The U.S. Securities and Exchange Commission (SEC) has clarified that meme coins are not classified as securities and do not require registration under federal securities laws. However, the agency warned that fraudulent or deceptive token offerings could still face legal action from other regulatory bodies.
In a statement released on February 27, the regulator compared meme coins to collectibles, emphasizing that their sale does not constitute a securities offering. Therefore, these do not require regulatory registration.
The SEC clarified that meme coins do not align with any traditional financial instruments outlined in the legal definition of a security, such as stocks or bonds. Unlike these assets, meme coins do not generate returns or grant holders rights to future earnings, profits, or business assets.
“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,”
Additionally, the agency stated that meme coins fail to meet the criteria of an investment contract under the Howey Test, which defines securities as investments made in a common enterprise with an expectation of profit driven by the efforts of a third party.
The regulator further clarified that deceptive practices related to meme coin offerings may be subject to enforcement actions or prosecution by other federal and state regulators under existing laws. Simply put, the SEC’s statement serves as guidance rather than enforceable law.
House Democrats Push MEME Act
On the same day the SEC released its statement, reports emerged that the U.S. House Democrats are gearing up to introduce a bill banning public officials and their families from issuing, sponsoring, or endorsing any security, commodity, or digital asset, including meme coins.
Top officials such as the president, vice president, members of Congress, senior executive branch officials and their spouses and dependent children will be subject to this ban under the proposed Modern Emoluments and Malfeasance Enforcement (MEME) Act.
California freshman Democrat Rep. Sam Liccardo, the sponsor of the MEME Act stated that he believes President Donald Trump and First Lady Melania Trump profited from their meme coins, benefiting early investors who backed the cryptocurrency.
Just days before the January 20 inauguration, President Trump and the First Lady introduced their own meme coins, drawing backlash from political commentators and even some of Trump’s supporters.
The value of these digital assets has since plummeted, with Trump’s token, Official Trump (TRUMP), losing nearly 83% from its peak, while Melania Trump’s coin, Melania Meme (MELANIA), has dropped by 93.5%, according to data from CoinGecko.
Read More
- Ivanka Trump Condemns Unauthorized $IVANKA Meme Coin, Warns Consumers
- President Touadéra Meme Coin Sparks Hype, Doubts, Deepfake Claims
- Meteora Co-Founder Ben Chow Resigns Amid Meme Coin Scheme Allegations
Michaela has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.