- Investors in memecoins will not receive the legal protections typically provided under securities laws.
- The announcement aligns with previous comments from the agency, advocating for a more lenient regulatory approach to crypto.
The U.S. Securities and Exchange Commission (SEC) has formally distanced itself from memecoins, stating that these tokens do not qualify as securities. In a new staff statement, the agency confirmed that memecoins, often tied to internet trends, memes, and social media hype, fall outside its regulatory scope.
This means investors purchasing such assets will not receive the protections typically offered under securities laws. The move reinforces remarks made earlier this month by Commissioner Hester Peirce, who has been a vocal advocate for a more measured approach to crypto regulation.
The SEC’s latest stance defines memecoins as crypto assets driven by online enthusiasm rather than functional use. According to the statement, these tokens have “limited or no use or functionality” and thus fail to meet the criteria outlined in the Howey Test, the legal standard for identifying securities.
Commissioner Peirce has echoed this sentiment in the past. Peirce has been outspoken about personal responsibility in crypto trading. She emphasized that the government should not be expected to intervene when speculative assets lose value.
See Related: Trump’s Memecoin Frenzy: Bernstein Predicts A New Chapter In Crypto Regulation
Regulatory Uncertainty Remains
While the SEC’s stance is clear, the agency has left the door open for enforcement action in cases where memecoins are used to circumvent securities laws. The staff statement does not hold the weight of formal regulation but signals how the SEC may approach the sector moving forward.
“Today’s statement paints meme coins as cultural projects whose purpose is entertainment and social engagement. The reality is that meme coins, like any financial product, are issued to make money,” Commissioner Caroline Crenshaw said. “Promoters make money from selling the coin, and often also from retaining and holding a significant portion of the token supply as its value increases.”
Although the SEC has clarified that memecoins do not fall under securities laws, broader questions about crypto regulation remain. The agency has shown a willingness to use its enforcement powers against bad actors in the industry.
However, without a concrete regulatory framework, crypto investors must continue to navigate an evolving landscape with limited legal protections. For now, memecoin traders will have to rely on their due diligence, just as Peirce suggested. The SEC’s message is clear: users can only invest at their own risk because the agency won’t be stepping in to offer a safety net.
