The U.S. Securities and Exchange Commission (SEC) has clarified its stance on memecoins, stating that these digital assets do not exactly fall under federal securities laws.
In a statement released on February 27, the SEC’s Division of Corporation Finance suggested that memecoins function more like collectibles than traditional investments, meaning they do not meet the legal definition of a security under the Howey test.
According to the SEC, memecoins are primarily purchased for entertainment, social interaction, and cultural engagement. Their value is largely driven by speculation and market demand rather than any underlying business structure or managerial efforts. Unlike securities, memecoins do not represent ownership in a centralized entity or a project promising long-term financial returns.
“Memecoins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. In this regard, memecoins are akin to collectibles,”
the SEC’s statement read.
Because memecoins are not tied to a formal enterprise pooling investor funds to develop a product or service, the Commission asserted that they fail to meet the criteria of an investment contract under the Howey test—a key legal standard for determining securities.
As a result of this classification, individuals and platforms involved in memecoin transactions do not need to register with the SEC. However, the Commission cautioned that fraudulent activities involving memecoins would still be subject to enforcement actions from federal and state regulators.
The agency emphasized that while memecoins themselves may not be considered securities, deceptive practices—such as misleading investors or engaging in scams—could still result in legal consequences. Furthermore, the SEC warned that crypto projects attempting to disguise themselves as memecoins to evade regulations could still face scrutiny depending on their structure and purpose.
Despite the significance of the statement, the SEC noted that this interpretation is not an official rule, regulation, or guidance, meaning it carries no legal force. Instead, the commission described it as a staff opinion aimed at providing clarity on the legal status of certain crypto assets.
The statement represents a notable shift from the SEC’s previous approach under former Chair Gary Gensler, who maintained that most cryptocurrencies—except Bitcoin—qualified as securities. Under Gensler’s leadership, the SEC took legal action against major crypto firms, including Coinbase and Ripple Labs.
A key legal battle during that period was the SEC’s lawsuit against Ripple Labs, filed in 2020. In a landmark 2023 ruling, a judge determined that Ripple’s programmatic sales of XRP did not constitute securities transactions, though the SEC later appealed the decision.
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