In a move that was only surprising in its speed of delivery, the SEC stated:
It is the Division’s view that transactions in the types of meme coins described in this statement, do not involve the offer and sale of securities under the federal securities laws.[4] As such, persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission under the Securities Act of 1933 (“Securities Act”) or fall within one of the Securities Act’s exemptions from registration. Accordingly, neither meme coin purchasers nor holders are protected by the federal securities laws.
Of course, collectibles are not securities and therefore not subject to the jurisdiction of the SEC.
The obvious beneficiary is Donald Trump and the meme coin he launched just before stepping into office.
The statement is just a clear cut look at the Howey test and its application to the class of meme coins.
First, meme coin purchasers are not making an investment in an enterprise. That is, their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise.
Second, any expectation of profits that meme coin purchasers have is not derived from the efforts of others. That is, the value of meme coins is derived from speculative trading and the collective sentiment of the market, like a collectible.
Moreover, the promoters of meme coins are not undertaking (or indicating an intention to undertake) managerial and entrepreneurial efforts from which purchasers could reasonably expect profit.
What’s missing from the memo is pitching a meme coin to indicate that its going to massively increase in value. Case in point, the Hawk Tuah meme coin. The promoters are getting sued. The “investors” (collectors? traders?) lost tons of money and are making securities claims.
The SEC is abdicating from its role in crypto. Investor protections are being removed left and right.
Sources:
- Staff Statement on Meme Coins SEC Division of Corporate Finance February 27, 2025
- Breaking News: SEC Regulation by Corporation Finance of SEC Regulation by Enforcement by JOhn Reed Stark