TLDR
- Even if memecoins avoid direct SEC registration mandates, any deceitful acts remain under the scrutiny of various other regulatory bodies.
- Promotions involving memecoins have drawn attention due to high-profile personalities like Trump and Argentina's President Milei, sparking debates.
- This new direction marks a break from the SEC's earlier views when Gary Gensler was chairman and regarded most digital currencies as securities.
- This development arrives as the SEC’s Division of Corporation Finance made an announcement on February 27, 2025, re-evaluating memecoins’ status as non-securities, which diverges from prior regulatory norms.
- The announcement described memecoins as essentially tools for entertainment and connecting with others. They are primarily purchased for culture's sake over financial gains.
The assessment made by SEC staff highlights that memecoins lack fundamental features to meet the Howey test, which defines an asset as an investment contract.
It was noted that memecoins typically aren't linked to pooled investment strategies, with no central teams mobilizing funds to foster new ventures.
Pricing of memecoins is largely speculative and driven by market appetite, unlike traditional securities, which rely on company operations for value.
Consequently, those who create memecoins no longer need to register with the SEC, though deceptive practices will remain subject to enforcement by other regulatory entities.
Recent controversy surrounding memecoins includes political implications. For example, Trump’s team launched a TRUMP token on Solana before his January inauguration.
According to CoinGecko’s data, the TRUMP token witnessed wild price changes, initially spiking but later plummeting by 83%, settling at $12.60.
Political Fallout
Argentina's President Javier Milei stepped into the memecoin conversation, with his social media endorsement triggering fraud charges and a judicial probe.
As a counter, Democratic lawmakers proposed the MEME Act, aiming to bar government officials and their relatives from backing memecoins.
The SEC clarified their announcement is more an interpretation by staff than an enforceable rule, lacking legal binding power.
Projects trying to disguise genuine securities as memecoins will not dodge regulatory analysis, with the SEC assessing tokens' 'economic realities' to rightly classify them.
This directive showcases a pivot from Gary Gensler's era when nearly all cryptocurrencies, excluding Bitcoin, were pegged as securities.
Take the Ripple Labs scenario—highlighting past regulatory views—where a 2023 verdict determined that XRP’s scheduled sell-offs didn’t breach securities regulations, but the SEC still challenged it.
Amid extensive upheavals in crypto governance under the Trump administration, this announcement surfaces as the SEC revises numerous crypto lawsuits initiated during the Biden administration.
With broad experience, Maisie plays a crucial role as a journalist, specializing in crypto and financial news for Moneycheck.com, level-up-casino-app.com, Computing.net, and serves as the Editor-in-Chief at Blockfresh.com.
Democrats are urging the SEC to disclose records concerning the crypto dealings of the Trump family.
