SEC Declares Meme Coins Aren’t Securities But Warns Against Fraud

• SEC clarifies meme coins don’t qualify as securities under law.
• SEC warns against fraudulent meme coin offerings facing enforcement.
• New bill could block public officials from endorsing digital assets.

The U.S Securities and Exchange Commission (SEC) has issued new guidance which clarifies that most meme coins do not qualify as securities under federal law. The SEC’s Division of Corporation Finance described these coins as speculative assets with limited or no practical use. 

Meme Coins Aren’t Securities, No Need for Registration

The agency emphasized that these tokens do not meet the criteria for securities, such as stocks or bonds, as they do not generate income or profits from a business.

The SEC’s statement also clarifies that meme coin transactions do not require registration with the Commission. However, the SEC warned that fraudulent meme coin offerings could still face enforcement actions from other federal or state agencies. However, the SEC stressed that this guidance is not a rule or regulation and has no legal force.

Meme coins, often associated with internet culture, are highly volatile and are typically seen as speculative investments. The SEC noted that these assets do not involve an investment in a common enterprise, which is a key factor to determine whether an asset qualifies as a security under the Howey test. As such, the SEC does not consider meme coins to be investment contracts.

SEC Clarification Boost Crypto Innovation

The SEC’s clarification is particularly important for platforms like Coinbase and Robinhood. These platforms may now feel more confident listing meme coins without fear of regulatory action, which could encourage more offerings. This move aligns with the SEC’s broader goal of providing more regulatory clarity for the rapidly growing cryptocurrency market.

The announcement follows a period of rapid growth for meme coins, particularly those associated with figures like former President Donald Trump. Tokens linked to Solana, which has become a hub for meme coin activity, have surged in popularity. 

SEC and Congress Heighten Crypto Scrutiny

However, the SEC’s statement emphasized that its views apply only to meme coins and does not apply to other crypto assets that disguise as meme coins to evade securities laws. Each case will be evaluated based on its specific economic realities. SEC Commissioner Hester Peirce, has previously indicated that many meme coins likely fall outside the scope of current securities regulations.

Moreover, the SEC’s statement comes amid growing legislative discussions. U.S. House Democrats have tabled a bill that would prohibit public officials from endorsing or issuing digital assets. This bill, if passed, would add another layer of regulatory scrutiny to the space, especially concerning tokens linked to high-profile figures.

Although this announcement provides some clarity, the SEC warned that any efforts to disguise securities as meme coins would still be subject to scrutiny. This marks a significant step that would define the regulatory landscape for crypto assets.