State “Blue Sky” laws were built to protect investors by regulating securities offers and sales within each state. In the secondary trading context, however, they can also create a patchwork of rules that affects whether broker-dealers and investment advisers can research, recommend, and facilitate trading in a company’s securities—especially for OTC-traded issuers.
In a September 2025 post, OTC Markets reported a major milestone: as of July 1, 2025, OTCQX Best Market had reached secondary trading Blue Sky exemptions in 41 U.S. states and jurisdictions, and OTCQB Venture Market in 37.
That’s meaningful progress—yet it’s also a reminder that Blue Sky compliance is still not fully uniform nationwide.
This article explains what that milestone means, how the most common exemptions work, why the remaining gaps matter, and how issuers can build a practical strategy to maximize Blue Sky coverage.
What “Blue Sky Recognition” Means in Secondary Trading
For many OTC issuers, the Blue Sky issue isn’t about registering a new offering—it’s about secondary market accessibility: whether intermediaries can comfortably support the stock for clients in a given state.
When a state provides a relevant exemption (or recognizes a disclosure framework), it can reduce friction for:
- broker-dealers deciding whether they can recommend or solicit transactions,
- investment advisers evaluating whether they can hold or discuss the security,
- and ultimately, investors trying to access liquidity.
OTC Markets’ argument is straightforward: if a company is meeting robust disclosure standards and information is easily accessible, then states should treat that disclosure as the modern equivalent of the traditional tools Blue Sky laws relied on.
The “Manual Exemption”: The Classic Route to Blue Sky Compliance
One of the most widely referenced paths to state Blue Sky secondary trading coverage is the manual exemption. OTC Markets describes it as allowing broker-dealers and investment advisers to publish research or solicit investments so long as current financial disclosure is available in a recognized securities manual (or electronic equivalent).
OTC Markets also notes that 44 states and jurisdictions maintain some form of manual exemption, and that each state determines which manuals qualify.
Separately, NASAA has discussed how manual exemptions historically centered on printed manuals (e.g., Mergent) and how states are evaluating modernization of these frameworks.
Issuer takeaway: Blue Sky strategy is often about being “recognized” where you trade—and that recognition depends heavily on your disclosure posture and where/how that disclosure is made available.
A Newer Model: Recognition Tied to SEC Rule 15c2-11 Standards
OTC Markets’ post highlights another pathway emerging at the state level: exemptions linked to modern SEC disclosure and quotation rules—especially Exchange Act Rule 15c2-11.
OTC Markets points to Florida as a notable example, describing a state framework enabling secondary trading through an SEC-registered alternative trading system (ATS) where issuers meet Rule 15c2-11 disclosure standards.
This approach essentially aligns state Blue Sky treatment with an established federal disclosure/quotation regime—reducing ambiguity about what “good disclosure” looks like.
Issuer takeaway: States that tie exemptions to Rule 15c2-11-style standards are effectively saying, “If the disclosure is current, public, and reviewable under a recognized framework, secondary trading should be less restricted.”
Why OTC Markets Is Advocating for National Recognition
Even with 41-state coverage for OTCQX, OTC Markets argues the current system remains inefficient: issuers can be compliant and transparent, yet still face limitations because Blue Sky exemptions are not uniform.
Their proposed solution is bold but logical: consider a federal solution—specifically, SEC exploration of preemption of state Blue Sky laws for secondary trading, to create a national standard while still preserving state enforcement against fraud.
Issuer takeaway: The push for national recognition is fundamentally about increasing access—more intermediaries willing to support OTC securities, fewer “state-by-state” roadblocks, and a more consistent investor experience.
What Issuers Can Do Now to Maximize Blue Sky Coverage
Even if national recognition expands over time, issuers can materially improve their position today with a few practical steps:
1) Know where you stand—state by state
Many companies assume they’re “fine everywhere” because they’re quoted. That’s often wrong. You need a current snapshot of coverage by state and exemption type.
2) Treat disclosure like a market-access tool
Blue Sky recognition commonly turns on whether your disclosure is current, accessible, and consistent. If your disclosure is uneven, your Blue Sky coverage (and broker comfort) tends to be uneven.
3) Use the right exemption pathway for your situation
Some states are manual-exemption driven, others have self-executing exemptions, and some may allow filings/registrations to support secondary trading. OTC Markets notes that multiple exemptions can sometimes be used within a single state—and that navigating the patchwork remains complex.
4) Sequence corporate actions and disclosures carefully
Corporate actions (splits, name changes, designations) can disrupt an issuer’s information trail if not coordinated—creating temporary “gaps” that spook intermediaries.
How Diedrich Consulting Helps Issuers Avoid Blue Sky Friction
Blue Sky strategy becomes much easier when it’s handled as part of your broader issuer readiness program rather than a one-off compliance scramble.
Diedrich Consulting helps companies:
- Assess Blue Sky posture and identify coverage gaps that could restrict research, recommendations, or investor access
- Strengthen disclosure readiness so your public information supports intermediary confidence (and aligns with modern standards discussed in the market, including Rule 15c2-11 frameworks)
- Coordinate corporate actions (splits, structure amendments, designations, dividends) so the market-facing record stays clean and consistent
- Build an execution plan that aligns legal, operational, and market communications—so Blue Sky issues don’t become a hidden liquidity problem
Closing Thought
“41 states” is a milestone—but the broader message is more important: market access is increasingly tied to disclosure quality and regulatory alignment, and issuers who treat Blue Sky strategy as part of their capital markets infrastructure tend to experience fewer trading and investor-relations headwinds.