The SEC clarified that memecoins don’t fall under securities laws but assured that it will still scrutinize fraudulent activities.
The Securities and Exchange Commission ruled that memecoins do not fall under securities regulations and do not require registration.
The SEC clarified that while securities laws do not cover memecoins, different regulatory bodies could still take action against fraudulent ones.
According to a Feb. 27 statement from the SEC’s Division of Corporation Finance, federal law does not classify memecoins as securities and considers them “akin 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 said.
The SEC further stated that memecoin investors lack protection under US securities laws, but other federal or state agencies may still prosecute fraudulent transactions involving memecoins.
The Division made it clear that its statement does not constitute SEC policy, and the commission has neither officially accepted nor rejected it, so it carries no legal effect.
The SEC added it shared its views “as part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets.”
Donald Trump, the U.S. President, is pushing to limit the SEC’s role in crypto oversight to fulfill a campaign vow.
To establish regulations for digital assets, the agency set up a Crypto Task Force last month.
Trump and Melania unveiled memecoins in the days leading up to their White House entry on Jan. 20, prompting criticism from both crypto figures and some of Trump’s supporters.
CoinGecko data shows that Donald Trump’s Official Trump (TRUMP) has lost nearly 83% of its value from its peak, whereas Melania Trump’s Melania Meme (MELANIA) has plummeted by 93.5%.
On the day the SEC issued its statement, ABC News reported that House Democrats are drafting a bill to ban public officials—including the president—from issuing, endorsing, or supporting securities, commodities, or digital assets like memecoins.
In its statement, the SEC said that memecoins “typically have limited or no use or functionality” and “tend to experience significant market price volatility.”
It added that a memecoin doesn’t fit with “any of the common financial instruments specifically enumerated in the definition of ‘security’” — such as stocks or bonds — as they don’t give a yield or rights to “future income, profits, or assets of a business.”
Under the Howey test, which requires an investment in a shared business with profits expected from someone else’s efforts, the SEC determined that memecoins do not qualify as “investment contracts.”
“The offer and sale of meme coins does not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others,” the agency said.
“In other words, a meme coin is not itself a security.”
The SEC noted that its statement does not apply to memecoins that do not fit its criteria or to any financial products labeled as memecoins as a way to bypass securities regulations.
“The Division will evaluate the economic realities of the particular transaction,” it said.
Hester Peirce, the SEC Commissioner in charge of the Crypto Task Force, commented this month that numerous memecoins “probably do not have a home in the SEC under our current set of regulations.”
Recently, Pump.fun faced a lawsuit in the Southern District of New York filed by memecoin investors. They argue that memecoins launched through the platform should fall under securities laws and claim that the platform itself violated these laws. This statement from the SEC’s division may now play a crucial role in determining the lawsuit’s direction.
