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US SEC Declares Memecoins Are Not Securities

US SEC Declares Memecoins Are Not Securities

byRitu Lavania
February 28, 2025
in Cryptocurrency News

The US Securities and Exchange Commission (SEC’s) Division of Corporation Finance issued guidance on meme coins, stating that they are not securities but are more akin to collectibles. The division also warned that memecoin investors must bear their own risks.

SEC’s Guidance on Memecoins

 

🚨NEW: The @SECGov Division of Corporation Finance has just put out guidance on memecoins saying they are NOT securities and are akin to collectibles.

“It is the Division’s view that transactions in the types of meme coins described in this statement, do not involve the offer…

— Eleanor Terrett (@EleanorTerrett) February 27, 2025

The Division announced that memecoins transactions, as outlined in the guidance, do not involve the offer and sale of securities under federal securities laws. Therefore, individuals engaging in the offer and sale of meme coins are not required to register their transactions with the Commission under the Securities Act of 1933 or qualify for an exemption from registration. “Meme coin purchasers or holders are not protected by the federal securities laws.”

Excerpt of the SEC's guidance on memecoins
Excerpt of SEC’s guidance on memecoins

According to SEC’s statement, memecoins do not meet the definition of ‘securities’ because they do not generate income or provide ownership rights in a business. The Division also evaluated whether memecoins could qualify as investment contracts under the Howey test. Since memecoins don’t involve investment in a business, nor are profits derived from the efforts of others, they do not meet the criteria to be classified as securities.

The SEC explained, “As such, persons who participate in the offer and sale of memecoins 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 memecoin purchasers nor holders are protected by the federal securities laws.”

However, this analysis does not apply to memecoins that might be created to evade federal securities laws or those that exhibit characteristics of securities.

In a cautionary note, the SEC added, “Fraudulent conduct related to the offer and sale of meme coins may be subject to enforcement action or prosecution by other federal or state agencies under other federal and state laws,” signaling that the sale of meme coins could raise concerns for other regulatory bodies.

Also Read: SEC Drops Investigation Into Robinhood Crypto

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Ritu Lavania

Ritu Lavania

Ritu Lavania is a versatile Web3 content creator with over three years of experience in the crypto space. She specializes in creating engaging and impactful content for diverse audiences. Her skill set includes research, creative writing, SEO, and cross-functional collaboration. She supports animal and education causes . She enjoys writing poetry and interpreting abstract art!

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