The U.S. Securities and Exchange Commission (SEC) has clarified its stance on memecoins with a press release, stating that it does not consider them securities under federal law. However, the agency cautioned that fraudulent activities related to these tokens could still face enforcement from other regulatory bodies.
In a statement issued on Feb. 27, the SEC’s Division of Corporation Finance explained its position, emphasizing that memecoins “do not involve the offer and sale of securities under the federal securities laws” and are more comparable to collectibles.
“As such, persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission,” the SEC stated.
The agency also warned that investors in memecoins would not be afforded protections under U.S. securities laws. However, it noted that any fraudulent activities involving memecoins “may be subject to enforcement action or prosecution.
The statement was part of the SEC’s broader effort to clarify how federal securities laws apply to digital assets, particularly in the wake of shifting regulatory approaches in Washington.
Political and Legislative Implications
The announcement comes amid efforts by President Donald Trump to limit the SEC’s authority over cryptocurrency regulation. Trump’s administration has taken steps to roll back oversight, aligning with his campaign promises. Last month, the agency launched a Crypto Task Force aimed at establishing a clearer regulatory framework for digital assets.
Notably, Trump and First Lady Melania Trump launched their own memecoins shortly before returning to the White House on Jan. 20. The move was met with criticism from both crypto analysts and some of Trump’s supporters. According to CoinGecko, the value of Donald Trump’s token, Official Trump (TRUMP), has plummeted nearly 83% from its peak, while Melania Trump’s memecoin, Melania Meme (MELANIA), has dropped 93.5% from its high.
Meanwhile, U.S. House Democrats are reportedly preparing to introduce a bill that would bar public officials, including presidents, from issuing, endorsing, or sponsoring any digital asset, including memecoins. ABC News first reported the development on the same day as the SEC’s statement.
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SEC’s Analysis of Memecoins
In its statement, the SEC described memecoins as typically having “limited or no use or functionality” and being subject to extreme price volatility.
The agency explained that memecoins do not meet the definition of a security under federal law, as they lack characteristics commonly associated with financial instruments such as stocks or bonds. Unlike traditional securities, memecoins do not provide holders with rights to “future income, profits, or assets of a business.”
Furthermore, the SEC noted that memecoins do not qualify as an “investment contract” under the Howey test—a legal standard used to determine whether a financial product is a security. Under this test, a security exists when there is an investment of money in a common enterprise with an expectation of profits derived from the efforts of others.
While the SEC’s statement provides some regulatory clarity, it also underscores the risks involved in the memecoin market, where speculation and volatility are prevalent. Investors remain responsible for assessing the risks associated with these digital assets, as protections under securities laws do not apply.
SEC’s Statement
SEC stated “As part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets, the Division of Corporation Finance is providing its views on “meme coins.” A “meme coin” is a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading. Although individual meme coins may have unique features, meme coins typically share certain characteristics.“
“Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. In this regard, meme coins are akin to collectibles. Meme coins also typically have limited or no use or functionality. Given the speculative nature of meme coins, they tend to experience significant market price volatility, and often are accompanied by statements regarding their risks and lack of utility, other than for entertainment or other non-functional purposes.”
