate risk taking. 



54 

extent, there could be differences due to the differences between online platform workers and 

traditional employees.  Specifically, platform workers may have different motives for 

undertaking such work and different employment horizons.128  As such, online platform workers 

might respond differently to equity-based pay as compared to traditional employees, making the 

economic effects of equity-based pay for these workers difficult to predict.  Moreover, the 

economic effects of the proposed amendments will be affected by the restrictions on the use of 

equity-based pay under the proposed amendments and will depend on how affected issuers 

structure compensation arrangements based on each issuer’s facts and circumstances.   

Equity-based pay also will introduce liquidity and valuation risks to the compensation of 

platform workers.  Such risks are likely to be more significant for compensation offered by non-

reporting issuers.  For example, the transferability prohibition in the proposed amendments to 

Rule 701 will introduce illiquidity in the compensation of non-reporting issuers’ platform 

workers.  Further, the relatively more opaque information environment of non-reporting issuers 

is likely to lead to increased valuation risk in the equity-based compensation offered.  These 

increased risks are likely to reduce the expected benefits of the proposed amendments for non-

reporting issuers and their platform workers.   

Below we discuss the expected benefits and costs from the proposed rules in more detail. 

 C. Expected Economic Benefits and Costs 

In this section, we discuss the expected economic benefits from the proposed 

amendments, including potential factors that are likely to introduce some uncertainty as to the 

expected benefits from the proposed amendments.  We then discuss how the furnished 

information concerning how platform providers use the provisions in the proposed amendments 

may serve to inform the Commission about whether to undertake further action.  Finally, we 

discuss potential costs related to the proposed amendments.  

                                                
128  For example, the majority of gig economy workers appear to engage in such work to supplement their basic 

income, and may engage in such work on a more sporadic basis, relative to traditional employees.  See supra 
Section IV.A.2. 



55 

  1. Expected Economic Benefits 

Providing issuers greater flexibility in the use of equity-based compensation may allow 

issuers to design compensation contracts or arrangements that are more efficient in aligning 

employee incentives with those of investors.  Improved incentives could lead to increased effort 

and improved decision-making by platform workers.129  Evidence in the academic literature 

shows a positive correlation between the use of non-executive stock option compensation and 

measures of operating performance and issuer innovation, but that such effect varies depending 

on facts and circumstances.130  Evidence also shows that the effect of non-executive stock 

options tends to be stronger when such plans are broadly implemented within the issuer.131 

The proposed amendments may provide affected companies with additional resources, 

which may particularly benefit issuers that face capital constraints.  Permitting issuers to use 

securities to compensate online platform workers may free up resources.  This would permit 

issuers to reallocate resources towards other productive uses.  Academic literature that examines 

the use of non-executive employee stock options finds that such compensatory plans are more 

                                                
129  It should be noted that the efficiency of variable pay may be higher when the metric/signal used to determine 

the variable component of pay accurately reflects the agent’s effort and performance.  Due in part to the 
business model of online platforms, and in part due to technological advances, online platform workers’ effort 
and performance may be measured with higher accuracy than in traditional business models.  For example, 
Uber drivers have an individual rating that is based on direct inputs from multiple customers receiving the 
service.  This characteristic of the online platform business model may facilitate more efficient contracting 
between the issuer and workers.  

130  See Xin Chang, Kangkang Fu, Angie Low & Wenrui Zhang, Non-executive employee stock options and 
corporate innovation, 115 J. FIN. ECON. 168 (2015). The study uses a sample of S&P 1500 companies over 
the 1998-2003 period to examine the effect of stock options granted to non-executive employees on corporate 
innovation, as measured by patent applications and patent citations.  The study documents a positive relation 
between the use of stock options to compensate non-executive employees and proxies for corporate innovation. 
The study also finds that the effect of employee stock options on innovation is due mostly to the risk-taking 
incentive that stock options provide to employees rather than the incentive to exert effort.  See also Yael 
Hochberg & Laura Lindsey, Incentives, Targeting, and Firm Performance: An Analysis of Non-executive Stock 
Options, 23 REV. FIN. STUD. 4148 (2010) (the “Hochberg Study”). The study uses a sample of S&P 1500 
companies over the 1997-2004 period to examine the effect of employee stock options on issuer performance.  
The study documents a positive relation between implied incentives from employee stock options and future 
operating performance, on average.  The study also documents that the positive relation between employee 
stock options and firm performance is concentrated in smaller firms and firms with significant growth options.  
Moreover, the study shows that such effect is stronger for broad-based option plans as they induce a mutual 
monitoring effect within employees. 

131  See Hochberg Study, supra note 130. 



56 

frequently used by issuers facing capital requirements and financing constraints.132  We expect 

that capital constraints are more likely to be a concern for at least a subset of non-reporting 

issuers.  We thus expect the proposed amendments to provide these issuers with increased 

flexibility in terms of available resources. 

The proposed amendments would permit affected issuers to offer compensatory securities 

to, in addition to natural persons, entities meeting specified conditions.  As stated above, the gig 

economy is an evolving market in which participating workers may be organized in various 

ways.  We expect this proposed amendment to expand the set of affected issuers that would be 

eligible to use securities to compensate platform workers.  Also, the proposed amendment may 

benefit platform workers as it would allow them to optimize their preferred organizational 

structure while being eligible to receive compensatory securities for services provided through 

the online platform. 

Finally, to the extent that issuers that use platform workers – i.e., “platform providers” – 

compete for labor with issuers that offer traditional employment, the use of equity-based 

compensation could permit platform providers to be more competitive in the labor market.  

Currently, platform providers cannot rely on Rule 701 or use Form S-8 to issue securities as 

compensation to their platform workers.  They are thus at a disadvantage in terms of offering 

compensation contracts that are likely to attract and retain platform workers.  Facilitating 

                                                
132  See John Core & Wayne Guay, Stock Option Plans for Non-Executive Employees, 61 J. FIN. ECON. 253 

(2001).  The study examines detailed information about non-executive employee stock option holdings, grants, 
and exercises for 756 companies during the 1994-1997 period.  Among other findings, the study’s results 
support the hypothesis that options are granted to non-executives more intensively when firms have greater 
financing needs and face financing constraints.  See also Ilona Babenko, Michael Lemmon & Yuri 
Tserlukevich, Employee Stock Options and Investment, 66 J. FIN. 981 (2011).  The study examines a sample of 
1,773 companies over the period 2000 to 2005 with regards to their broad-based employee stock option 
programs.  The study finds evidence consistent with the idea that stock options can mitigate financing 
constraints by substituting for cash wages at the time of the grant, and by providing significant cash inflows at 
the time of exercise, conditional on a high stock price. The study further estimates that $0.34 of each dollar of 
cash inflow received by the firm from the exercise of stock options is allocated to increasing capital and R&D 
expenditures. 



57 

platform providers’ efforts to attract and retain platform workers could increase their 

competitiveness.   

To the extent that platform providers require platform workers with specialized skills, the 

academic literature provides evidence that issuers are more likely to use employee stock option 

plans when they need to attract employees with skills that may be critical for an issuer’s 

success.133  Relatedly, to the extent that platform providers benefit from having exclusive access 

to platform workers, we expect the proposed amendments to facilitate such efforts. 

There are, however, potential factors that likely introduce some uncertainty as to the 

expected benefits from the proposed amendments.  First, issuing securities as compensation 

would introduce liquidity and valuation risks.  These risks are likely to create uncertainty in the 

value of platform workers’ compensation.  This may partially offset benefits arising from greater 

incentive alignment.  Specifically, depending on the facts and circumstances, this uncertainty 

could lead platform workers to discount the value of such pay to varying extents.  We expect the 

liquidity and valuation risks to be relatively more pronounced for non-reporting issuers, as their 

information environment is more opaque and the compensatory securities would not be sellable.  

If platform workers demand additional pay as compensation for bearing these risks, equity-based 

pay would be a more costly form of compensation for the issuer (relative to cash).134  Thus, 

issuers may need to provide increased amounts of equity-based pay to be able to offer an overall 

compensation value that would attract and retain employees.135 

                                                
133  See id.  
134  See Brian Hall & Kevin Murphy, Stock Options for Undiversified Executives, 33 J. ACCT. & ECON. 3 (2002).  

The study analyzes the value of non-tradeable options held by undiversified and risk-averse executives.  The 
study distinguishes between the value of the option to the executive, and the cost of the option to the issuer.  
Intuitively, the paper provides evidence that risk-aversion and non-diversification create a difference between 
the issuer cost and the executive value of stock options.  See also Lisa Meulbroek, The Efficiency of Equity-
Linked Compensation: Understanding the Full Cost of Awarding Executive Stock Options, 30 FIN. MGMT. 2 
(2001).  The study argues that undiversified managers will value stock or option-based compensation at less 
than its market value and derives a method to measure such deadweight costs, ultimately concluding that 
undiversified managers at rapidly growing, entrepreneurial-based firms heavily discount the value of these 
options.  

135  In economic theory, this is referred to as the reservation wage of the agent/employee. The expected value of the 
compensation offered must meet the minimum required compensation that the employee requires to participate 
in a specific job or task. 



58 

In addition, the motives of workers that choose to engage in platform work differs from 

those of workers that engage in traditional forms of employment.  As discussed above, surveys 

of the online platform economy show that the majority of online platform workers (1) earn 

secondary income from such work and (2) tend to participate selectively in such work during 

times when their demand for immediate income is high.  As such, it may be reasonable to 

assume that the majority of online platform workers place particular value on the ability to 

generate immediate income from platform-based work.  Therefore, the transfer prohibitions in 

the proposed amendments136 may limit the benefit of the amendments in terms of platform 

worker attraction and retention, and platform worker incentive alignment.137 

Platform workers may benefit from the proposed amendments, depending on how 

affected issuers structure compensation contracts under the proposed amendment.  For example, 

the proposed amendments would provide an opportunity for platform workers to own equity in 

the platform provider, possibly at an earlier stage of development.  If the platform provider’s 

value increases in the future, platform workers holding its securities would experience an 

increase in their wealth. 

Under the proposed amendments, issuers that issue securities to platform workers would 

be required to furnish certain information to the Commission on a periodic basis.138  We believe 

that this information would provide insight into how affected companies are using these 

compensatory securities.  We also believe it could help inform our assessment of the potential 

benefits of broadening the scope of work relationships for which issuers may issue securities as 

                                                
136  Specifically, the proposed amendments to Rule 701 require the issuer to take reasonable steps to prohibit the 

transfer of securities issued to platform workers pursuant to the exemption, other than a transfer to the issuer or 
by operation of law. 

137 Transfer restrictions reduce the liquidity of equity-based compensation, leading recipients of such compensation 
to discount the value of the equity-based pay they are offered.  Companies thus may need to provide additional 
pay to compensate online platform workers for the possible lack of liquidity in their compensation arrangements. 

138  Although the proposed rule would require issuers to furnish certain information, furnishing the identified 
information would not be a condition to rely on Rule 701 or Form S-8.  See supra Section II.F. 



59 

compensation.139  If, however, not all of the issuers furnish the required information, the 

collected information would be incomplete and could be biased, which could weaken the 

magnitude of this benefit. 

The proposed amendments to Rule 12g5-1 would extend the exclusion from the 

definition of securities “held of record,” and the corresponding safe harbor, to securities held by 

platform workers who received them under the proposed amendment to Rule 701.  This would 

allow non-reporting issuers that issue compensatory securities to platform workers to control 

how and when they become subject to reporting requirements.  The proposed amendment to Rule 

12g5-1 could be particularly beneficial for cash-constrained issuers, which would be able to issue 

compensatory securities to their platform workers without being subject to the compliance costs 

associated with the Exchange Act reporting requirements.  The proposed amendment to Rule 

12g5-1 would not be temporary.  We expect that issuers will benefit from the non-temporary 

nature of this proposed amendment because it will allow them to weigh the costs and benefits of 

using the exemption without it causing them to become subject to Exchange Act reporting 

requirements and the associated compliance costs, if the exemption is not extended. 

The proposed amendments would ensure that estates of deceased employees and 

representatives of incompetent former employees would receive securities underlying options, 

warrants, or rights issued to a former employee pursuant to Rule 701.  Given that such options, 

warrants, or rights typically include a vesting period, the proposed amendment would benefit 

issuers and platform workers as it would provide certainty to platform workers that securities 

related to options, warrants, or rights would be received by executors, administrators, or 

beneficiaries in the future.  We expect the proposed amendment to strengthen the anticipated 

benefits described above. 

  2. Expected Economic Costs 

                                                
139  Relatedly, while it is too early to assess the long-term effects of the COVID-19 pandemic on the gig economy, 

we intend to monitor developments in this area. 



60 

To the extent that the proposed amendments result in an expanded use of Rule 701 and 

Form S-8 to issue compensatory securities, there would be a corresponding increase in the 

overall burden estimates associated with these provisions for purposes of the Paperwork 

Reduction Act.  We discuss these increased burden estimates in Section V.C below. 

Under the proposed amendments, any issuer that grants compensatory securities to 

platform workers would be required to furnish certain information to the Commission at six-

month intervals.  Furnishing this required information would impose certain costs on affected 

issuers to compile and submit the specified information.  As discussed in Section V.C below, for 

purposes of the Paperwork Reduction Act, we estimate that this aspect of the proposed 

amendments would result in an additional 1.5 burden hours per semi-annual response for non-

reporting issuers and 1 additional burden hour per semi-annual response for registrants. 

Affected issuers may incur costs in establishing and administering a compensation 

program for platform workers.  We expect such costs (including but not limited to accounting 

and legal costs, and costs related to preparing and filing a registration statement, if applicable) to 

vary based on facts and circumstances.  If an affected issuer already has an established 

compensation plan for employees, then the incremental cost to administer a similar program for, 

or amend the plan to include, platform workers is likely to be relatively low.  Such costs are 

likely to be relatively higher for issuers that do not have an existing employee compensation plan 

in place.140  Similarly, the incremental costs incurred by registrants that already register offers 

and sales of securities on Form S-8 under their employee compensation plans would be lower 

than those for registrants registering securities on Form S-8 for the first time.  We are not able to 

quantify these potential costs due to lack of data. 

                                                
140 We expect that platform providers would incur legal costs to create the equity-based compensation contract.  We 

do not expect plan administration costs to be material, however, as it is our understanding that most plans are 
not tax-qualified plans and therefore are not required to adhere to ERISA requirements, which can be costly.61 

Affected workers could incur costs that could vary based on how issuers structure 

compensation packages and to the extent awards under compensation plans are substituted for 

cash or other compensation.  As discussed above, any illiquidity and valuation risks associated 

with these securities could lower their value to the holder.  If affected companies offer securities 

in lieu of cash compensation, the overall value of the compensation to the platform worker may 

decline.  We expect such potential costs to be mitigated by the limit on the amount of 

compensatory securities that may be offered by affected issuers, as well as by competition for 

platform workers in labor markets. 

  D. Effects on Efficiency, Competition, and Capital Formation 

The proposed amendments are expected to increase the competitiveness of affected 

issuers in their efforts to attract and retain workers, to the extent that the affected issuers compete 

with one another and with traditional issuers for the same workers.  As discussed above, 

however, the extent of any increase in their competitiveness would depend on how affected 

issuers use the increased flexibility offered by the proposed amendments in designing 

compensation arrangements for online platform workers.   

To the extent that the proposed amendments enable affected issuers to improve the 

quality and the incentive alignment of their workforce, it could improve these issuers’ overall 

operational efficiency and thus enhance their ability to attract capital.  Similarly, the additional 

flexibility to issue securities as compensation for platform workers may free up resources, 

particularly for capital-constrained issuers, permitting these issuers to reallocate resources to 

other productive uses. 

 E. Reasonable Alternatives 

The amendments are proposed primarily on a five-year temporary basis.  We could have 

proposed all of the amendments on a permanent basis.  A permanent rule would provide more 

certainty to issuers and might encourage additional use of the proposed amendments, particularly 

if the initial set-up costs for such compensation programs are high.  As noted above, however, 



62 

there are uncertainties surrounding the nature of these companies’ business models, and the gig 

economy continues to evolve.  Moreover, data shows that platform workers, on average, may 

have different motivations than traditional employees for undertaking work.  Specifically, as 

discussed above, platform workers appear to be driven mainly by an effort to supplement basic 

sources of income when additional income is needed.  As such, platform workers are likely to 

differ from traditional employees in their time horizon for such work.  Due to these uncertainties, 

it is challenging to predict how issuers affected by the rule would use securities for 

compensatory purposes and how platform workers receiving such compensation would perceive 

its value.   

Adopting the amendments on a temporary basis would allow the Commission to assess 

their effectiveness and make any necessary adjustments before implementing a permanent rule.  

Specifically, the information furnished by issuers that choose to rely on the proposed 

amendments would serve to inform the Commission on any potential future adjustments.  For 

example, information collected would inform the Commission on the extent to which gig 

economy companies issue compensatory securities and how they structure such compensation 

across the various online platforms based on their facts and circumstances.  Such information 

could be used to assess whether and how the proposed amendments should be extended or made 

permanent. 

The proposed amendments’ scope is limited to a part of the gig economy.  We could have 

proposed amendments that apply to all gig economy issuers and corresponding workers.  Such an 

alternative would have allowed additional gig economy companies, for example online platforms 

that facilitate the sale of goods, to compensate their platform workers with securities.  Under 

such alternative, a broader set of gig economy companies would be able to issue securities as 

compensation to platform workers, with the expected benefits as described above for gig 

economy companies with platform workers who provide services.  The different nature of 

platform workers as compared to traditional employees introduces some uncertainty as to the 



63 

effects of the proposed amendments, as discussed above.  Thus, proposing the amendments with 

an expanded scope would likely carry increased uncertainty as to the amendments’ economic 

impact. 

Further, we could have proposed different limits, including no limits, on the amount of 

compensatory securities that may be offered to individual platform workers.  The proposed rule 

would limit equity-based compensation to 15 percent of the total compensation provided on a 12-

month basis and no more than $75,000 over a 36-month period.  The proposed limits could have 

been higher or lower, or could apply to longer or shorter periods, allowing affected issuers to 

include different amounts of securities in compensation arrangements.  We are unable to evaluate 

with precision whether a higher or lower cap or a longer or shorter period would be preferable in 

comparison to the proposed amendments’ requirements, due mostly to the lack of data and also 

due to uncertainty as to how affected issuers may use the new form of compensation available to 

them.  In general, allowing for greater amounts of equity-based compensation would provide 

companies with additional flexibility to structure compensation arrangements that might provide 

stronger incentives, a potentially increased ability to compete for talent, and more flexibility in 

terms of internal capital-allocation options.  Going further, we could have proposed no individual 

limit on the amount of compensatory securities that may be offered to individual platform 

workers.  However, as discussed above, due in part to the nature of equity-based compensation 

and in part due to the characteristics of platform workers, equity-based compensation may be a 

more costly way to compensate and provide incentives.  Accordingly, it is unclear to what extent 

issuers would take advantage of the ability to issue greater amounts of securities-based 

compensation.  Limiting issuers to lower amounts of securities-based compensation, on the other 

hand, may not provide adequate flexibility to affected issuers to incorporate equity-based 

compensation into compensation arrangements, thus limiting the potential benefits of the 

proposed amendments.  



64 

The proposed changes to Rule 701 would require the issuer to take reasonable steps to 

prohibit the transferability of securities issued to platform workers pursuant to the exemption, 

except for transfers to the issuer or by operation of law, while the proposed changes to Form S-8 

would not include such a requirement.  As discussed above, the transferability restriction is likely 

to affect the perceived value of compensatory securities offered pursuant to revised Rule 701 and 

as a consequence weaken the magnitude of expected benefits from the proposed amendments to 

Rule 701.  We could have proposed an extended holding period in lieu of an outright restriction 

on transfer, or eliminate the transfer restrictions altogether.  Eliminating the transfer restriction 

would provide issuers issuing shares pursuant to Rule 701 and registrants registering the issuance 

of shares on Form S-8 with the same expected benefits in terms of their ability to attract and 

retain platform workers.  Introducing a defined holding period would provide some certainty as 

to when these securities become transferable and potentially increase their value for platform 

workers.  However, doing so could increase the risk of an informal market developing for such 

securities, which given the opaque information environment of non-reporting issuers, could lead 

to adverse consequences for platform workers and other investors.  

Securities offered to platform workers under the proposed amendment to Rule 701 would 

be aggregated with securities offered to employees under the current Rule 701 exemption in 

order to determine whether the issuer is required to deliver certain disclosure under Rule 701(e), 

and whether the overall cap on compensatory securities offerings has been met under Rule 

701(d).  Alternatively, we could have proposed a separate cap for compensatory securities 

offered to platform workers.  Such alternative would increase the amount of securities that could 

be issued to platform workers for issuers with a mix of traditional employees and platform 

workers, leading to potentially greater benefits for these issuers.  However, it is possible that 

such an alternative could adversely affect issuers that employ traditional workers as compared to 

issuers that employ both traditional and platform workers. 



65 

The proposed amendments to Rule 12g5-1 would extend the exclusion from the 

definition of securities “held of record,” and corresponding safe harbor, to securities held by 

platform workers who receive them pursuant to a compensation plan under the proposed 

amendments to Rule 701.  Absent such proposed amendments, platform workers holding 

compensatory securities of non-reporting issuers would be considered holders of record.  We 

believe that this would weaken the expected economic benefits from the proposed amendments 

to Rule 701.  Under such an alternative, gig economy issuers may be disinclined to issue 

compensatory securities to their platform workers to avoid being subject to Exchange Act 

reporting requirements and the associated compliance costs.  The proposed amendments to Rule 

12g5-1 are not temporary.  We could have proposed these amendments on a five-year temporary 

basis.  Such alternative would result in platform workers holding compensatory securities 

becoming holders of record at the end of the five-year period if the exemption were not 

extended.  We believe that under such alternative, gig economy issuers would be disinclined to 

issue compensatory securities to their platform workers to avoid being subject to Exchange Act 

reporting requirements and the associated compliance costs, at the expiration of the five-year 

period. 

Request for Comment  

We request comment on all aspects of our economic analysis, including the potential 

costs and benefits of the proposed amendments and alternatives thereto, and whether the 

proposed amendments, if adopted, would promote efficiency, competition, and capital formation 

or have an impact or burden on competition.  Commenters are requested to provide empirical 

data, estimation methodologies, and other factual support for their views, in particular, on costs 

and benefits estimates.  

In particular, we seek comment with respect to the following questions: Are there any 

costs and benefits that are not identified or are misidentified in the above analysis?  Are there 

any effects on efficiency, competition, and capital formation that are not identified or are 



66 

misidentified in the above analysis?  Should we consider any of the alternative approaches 

outlined above instead of the proposed rules?  Which approach and why?  Are there any other 

alternative approaches that we should consider?  If so, what are they and what would be the 

associated costs or benefits of these alternative approaches? 

V. PAPERWORK REDUCTION ACT 

 A.  Summary of the Collection of Information 

Certain provisions of our rules and forms that would be affected by the proposed 

amendments contain “collection of information” requirements within the meaning of the 

Paperwork Reduction Act of 1995 (“PRA”).141  The Commission is submitting the proposal to 

the Office of Management and Budget (“OMB”) for review in accordance with the PRA.142  The 

hours and costs associated with preparing and filing the forms and reports constitute reporting 

and cost burdens imposed by each collection of information.  An agency may not conduct or 

sponsor, and a person is not required to respond to, a collection of information requirement 

unless it displays a currently valid OMB control number.  Compliance with the information 

collections is mandatory.  Responses to the information collections are not kept confidential and 

there is no mandatory retention period for the information disclosed.  The titles for the affected 

collections of information are: 

• “Form S-8” (OMB Control No. 3235-0066); and 

• “Rule 701” (OMB Control No. 3235-0522). 

We adopted Form S-8 and Rule 701 pursuant to the Securities Act.  Form S-8 sets forth 

the disclosure requirements for a registration statement for securities to be offered by a registrant 

under an employee benefit plan to its employees, or employees of a subsidiary or parent 

company, to help such investors make informed investment decisions.  Rule 701 provides an 

                                                
141  See 44 U.S.C. 3501 et seq. 
 
142  44 U.S.C. 3507(d) and 5 CFR 1320.11. 

 



67 

exemption from registration for offers and sales of securities pursuant to certain compensatory 

benefit plans and contracts relating to compensation.  Issuers conducting compensatory benefit 

plan offerings in excess of $10 million in reliance on Rule 701 during any consecutive 12-month 

period are required to provide plan participants with certain disclosures, including financial 

statement disclosures.143  This disclosure constitutes a collection of information.  A description 

of the proposed rule amendments, including the need for the information and its proposed use, as 

well as a description of the likely respondents, can be found in Section II above, and a discussion 

of the economic effects of the proposed amendments can be found in Section IV above. 

 B. Summary of the Proposed Amendments’ Effects on the Collections of   
  Information 

 
The following table summarizes the estimated effects of the proposed amendments on the 

paperwork burdens associated with the affected collections of information. 

PRA Table 1.  Estimated Paperwork Burden Effects of the Proposed Amendments 

                                                
143  See 17 CFR 230.701(e). 

Collection 
of 

Information 

Proposed Amendment   Expected Estimated PRA 
Effect of Proposed 

Amendment 

Current No. of 
Average Annual 

Responses 

Estimated 
Increase in No. 

of Average 
Annual 

Respondents1 

Form S-8 

 

 

 

 

 
 
 

Rule 701 
 

• Would temporarily expand 
the scope of Form S-8 to 
include issuances to a 
registrant’s platform 
workers in addition to its 
employees. 
 

• Issuers would be required to 
furnish certain information 
every six months. 
 
 
 

• Would temporarily expand 
the scope of Rule 701 to 
exempt issuances to an 
issuer’s platform workers in 
addition to its employees. 

 

• Expected to increase the 
average annual number of 
Form S-8s filed during the 
temporary 4-year period. 
 
 

• Expected to increase PRA 
burden by 2 hours per 
affected respondent annually 
(i.e., 1 hour for each semi-
annual response).  
 

• Expected to increase 
average annual number of 
issuers required to provide 
Rule 701(e) disclosure 
because offers and sales to 
platform workers would be 
integrated with offers and 
sales to employees for 

• 2,140 
 
 
 
 
 

• 0 
 
 
 
 
 

• 800 
 

 

 

• 17 
 
 
 
 
 

• 17 
 
 
 
 
 

• 6 
 
 
 
 
 
 



68 

  
1 These estimates are based on the Farrell study, which identified 106 companies making payments to online 

platform workers providing services during 2012-2018.  See supra Section IV.A, note 119 and accompanying 
text. The staff updated this study’s findings using an assumed growth rate of 15 percent for such companies in 
2019, which yielded an estimate of 122 companies making payments to platform workers as of calendar year-
end 2019.  Upon a review of Commission filings, the staff estimated that 17 of those companies are public, and 
105 private.  The staff further estimated that 5 percent of those private companies (six companies) would likely 
exceed the $10,000,000 threshold for aggregate annual securities offerings to its employees and platform 
workers and would be required to provide the disclosure pursuant to Rule 701(e).  In making this estimate, the 
staff relied on the PRA estimates in Release No. 33-10520, which increased the Rule 701(e) disclosure 
threshold from $5,000,000 to $10,000,000. 

2  We estimate a greater increase in the PRA burden for Rule 701(h)’s furnished disclosure provision because it 
would solicit more information compared to the similar proposed provision for Form S-8.    
  

 C. Incremental and Aggregate Burden and Cost Estimates for the Proposed  
  Amendments 

Below we estimate the incremental and aggregate increase in paperwork burden as a 

result of the proposed amendments.  These estimates represent the average burden for all issuers, 

both large and small.  In deriving our estimates, we recognize that the burdens will likely vary 

among individual issuers based on a number of factors, including the nature of their business.  

For purposes of the PRA, the burden is to be allocated between internal burden hours and outside 

professional costs.  The table below sets forth the percentage estimates we typically use for the 

burden allocation for each affected collection of information.  We also estimate that the average 

cost of retaining outside professionals is $400 per hour.144 

                                                
 144  We recognize that the costs of retaining outside professionals may vary depending on the nature of the 

professional services, but for purposes of this PRA analysis, we estimate that such costs would be an average of 
$400 per hour. This estimate is based on consultations with several registrants, law firms, and other persons 
who regularly assist registrants in preparing and filing reports with the Commission. 

 
 
 
 
 
 
 

• Issuers would be required to 
furnish certain information 
every six months. 

purpose of determining 
whether an issuer has 
exceeded the $10 million 
threshold under Rule 701(e). 
 

• Expected to increase PRA 
burden by 3 hours per 
affected respondent 
annually (i.e., 1.5 hours for 
each semi-annual 
response).2 

 

 

 
 

• 0 
  

 

 

 
 
 
 
• 105 

Collection of 
Information 

 

Internal Outside Professionals 



69 

PRA 
Table 
2.  

Standard Estimated Burden Allocation for Specified Collections of  
                         Information 
 

 
 
 

 

We estimate that the proposed amendments would change both the frequency of 

responses to, and the burden per response of, the existing collections of information.  The burden 

increase estimates were calculated by multiplying the estimated increased number of responses 

by the increased estimated average amount of time it would take to prepare and review the 

disclosure required under the affected collection of information.  The table below illustrates the 

incremental change to the annual compliance burden of the affected collection of information, in 

hours and in costs. 

PRA Table 3.  Calculation of the Incremental Change in Burden Estimates of Current 
Responses Resulting from the Proposed Amendments 

Form S-8 

Rule 701 

50% 

25% 

50% 

75% 

Collection of 
Information 

Number of 
Estimated 
Affected 

Respondents 
 
 
 
 

(A) 

Burden 
Hour 

Annual 
Increase 

per  
Affected 

Respondent 
 

(B) 

 

Increase in 
Burden Hours 
for Affected 
Respondents 

 
 
 
 
(C) = (A) x (B) 

 

Increase in 
Internal 
Burden 

Hours for 
Affected 

Respondents 
 
 
(D) = (C) x 
0.5  or 0.25 

Increase in 
Professional Hours 

for Affected 
Respondents 

 
 
 
 
(E) = (C) x 0.5 
            or 0.75 

Increase in Professional 
Costs for Affected 

Respondents 
 

 
 
 
 
         (F) = (E) x $400 

 
S-8  
(including 
furnished 
disclosure)  

 
17 

 
291 

 
493 

  
246.5 

  
246.5 

 
$98,600 

Rule 701(e) + 
Rule 701(h) 
furnished 
disclosure 

6 
 

52 
 

30 7.5 22.5 $9,000 

Rule 701  
(only 
furnished 
disclosure) 

99 3 297 74.25 222.75 $89,100 

Rule 701 
(total) 

105  327 81.75 245.25 $98,100 



70 

1 Based on the current OMB inventory of 27 annual burden hours per response + 1 burden hour for 
  each semi-annual required furnished disclosure (2 additional annual burden hours) = an increase of 29 burden   
  hours per response. 
2 Based on the current OMB inventory of 2 annual burden hours per response + 1.5 burden hours for each semi- 
  annual required furnished disclosure (3 additional annual burden hours) = an increase of 5 burden hours per   
  response.     
 
  The table below illustrates the program change expected to result from the proposed rule 

amendments together with the total requested change in reporting burden and costs.  

PRA Table 4.  Requested Paperwork Burden under the Proposed Amendments 

 

1 Rounded to nearest whole number. 
2 Thus, the estimated change in internal burden would result in an annual internal burden per response of  
  2.13 hours, which is a slight increase in the current annual internal burden of 2 hours.  482/.25 = 1,928; 1,928/905  
   = 2.13. 
 
 D. Request for Comment 
 

 We request comment in order to: 

• Evaluate whether the proposed collection of information is necessary for the proper 

performance of the functions of the agency, including whether the information would 

have practical utility;  

• Evaluate the accuracy of our estimate of the burden of the proposed collection of 

information;  

Collection 
of 
Informa-
tion 

Current Burden 
 

Program Change Requested Change in Burden 

 Current  
  Annual 
Responses  

 
 

(A) 

Current 
Burden 
Hours 

 
 

(B) 

Current Cost 
Burden  

 
 
 

(C) 

Number of 
Affected 

Responses 
 
 

(D) 
 

Change in 
Issuer 
Hours 

 
 

(E)  
 
 

 
 

Change in 
Professional  

Costs  
 
 

(F) 
 
 
 

Requested
Annual 

Responses 
 
 

(G) 

Requested 
Burden 
Hours1 

 

 

(H) = (B) 
+ (E) 

Cost 
Burden 

 
 
 

(I) = (C) 
+ (F) 

 
S-8 

 

 
2,140 

 
28,890 

 
 
 

 
$11,556,000 

 
 
 

 
17 
 
 
 

 
246.5 

 
 
 

 
$98,600 

 
 
 

 
2,157 

 
 
 

 
29,137 

 

 
 

 
$11,654,600 

Rule 701 
 

 
800 

 
400 

 
$480,000 

 
105 

 
81.75 

 
$98,100 

 
905 

 
4822 

 
$578,100 



71 

• Determine whether there are ways to enhance the quality, utility, and clarity of the 

information to be collected;  

• Evaluate whether there are ways to minimize the burden of the collection of information 

on those who are to respond, including through the use of automated collection 

techniques or other forms of information technology; and  

• Evaluate whether the proposed amendments would have any effects on any other 

collections of information not previously identified in this section.145 

 Any member of the public may direct to us any comments about the accuracy of these 

burden estimates and any suggestions for reducing these burdens.  Persons submitting comments 

on the collection of information requirements should direct the comments to the Office of 

Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, 

Office of Information and Regulatory Affairs, Washington, DC 20503, and should send a copy to 

Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, 

Washington, DC 20549-1090, with reference to File No. S7-19-20.  Requests for materials 

submitted to OMB by the Commission with regard to these collections of information should be 

in writing, refer to File No. S7-19-20, and be submitted to the Securities and Exchange 

Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549-2736. OMB is 

required to make a decision concerning the collection of information between 30 and 60 days 

after publication of this release. Consequently, a comment to OMB is best assured of having its 

full effect if OMB receives it within 30 days of publication. 

VI. INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS 

This Initial Regulatory Flexibility Act Analysis (“IRFA”) has been prepared, and made 

available for public comment, in accordance with the Regulatory Flexibility Act (“RFA”).146  It 

relates to the proposed amendments to Securities Act Rule 701 and Form S-8 to permit the offer 

                                                
145 We request comment pursuant to 44 U.S.C. 3506(c)(2)(B). 
146  5 U.S.C. 601 et seq. 



72 

and sale of securities to internet platform workers, subject to specified conditions, for a 

temporary, five-year period.  The Commission also is proposing to amend Exchange Act Rule 

12g5-1 to exclude from the definition of “held of record” securities held by platform workers 

who received them pursuant to a compensation plan under proposed Rule 701(h) and to provide 

a safe harbor for issuers in connection with such exclusion.  Neither the proposed exclusion nor 

the corresponding safe harbor would be temporary.  As required by the RFA, this IRFA 

describes the impact of these proposed amendments on small entities.147  

 A. Reasons for, and Objectives of, the Proposed Action 

 The proposed amendments would expand the scope of Rule 701 and Form S-8 to address 

recent changes in the workforce caused by the rise of the “gig economy” by permitting the 

issuance of securities to an issuer’s platform workers, in addition to its employees, for 

compensatory purposes.  The proposed amendments would include conditions designed to limit 

the possibility of the changes to Rule 701 and Form S-8 resulting in offers and sales for capital-

raising purposes.  The proposed amendments to Rule 701 and Form S-8 would be temporary to 

enable the Commission to assess whether issuances of securities to platform workers are being 

made for legitimate compensatory purposes, and not for capital-raising purposes, and whether 

such issuances have the expected beneficial effects for issuers in the “gig economy” and their 

investors.   

The proposed amendments to Exchange Act Rule 12g5-1 would extend the exclusion 

from the definition of “held of record” and safe harbor, for purposes of Section 12(g), which 

currently applies to securities held by persons who received them pursuant to an employee 

compensation plan, to securities held by platform workers pursuant to a compensation plan under 

proposed Rule 701(h).  The proposed amendments to Rule 12g5-1, which would not be 

temporary, are intended to remove a potential disincentive to the issuance of securities as 

                                                
147  5 U.S.C. 603(a).  
 



73 

compensation to platform workers and to avoid favoring issuers that do not have platform 

workers over issuers that have them.  The reasons for, and objectives of, all of the proposed 

amendments are discussed in more detail in Sections II.A. through II.F., above. 

 B. Legal Basis 

 We are proposing the amendments contained in this release under the authority set forth 

in Sections 7, 10, and 19(a) of the Securities Act, as amended, and Sections 3(b), 12, 13, 15, 

23(a), and 36 of the Exchange Act, as amended. 

 C. Small Entities Subject to the Proposed Rules 

 The proposed changes would affect some issuers that are small entities.  The RFA defines 

“small entity” to mean “small business,” “small organization,” or “small governmental 

jurisdiction.”148  For purposes of the RFA, under 17 CFR 240.0-10(a), an issuer, other than an 

investment company, is a “small business” or “small organization” if it had total assets of $5 

million or less on the last day of its most recent fiscal year and, under 17 CFR 230.157, is also 

engaged or proposing to engage in an offering of securities that does not exceed $5 million.   

The proposed amendments would apply only to issuers whose platform workers provide 

services; they would not apply to issuers whose platform workers are providing goods.  We 

estimate that there are only a limited number of companies with platforms providing services that 

would be affected by the proposed rules.149  Although it is possible that the proposed amendment 

to Form S-8 could cause a small entity to file a Form S-8 for the issuance of securities to its 

platform workers, based upon staff review of Commission filings during 2018-2019, and due to 

the resulting burden and expense, we do not believe that this outcome is likely.150  There is, 

however, a lack of information concerning the assets of potentially affected private companies, 

and as such, it is difficult to estimate with certainty the number of private issuers that qualify as 

                                                
148  5 U.S.C. 601(6). 
149  Based upon a review of Commission filings and other relevant data, the staff estimated that the proposed rules 

would affect 122 companies, 17 of which are public and 105 of which are private.  See supra Section V.B.  
150  None of the 17 Forms S-8 filed by issuers with service-providing platforms were small entities. 
 



74 

small entities that would be eligible to rely on the proposed amendments to Rule 701 and Rule 

12g5-1 or that would choose to become public companies and then rely on the proposed 

amendments to Form S-8.  We therefore are soliciting comment on the number of small entities 

that would be affected by the proposed amendments. 

 D. Reporting, Recordkeeping, and Other Compliance Requirements 

 As noted above, the purpose of the proposed amendments is to permit the issuance of 

securities for compensatory purposes under Rule 701 and Form S-8 to a new category of worker, 

the “platform worker.”  By expanding the scope of Rule 701 to include issuances of unregistered 

securities to a non-reporting issuer’s platform workers, the proposed amendments likely would 

result in cost savings for such an issuer, which would otherwise have to incur the costs of 

registering the securities, absent another exemption from registration, and thereby become an 

Exchange Act reporting issuer.  In addition, by extending the current exclusion and safe harbor 

under Exchange Act Rule 12g5-1 to securities held by platform workers who received them 

pursuant to a compensation plan under the proposed Rule 701 amendment, a non-reporting issuer 

would benefit by not being required to count those platform workers as record holders for the 

purpose of determining its Section 12(g) registration obligations.   

We believe that the proposed amendments to Rule 701 and Rule 12g5-1 could be of 

particular benefit to small entities, which may be financially constrained, by enabling them to 

issue securities as compensation, instead of cash, within the proposed limits.  This could help 

small entities attract potential workers and enhance their competitive position. 

In contrast, we do not believe that the compliance costs of the proposed Rule 701 

amendment would be significant.  The most significant compliance burden under current Rule 

701 is the financial disclosure requirement under Rule 701(e) for issuers that exceed the $10 

million threshold during a 12-month period.  Due to the $10 million threshold, this requirement 



75 

would not apply to small entities.151  Moreover, although under the proposed rules, an issuer 

offering securities to its platform workers pursuant to the amended Rule 701 would be required 

to furnish certain information every six months, we do not expect the resulting compliance 

burden to be significant.152 

 The proposed amendment to Form S-8 would benefit public companies with platforms 

offering services by permitting them to issue registered securities to their platform workers in 

addition to their employees, which could enhance their competitive position vis-à-vis companies 

that only have employees.  The proposed amendments likely would result in the filing of 

additional Form S-8 registration statements to cover offers and sales to such workers.  Those 

registrants would incur the compliance burden and costs typically associated with preparing and 

filing Form S-8.  In addition, because we are proposing a requirement to furnish information 

every six months for Form S-8 issuers, similar to the proposal for Rule 701 issuers, those 

registrants would incur the compliance burden and costs associated with furnishing the required 

information, which we similarly estimate would not be significant.153  Although it is possible that 

the proposed amendment to Form S-8 could cause a small entity to file a Form S-8 for the 

issuance of securities to its platform workers, based upon staff review of Commission filings 

during 2018-2019, and due to the resulting burden and expense, we do not believe that this 

outcome is likely.154  Nevertheless, we are soliciting comment on the costs and benefits of the 

                                                
151  See 17 CFR 230.701(d), which limits the aggregate sales price or amount of securities sold under Rule 701  

during any consecutive 12-month period to the greatest of $1,000,000, 15 percent of the total assets of the 
issuer, or 15 percent of the outstanding amount of the class of securities being offered and sold in reliance on 
Rule 701.  The purpose of the Rule 701(d) caps is to help curb non-compensatory sales in reliance on the rule.  
For example, applying the asset cap, a small entity would only be able to offer 15 percent of $5,000,000, or 
$750,000 during a consecutive 12-month period.  Although in a companion rulemaking, the Commission is 
proposing to increase the asset limitation to 25 percent, under this increased limit, if adopted, a small entity 
would still be able to offer only 25 percent of $5,000,000, or $1,250,000.  While the Commission is also 
proposing to raise the dollar cap, the new cap would only increase to $2,000,000.  See Release No. 33-10891 at 
Section II.B. 

152  We estimate that the compliance burden associated with furnishing the required information under the proposed 
Rule 701 amendment would be 1.5 hours for each semi-annual disclosure per issuer, or a total of 3 hours per 
issuer on an annual basis.  See supra Section V.B. 

153   We estimate that the compliance burden associated with furnishing the required information under the proposed 
Form S-8 amendment would be 1.0 hours for each semi-annual disclosure per issuer, or a total of 2 hours per 
issuer on an annual basis.  See supra Section V.B. 

154  See supra note 150. 



76 

proposed amendments for small entities. 

 Compliance with the proposed amendments would require the use of professional skills, 

including legal skills, both to help ensure that an issuer has met the proposed conditions under 

Rule 701 designed to prevent the issuance of securities for a capital-raising purpose, and to 

enable a registrant to meet the requirements of Form S-8.  We discuss the economic impact, 

including the estimated compliance burdens and costs, of the proposed amendments to all 

issuers, including small entities, in greater detail in Sections IV and V above. 

 E. Duplicative, Overlapping, or Conflicting Federal Rules 

We believe that the proposed amendments would not duplicate, overlap, or conflict with 

other Federal rules. 

 F. Significant Alternatives 

The RFA directs us to consider alternatives that would accomplish our stated objectives, 

while minimizing any significant economic impact on small entities.  In connection with the 

proposed amendments, we considered the following alternatives: 

• Establishing different compliance or reporting requirements that take into account the 

resources available to small entities; 

• Clarifying, consolidating, or simplifying compliance and reporting requirements under 

the rules for small entities; 

• Using performance rather than design standards; and 

• Exempting small entities from all or part of the requirements. 

The proposed amendments to Rule 701 and Form S-8 would permit the issuance of 

securities to platform workers subject to specified conditions.  Although an issuer, including a 

small entity, would incur some compliance costs to ensure that it has met those conditions, 

issuers proceeding under the proposed amendment to Rule 701 would largely benefit due to the 

savings derived from not having to register the securities.  In addition, we expect the increase in 

Form S-8 compliance costs to be limited because, although the proposed amendment to Form S-



77 

8 would likely result in more registration statements on that form being filed, we believe that the 

proposed amendment would only slightly increase the actual burden of preparing and filing each 

Form S-8.  We also believe that it is unlikely that the proposed amendment would result in a 

small entity filing a Form S-8.  We are not proposing an amendment to reduce the costs of 

preparing and filing a Form S-8 because we believe the requirements that result in those costs are 

necessary to protect investors.  We also are not proposing to exempt small entities from the costs 

associated with the proposed requirement to furnish information on a semi-annual basis because 

we believe that requirement is necessary to assess fully the impact of the temporary rules.  

Accordingly, we do not believe it is necessary to establish different compliance or reporting 

requirements for small entities or to exempt small entities from all or part of the proposed 

amendments. 

Finally, with respect to using performance rather than design standards, the proposed 

amendments generally contain elements similar to performance standards.  For example, the 

proposed definition of platform worker would include the condition that the issuer operates the 

platform for the provision of services pursuant to a written contract or agreement between the 

issuer and the platform worker under which the issuer controls the use of the platform.  Issuer 

control would be demonstrated by the issuer being able to establish the amount of the fees 

charged for using the platform and the terms and conditions by which the platform worker 

receives payment for the services provided through the platform.  In addition, the issuer must 

have the authority to accept and remove the internet platform workers providing services through 

the platform.  However, the proposed amendments would not require that a specific fee be 

charged or that a specific payment mechanism be utilized.  The proposed amendments would 

also not limit what services an issuer could facilitate through its platform or how participating 

workers could provide the services. 

Request for Comment 



78 

We encourage the submission of comments with respect to any aspect of this IRFA.  In 

particular, we request comments regarding: 

• How the proposed rule and form amendments can achieve their objective while lowering 

the burden on small entities; 

• The number of small entity companies that may be affected by the proposed rule and 

form amendments; 

• The existence or nature of the potential effects of the proposed amendments on small 

entity companies discussed in the analysis;  

• How to quantify the effects of the proposed amendments; and 

• Whether there are any federal rules that duplicate, overlap, or conflict with the proposed 

amendments. 

Commenters are asked to describe the nature of any effect and provide empirical data 

supporting the extent of that effect.  Comments will be considered in the preparation of the Final 

Regulatory Flexibility Analysis, if the proposed rules are adopted, and will be placed in the same 

public file as comments on the proposed rules themselves. 

VII. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT 

  For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 

(“SBREFA”),155 the Commission must advise OMB as to whether the proposed amendments 

constitute a “major” rule.  Under SBREFA, a rule is considered “major” where, if adopted, it 

results in or is likely to result in:  

• An annual effect on the U.S. economy of $100 million or more;  

• A major increase in costs or prices for consumers or individual industries; or  

• Significant adverse effects on competition, investment, or innovation.  

                                                
155  5 U.S.C. 801 et seq. 



79 

We request comment on whether our proposal would be a “major rule” for purposes of 

SBREFA.  In particular, we request comment and empirical data on:  

• The potential effect on the U.S. economy on an annual basis;  

• Any potential increase in costs or prices for consumers or individual industries; and  

• Any potential effect on competition, investment, or innovation. 

VIII. STATUTORY AUTHORITY  

The amendments contained in this release are being proposed under the authority set 

forth in Sections 7, 10, and 19(a) of the Securities Act, as amended, and Sections 3(b), 12, 13, 

15, 23(a), and 36 of the Exchange Act. 

List of Subjects in 17 CFR Parts 230, 239, and 240 

 Reporting and recordkeeping requirements, Securities. 

TEXT OF THE PROPOSED AMENDMENTS 

For the reasons set out in the preamble, the Commission is proposing to amend title 17, 

chapter II of the Code of Federal Regulations as follows: 

PART 230 – GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933 

 1. The authority citation for part 230 continues to read, in part, as follows: 

 Authority:  15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 

78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 

80a29, 80a-30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126 Stat. 313 (2012), 

unless otherwise noted. 

* * * * * 

 Sections 230.400 to 230.499 issued under secs. 6, 8, 10, 19, 48 Stat. 78, 79, 81, and 85, as 

amended (15 U.S.C. 77f, 77h, 77j, 77s). 

* * * * * 

 2. Amend § 230.428 by adding paragraph (d) to read as follows: 



80 

§ 230.428  Documents constituting a section 10(a) prospectus for Form S-8 registration 

statement; requirements relating to offerings of securities registered on Form S-8. 

* * * * * 

 (d)(1) Where securities are to be offered to platform workers pursuant to a registration 

statement on Form S-8 (§ 239.16b(c)), the documents and other information identified in 

paragraph (a) of this section shall, taken together, constitute a Section 10(a) prospectus for 

offerings to platform workers pursuant to a written compensation plan, contract, or agreement.  

The document retention requirements in paragraph (a)(2) of this section and the delivery, 

updating, and related procedural requirements in paragraph (b) of this section shall also apply to 

such offerings to platform workers. 

 (2) This paragraph (d) will expire on the same date that 17 CFR 239.16b(c) will expire 

pursuant to 17 CFR 239.16b(c)(4).  

3. Amend § 230.701 by adding Note 1 to paragraph (c) and adding paragraph (h) to read 

as follows: 

§ 230.701  Exemption for offers and sales of securities pursuant to certain compensatory 

benefit plans and contracts relating to compensation. 

* * * * * 

 (c) * * * 

 Note 1 to paragraph (c): Refer to § 230.701(h) for the exemption under § 230.701 

applicable to offers and sales of securities to platform workers.  Platform worker is defined in § 

230.701(h)(2). 

* * * * * 

(h)(1) Transactions with platform workers. (i) In addition to the transactions exempted by 

paragraph (c) of this section, this section exempts offers and sales of securities (including plan 

interests and guarantees pursuant to paragraph (d)(2)(ii) of this section) under a written 

compensatory benefit plan (or written compensation contract) established by the issuer, its81 

parents, its subsidiaries, or subsidiaries of the issuer’s parent, for the participation of platform 

workers as defined in paragraph (h)(2) of this section.  As used in this section, the term “platform 

worker” includes former platform workers, executors, administrators, or beneficiaries of the 

estates of deceased platform workers, guardians or members of a committee for incompetent 

former platform workers, or similar persons duly authorized by law to administer the estate or 

assets of former platform workers.  This section exempts offers and sales to former platform 

workers only if such workers met the conditions of paragraph (h) of this section at the time the 

securities were offered or during a period of service ending within 12 months preceding the 

termination of service for which the securities were issued.  This section also exempts offers and 

sales to former platform workers of an acquired entity of securities issued in substitution or 

exchange for securities issued to such workers by the acquired entity on a compensatory basis 

while such persons were providing services to the acquired entity. 

(ii) The exemption for offers and sales of securities to platform workers under this section 

is temporary and will expire pursuant to paragraph (h)(6) of this section, except that, following 

the expiration date specified in paragraph (h)(6) of this section, an issuer may continue to rely on 

the exemption in this paragraph (h) for the sale of securities underlying options, warrants, or 

rights previously issued in an exempt transaction pursuant to this paragraph (h). 

(2) Definition of platform worker.  A platform worker is a natural person or an entity 

specified in paragraph (h)(2)(iii) of this section, who is unaffiliated with the issuer and meets the 

following conditions: 

 (i) The worker provides bona fide services to the issuer (or the issuer’s parents, the 

issuer’s subsidiaries or subsidiaries of the issuer's parent) or to third-party end-users, and such 

services benefit the issuer.  Selling or transferring permanent ownership of discrete, tangible 

goods would not constitute services for purposes of this section;   

 (ii) The services are provided pursuant to a written contract or agreement between the 

issuer and the worker and are provided through an internet-based platform or other widespread, 



82 

technology-based marketplace platform or system that the issuer operates and controls, as 

demonstrated by the following:  

 (A) The issuer provides access to the platform and establishes the principal terms of 

service for using the platform; 

(B) The issuer establishes the terms and conditions by which the platform worker 

receives payment for the services provided through the platform; and  

 (C) The issuer can accept and remove the platform worker. 

 (iii) A platform worker may be an entity if: 

(A) Substantially all of its activities involve the performance of bona fide services that 

meet the requirements of paragraphs (h)(2) and (h)(3) of this section; and 

(B) The ownership interest of the entity is wholly and directly held by the 

natural person performing the services pursuant to paragraph (h) of this section through the 

entity.  

 (3) Additional requirements for issuances to platform workers.  Offers and sales of 

securities to platform workers are eligible for an exemption under this section if the following, 

additional requirements are met: 

 (i) The issuance is pursuant to a compensatory arrangement, as evidenced by a written 

compensation plan, contract, or agreement, and is not for services that are in connection with the 

offer or sale of securities in a capital-raising transaction, or services that directly or indirectly 

promote or maintain a market for the issuer's securities;  

 (ii) No more than 15 percent of the value of compensation received by a platform worker 

from the issuer for services provided during a consecutive 12-month period, and no more than 

$75,000 of the value of compensation received by the platform worker from the issuer during a 

consecutive 36-month period, shall consist of securities, with such value determined at the time 

the securities are granted; 



83 

 (iii) The amount and terms of any securities issued to a platform worker may not be 

subject to individual bargaining or the worker’s ability to elect between payment in securities or 

cash; and 

 (iv) The issuer must take reasonable steps to prohibit the transfer of the securities issued 

to a platform worker pursuant to this exemption, other than a transfer to the issuer or by 

operation of law, except that 90 days after the issuer becomes subject to the reporting 

requirements of Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or 78o(d)), securities 

issued under this section may be resold pursuant to paragraph (g)(3) of this section.  

 (4) Requirement to furnish certain information.  An issuer using the exemption under this 

section for the issuance of securities to platform workers is required to furnish the following 

information to the Commission at six-month intervals commencing six months after the first 

such issuance: 

 (i) The criteria used to determine eligibility for securities awards to platform workers, 

whether they are the same as for other compensatory transactions and whether those criteria, 

including revisions to the criteria, are communicated to workers in advance as an incentive; 

 (ii)  The type and terms of securities issued to platform workers during each six-month 

interval, and whether they are the same as for other compensatory transactions by the issuer 

during that interval; 

 (iii) The reasonable steps taken to prohibit the transfer of the securities sold pursuant to 

this paragraph (h); 

(iv) The percentage of overall outstanding securities that the amount issued cumulatively 

under this paragraph (h) represents;  

(v) During each six-month interval, the number of platform workers, the number of non-

platform workers, the number of platform workers receiving securities pursuant to this paragraph 

(h), and the number of non-platform workers who received securities pursuant to § 230.701; and 



84 

(vi) The number and dollar amount of securities issued to platform workers in each six-

month interval, both in absolute amounts and as a percentage of the issuer’s total exempt sales 

under § 230.701. 

Instruction to § 230.701(h)(4).  An issuer should furnish the required information 

specified in this paragraph in the manner designated by the Division of Corporation Finance for 

this purpose. 

(5) Request for confidential treatment.  An issuer may request confidential treatment 

under § 200.83 for information furnished pursuant to paragraph (h)(3) of this section.  Written 

requests for confidential treatment under § 200.83 relating to the furnished materials may be 

submitted either in paper format or electronically.   

 (6) Expiration of temporary exemptive rule.  Except as provided in paragraph (h)(1)(ii) of 

this section, the exemption for the issuance of securities to platform workers pursuant to this 

paragraph (h) applies only to offers or sales of securities occurring prior to five years following 

the date of the section’s effectiveness.   

 (7) This paragraph (h) will expire five years from the date of effectiveness of § 

230.701(h).   

PART 239 – FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933  

 4. The general authority citation for part 239 continues to read as follows:  

 Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77sss, 78c, 78l, 78m, 

78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-

13, 80a-24, 80a-26, 80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat. 312, 

unless otherwise noted.  

* * * * * 

 5.  Amend § 239.16b by adding “or other compensatory plans” at the end of the title and 

adding paragraphs (a)(3) and (c) to read as follows:  



85 

§ 239.16b  Form S-8, for registration under the Securities Act of 1933 of securities to be 

offered to employees pursuant to employee benefit plans or other compensatory plans. 

 (a)  * * * 

 (3) Securities of the registrant to be offered to marketplace platform workers pursuant to  

§ 239.16b(c). 

* * * * * 

 (c) Issuances to platform workers.  (1) A registrant may register on Form S-8 securities to 

be offered or sold to platform workers, as defined by § 230.701(h), for the temporary period set 

forth in § 239.16b(c)(4), only if: 

 (i) The issuance is pursuant to a compensatory arrangement, as evidenced by a written 

compensation plan, contract or agreement, and is not for services that are in connection with the 

offer or sale of securities in a capital-raising transaction or that directly or indirectly promote or 

maintain a market for the issuer's securities;  

(ii) No more than 15 percent of the value of compensation received by a platform worker 

from the issuer for services provided during a consecutive 12-month period shall consist of 

securities, with such value determined at the time the securities are granted, with the remainder 

of compensation received by the platform worker from the issuer paid in cash, and no more than 

$75,000 of such compensation received from the issuer during a consecutive 36-month period 

shall consist of securities, with such value determined at the time the securities are granted; and 

(iii) The amount and terms of any securities issued to a platform worker may not be 

subject to individual bargaining or the worker’s ability to elect between payment in securities or 

cash. 

(2) A registrant using Form S-8 for the issuance of securities to platform workers is 

required to furnish the following information in the manner designated by the Division of 

Corporation Finance for this purpose at six-month intervals commencing six months after the 

first such issuance: 



86 

(i) The criteria used to determine eligibility for securities awards to platform workers, 

whether they are the same as the criteria for other compensatory transactions, and whether those 

criteria, including revisions to the criteria, are communicated to workers in advance as an 

incentive; 

(ii) The type and terms of securities issued to platform workers during each six-month 

interval and whether they are the same as for other compensatory transactions by the registrant 

during that interval; 

(iii) The percentage of overall outstanding securities that the amount issued cumulatively 

to platform workers under this section represents;  

(iv) During each six-month interval, the number of platform workers, the number of non-

platform workers, the number of platform workers receiving securities registered on Form S-8, 

and the number of non-platform workers who received securities registered on Form S-8; 

(v) The number of platform workers, in an absolute amount and as a percentage of the 

total number of platform workers, employees, and other persons eligible to receive securities on 

Form S-8; and 

(vi) The number and dollar amount of securities issued to platform workers, both in 

absolute amounts and as a percentage of the issuer’s total sales on Form S-8 during each six-

month interval. 

(3) A registrant may request confidential treatment under § 200.83 for information 

furnished pursuant to this section.  Written requests for confidential treatment under § 200.83 

relating to the furnished materials may be submitted either in paper format or electronically. 

(4) This paragraph (c) applies only to offers or issuances of securities occurring prior to 

five years from the date of the section’s effectiveness. 

(5) This paragraph (c) will expire five years from the date of effectiveness of § 

239.16b(c). 

 6.  Amend Form S-8 (referenced in § 239.16b) by: 



87 

 a.  Redesignating paragraph (b) of General Instruction A.1. as paragraph (c); 

b.  Adding paragraph (b) of General Instruction A.1.; 

c.  Revising paragraph 1 of General Instruction G. (“Updating”); 

d.  Revising the Note immediately following the heading “Part I - INFORMATION 

REQUIRED IN THE SECTION 10(a) PROSPECTUS;”  

e.  Revising Item 2 of Part I; and 

f.  Revising the “Signatures” section for “the Plan” by replacing the parenthetical “or 

other persons who administer the employee benefit plan” with “or other persons who administer 

the plan” in the first sentence. 

The additions and revisions read as follows: 

Note: The text of Form S-8 does not, and this amendment will not, appear in the 

Code of Federal Regulations.  

UNITED STATES  
SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549  
 

FORM S-8  
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933  

 
* * * * * 

GENERAL INSTRUCTIONS 

A.   Rule as to Use of Form S-8 

 1.  * * * 

(a) * * * 

(b)(1) Securities of the registrant to be offered to platform workers pursuant to a written 

compensation plan, contract, or agreement.  The term “platform worker” is defined by Rule 

701(h)(2) (§ 230.701(h)(2)).  As used in this form, the term “plan” includes a written 

compensation plan, contract, or agreement for the issuance of securities to platform workers.   



88 

(2) Form S-8 is available for the issuance of securities to platform workers only if, pursuant 

to § 239.16b(c): 

(i) The issuance is pursuant to a compensatory arrangement, as evidenced by a written 

compensation plan, contract, or agreement, and is not for services that are in connection with the 

offer or sale of securities in a capital-raising transaction, or services that directly or indirectly 

promote or maintain a market for the issuer's securities; 

(ii) No more than 15 percent of the value of compensation received by a platform worker 

from the issuer for services provided during a consecutive 12-month period shall consist of 

securities, with such value determined at the time the securities are granted, with the remainder 

of compensation received by the platform worker from the issuer paid in cash, and no more than 

$75,000 of such compensation received from the issuer during a consecutive 36-month period 

shall consist of securities, with such value determined at the time the securities are granted;  

(iii) The amount and terms of any securities issued to a platform worker may not be subject 

to individual bargaining or the worker’s ability to elect between payment in securities or cash; 

and  

(iv) The offers or sales of securities occur prior to five years from the date of the 

effectiveness of § 239.16b(c)].  On that date, § 239.16b(c) will expire and will no longer be 

effective. 

Note: The purpose of § 239.16b(c) is to permit the issuance of securities to platform workers 

for a compensatory purpose.  This section is not available for plans or schemes to circumvent 

this purpose, such as to raise capital.  This section also is not available to any transaction that is 

in technical compliance with § 239.16b(c) but is part of a plan or scheme to evade the 

compensatory purpose of this section.   

(3) A registrant using Form S-8 for the issuance of securities to platform workers is required 

to furnish the information specified in § 239.16b(c)(3) in the manner designated by the Division 



89 

of Corporation Finance for this purpose at six-month intervals commencing six months after the 

first issuance of securities to platform workers on this form.  

Note:  A registrant may request confidential treatment under § 200.83 for information 

furnished pursuant to § 239.16b(c)(3).  Written requests for confidential treatment under § 

200.83 relating to the furnished materials may be submitted either in paper format or 

electronically. 

(4)  The term “platform worker” includes: 

(i)  Former platform workers, only if such workers provided services pursuant to  

§ 239.16b(c) of this chapter at the time the securities were offered or during a period of service 

ending within 12 months preceding the termination of service for which the securities were 

issued; 

(ii) Former platform workers of an entity acquired by the issuer who may receive securities 

registered on this form in substitution or exchange for securities issued to them by the acquired 

entity on a compensatory basis while such persons were providing services to the acquired entity; 

and 

(iii)  Executors, administrators, or beneficiaries of the estates of deceased platform workers, 

guardians or members of a committee for incompetent former platform workers, or similar 

persons duly authorized by law to administer the estate or assets of former platform workers. 

(5)  The inclusion of individuals described in paragraph (4) of General Instruction A.1.(b) in 

the term “platform worker” is only to permit registration on Form S-8 of the exercise of stock 

options issued to platform workers pursuant to a plan, and the subsequent sale of the securities, if 

these exercises and sales are permitted under the terms of the plan. 

* * * * * 

G. Updating 

 Updating of information constituting the Section 10(a) prospectus pursuant to Rule 

428(a) (§230.428(a)) during the offering of the securities shall be accomplished as follows: 



90 

 1.  Plan information specified by Item 1 of Form S-8 required to be sent or given to 

employees or platform workers shall be updated as specified in Rule 428(b)(l) (§230.428(b)(l)) 

or Rule 428(d)(1) (§230.428(d)(1)).  Such information need not be filed with the Commission. 

* * * * * 

Part I 

INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS 

Note: The document(s) containing the information specified in this Part I will be 

sent or given to employees or platform workers as specified by Rules 428(b)(1) and 428(d) 

(§§ 230.428(b)(1) and 428(d)).  Such documents need not be filed with the Commission 

either as part of this registration statement or as prospectuses or prospectus supplements 

pursuant to Rule 424 (§230.424).  These documents and the documents incorporated by 

reference in the registration statement pursuant to Item 3 of Part II of this Form, taken 

together, constitute a prospectus that meets the requirements of Section 10(a) of the 

Securities Act.  See Rules 428(b)(1) and 428(d) (§§ 230.428(b)(1) and 428(d)). 

* * * * * 

Item 2.  Registrant Information and Participant Plan Annual Information 

 The registrant shall provide a written statement to participants advising them of the 

availability without charge, upon written or oral request, of the documents incorporated by 

reference in Item 3 of Part II of the registration statement, and stating that these documents are 

incorporated by reference in the Section 10(a) prospectus.  The statement also shall indicate the 

availability without charge, upon written or oral request, of other documents required to be 

delivered to employees pursuant to Rule 428(b) (§230.428(b)), and to platform workers pursuant 

to Rule 428(d).  The statement shall include the address (giving title or department) and 

telephone number to which the request is to be directed. 

* * * * * 



91 

PART 240 – GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE 

ACT OF 1934 

7.  The general authority citation for part 240 continues to read as follows:  

 Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 

77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 

78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 80a-20, 80a-23, 

80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 

5221(e)(3); 18 U.S.C. 1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106, 

secs. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted. 

*  *  *  *  * 

 8.  Amend § 240.12g5-1 by revising paragraph (a)(8) to read as follows:  

§ 240.12g5-1   Definition of securities “held of record”. 

 (a)  * * * 

 (8)(i)  For purposes of determining whether an issuer is required to register a class of 

equity securities with the Commission pursuant to Section 12(g)(1) of the Act (15 U.S.C.  

78l(g)(1)), an issuer may exclude securities:   

(A)  Held by persons who received the securities pursuant to an employee compensation 

plan, or a compensation plan for platform workers pursuant to § 230.701(h) of this chapter, in 

transactions exempt from, or not subject to, the registration requirements of Section 5 of the 

Securities Act of 1933 (15 U.S.C. 77e); and  

 (B)  Held by persons who received the securities in a transaction exempt from, or not 

subject to, the registration requirements of Section 5 of the Securities Act (15 U.S.C. 77e) from 

the issuer, a predecessor of the issuer, or an acquired company in substitution or exchange for 

excludable securities under paragraph (a)(8)(i)(A) of this section, as long as the persons were 

eligible to receive securities pursuant to § 230.701 of this chapter at the time the excludable 

securities were originally issued to them.  



92 

 (ii)  As a non-exclusive safe harbor under this paragraph (a)(8):   

(A)  An issuer may deem a person to have received the securities: 

(1) Pursuant to an employee compensation plan if such plan and the person who received 

the securities pursuant to the plan met the plan and participant conditions of § 230.701(c) of this 

chapter; or  

(2) Pursuant to a compensation plan for platform workers if such plan and the person who 

received the securities pursuant to the plan met the plan and participant conditions of  

§ 230.701(h) of this chapter.  

(B) An issuer may, solely for the purposes of Section 12(g) of the Act (15 U.S.C.  

78l(g)(1)), deem the securities to have been issued in a transaction exempt from, or not subject 

to, the registration requirements of Section 5 of the Securities Act (15 U.S.C. 77e) if the issuer 

had a reasonable belief at the time of the issuance that the securities were issued in such a 

transaction.   

 Note 1 to paragraph (a)(8)(ii): Section 230.701(h) applies only to offers or sales of 

securities occurring prior to five years following the date of effectiveness of § 230.701(h).  On 

that date, § 230.701(h) will expire and will no longer be effective. 

* * * * * 

By the Commission. 

Dated: November 24, 2020. 

Vanessa A. Countryman, 

Secretary.