Blue Sky Laws Law and Legal Definition

Blue sky laws refer to State securities laws in the United States that regulate the offering and sale of securities to protect the public from fraud. Such laws intend to protect the public from purchasing stock in fraudulent companies that lack substance, such as those selling swamp land, non-existent gold strikes and dry oil wells, or who have no assets besides a post office box. Blue sky laws require that companies seeking to sell stock to the public must submit information to and obtain the approval of the State Securities Commissioner and/or the Securities Exchange Commission after providing details on financing and management. The term comes from the intent to prevent the existence of corporations that have nothing behind them but "blue sky." While these laws vary from state to state, the laws require registration of securities offerings, and registration of brokers and brokerage firms.