“Memecoins Do Not Qualify As Securities” U.S. SEC Says

The U.S. Securities and Exchange Commission (SEC) has announced on Thursday that memecoins do not meet the legal definition of securities. In a policy statement, the SEC’s Division of Corporation Finance outlined its view that memecoins generally fall outside the scope of federal securities laws.

“A meme coin does not constitute any of the common financial instruments specifically enumerated in the definition of “security” because, among other things, it does not generate a yield or convey rights to future income, profits, or assets of a business.” the statement reads.

Additionally, the agency emphasized that these assets are primarily purchased for “entertainment, social interaction, and cultural purposes,” rather than as investments. Unlike traditional securities, memecoins derive their value from speculative trading and market sentiment, acting as collectibles.

The decision provides immediate relief to crypto projects and traders, as memecoin issuers will no longer need to register offerings with the SEC or seek exemptions. However, the agency warned that fraudulent activities tied to memecoins could still face enforcement from other federal or state regulators.

The Howey Test and How it Applies to Memecoins

To reach its conclusion, the SEC relied on the infamous Howey Test, an old Supreme Court framework used to determine and ascertain whether an asset qualifies as an investment contract. This test defines a security as an investment in a company whose profits come from others’ efforts.

The agency argued that memecoins fail both instances of the Howey Test. First, purchasers do not pool funds into a shared enterprise managed by promoters. Second, profits depend on market speculation rather than managerial efforts.

The SEC’s new approach closely aligns with President Donald Trump’s pro-crypto campaign promises. Trump’s administration has moved quickly to undo former chair Gary Gensler’s harsh regulatory framework, dismissing long running lawsuits against firms like Coinbase and Robinhood.

SEC Warns Against Memecoins Misuse

While the SEC’s decision grants memecoins a regulatory reprieve, the statement stressed that the agency will evaluate each asset’s “economic realities” to prevent abuse.

The statement warned that products labeled “meme coins” attempt to evade federal securities laws by disguising themselves as something other than securities.