The U.S. Securities and Exchange Commission has clarified that memecoins do not meet the definition of securities under federal law. While this decision relieves traders and creators from certain regulatory obligations, the agency warns that deceptive activities surrounding these tokens remain subject to enforcement.
Memecoins and the SEC’s Position
In a statement from its Division of Corporation Finance, the SEC emphasized that memecoins do not grant holders rights to future profits, assets, or business control. Unlike stocks or bonds, memecoins derive their value from market demand rather than structured financial mechanisms. Consequently, they do not require registration under the Securities Act of 1933, nor do federal securities laws offer protection to traders.
The agency relied on the Howey Test to assess whether memecoins constitute investment contracts. Since they do not involve pooled investments or profit expectations tied to managerial efforts, they fall outside the scope of securities regulation. As a result, individuals trading or issuing these types of assets are not required to comply with SEC securities laws.
Despite this classification, the SEC warned that fraudulent schemes disguised as memecoins could still be subject to legal scrutiny. If a project misrepresents itself to evade securities laws or engages in deceptive practices, regulators retain the authority to take action.
A Changing Regulatory Environment
The SEC’s approach to crypto regulation has shifted following the leadership transition from Gary Gensler to Paul Atkins and Hester Peirce. Under the new administration, the agency has adopted a more crypto-friendly stance, recently withdrawing cases against Coinbase, Gemini, MetaMask, OpenSea, Robinhood, and Uniswap.
Additionally, new legislation is being considered to limit public officials’ involvement in cryptocurrencies. Representative Sam Liccardo proposed a bill that would prevent members of Congress and their families from launching or promoting cryptocurrencies, following reports that former President Donald Trump and First Lady Melania Trump had introduced their own memecoins.
