by Scott Emick
2/27/25
In a landmark decision, the U.S. Securities and Exchange Commission (SEC) has declared that meme coins—often created as jokes or community-driven tokens—do not qualify as securities under federal law. This announcement marks a significant regulatory shift that could reshape the landscape of digital assets.
SEC’s Official Position
The SEC’s Division of Corporation Finance issued a staff statement clarifying that transactions involving meme coins do not constitute the offer and sale of securities. The statement emphasized that meme coins, similar to collectibles, do not generate yields or grant rights to future income or profits.
As a result, individuals who issue, trade, or hold meme coins are not subject to the same stringent regulations as securities under the Securities Act of 1933. However, the SEC cautioned that fraudulent activities surrounding meme coins remain subject to enforcement actions under federal and state laws.
Regulatory and Political Context
This development aligns with the broader pro-crypto stance of the Trump administration, which has introduced a wave of deregulation. President Trump’s appointment of crypto-friendly officials, including SEC Chairman Paul Atkins, has led to the dismissal of high-profile enforcement actions against crypto firms.
Recently, the SEC dropped its lawsuit against Coinbase, the largest U.S.-based cryptocurrency exchange, which had been accused of operating as an unregistered securities exchange. Other cases, such as investigations into NFT marketplace OpenSea and Robinhood’s crypto division, have also been closed, signaling a softer regulatory approach.
Legislative Backlash: The MEME Bill
In response to the growing influence of meme coins, House Democrats are preparing to introduce the Modern Emoluments and Malfeasance Enforcement (MEME) Act, a bill that aims to prevent political figures and their families from launching meme coins for personal gain. The bill is widely seen as a reaction to President Trump’s involvement in launching the TRUMP meme coin shortly before his second inauguration.
“I Told You So” – The Howey Test and Crypto Regulation
This ruling is unsurprising for those who have followed my previous analysis. As I explained in my earlier article, “What is the Howey Test & Why Are Most Cryptocurrencies Not Securities?”, the SEC’s case for treating cryptocurrencies as securities has always been weak, particularly when applied to meme coins.
The Howey Test, the legal framework used to determine whether an asset is a security, requires an investment of money in a common enterprise with an expectation of profits derived from the efforts of others. Most meme coins fail this test because they lack a central issuer, utility, or organized structure that could classify them as securities. The SEC’s decision now officially confirms this interpretation.
Implications for the Crypto Market
The SEC’s ruling provides much-needed clarity, allowing meme coin projects and investors to operate without fear of violating securities laws. However, it also highlights the speculative nature of these tokens, as they remain highly volatile and susceptible to market manipulation.
With fewer regulatory hurdles, the meme coin market may experience a new wave of creativity and participation. At the same time, investors must remain cautious, as scams and rug pulls remain prevalent in this sector.
As the crypto industry continues to evolve, one thing is clear—regulatory battles are far from over, and new policies will shape the future of digital assets. But for now, the meme coin community has scored a major victory.
