State registration laws, also known as "Blue Sky" laws, are enacted by each state in order to protect their citizenry from fraud. These laws, many of which predate the Federal Securities Acts in 1933 and 1934, require brokers, brokerage firms, investment advisers, and securities offerings be registered in the state in which they operate.
The term "Blue Sky" refers to the nothingness that composes the great blue yonder. It comes from a phrase used in a Supreme Court case Hall vs. Geiger-Jones Co. from 1917. The laws are intended to prevent the fraudulent sale of "Blue Sky" to investors and allow for states to enforce those laws. However, the ability of states to regulate and enforce some securities laws has been limited due to the enactment of the National Securities Markets Improvement Act of 1996. There are some securities that are considered covered and exempt from Blue Sky laws, including those securities listed on the NYSE, AMEX, and NASDAQ, and also many mutual fund shares.
For more information about Blue Sky Laws, be sure to visit these sites:
Blue Sky Laws, State Law, Securities