Caroline Crenshaw, a member of the Securities and Exchange Commission (SEC), called long-standing legal principles an unprecedented negative move and criticised the agency’s recent decision to remove multiple crypto-related cases.
The Commissioner also has problems with the SEC’s corporate finance division due to his stance that Memecoin is not certified as a securities under federal law, claiming that this position lacks legal foundation and clarity.
SEC retreat from code enforcement
Last week, the SEC dropped several lawsuits against major crypto companies such as Coinbase, Robinhood and Gemini. This shift follows the formation of a specialized cryptographic task force aimed at developing future regulations.
The SEC attributes these dismissals to ongoing regulatory considerations, but Crenshaw argues that new policies should not abandon enforcement while still in development.
She wrote:
“If the Commission enacts new regulations, or if Congress changes the law, we can go another path. But until then, we have put in place a framework, which should be applied and enforced equally with respect to all participants.”
The Commissioner argued that the court has consistently confirmed the SEC’s authority over cryptography, citing the example of the currently-born Coinbase litigation. In that case, Crenshaw argued that the agency had already established a strong case, and the court agreed that “the Commission properly filed a violation of the securities law.”
Meanwhile, the committee members questioned whether these decisions undermine the SEC’s ability to combat fraud, including the Ponzi scheme, and whether digital assets are currently receiving priority over traditional financial products.
She also warned that selective enforcement could erode trust in the SEC and erode fuel perceptions of political bias. She concluded:
“Our agency work is to do the right thing for investors, issuers and capital markets. This isn’t the case.”
Discussions surrounding Memecoin
Crenshaw also criticized the SEC’s recent guidance on memokine, claiming it would present an incomplete and unsupported view.
She questioned the lack of a clear definition of Memocoin, noting that the guidance roughly describes them as speculative assets that influence online trends. However, she noted that these characteristics are widely applied to most digital assets, and the distinction is unclear.
She asked:
“And exactly what is a memecoin, the category this guidance is directed to? What basis is needed to determine if something is a memecoin, except in the way that promoters choose to label it?”
She further argued that labeling tokens as memecoin is not exempt from the Securities Act. Howey tests that determine whether an asset is eligible for security, focus on the economic reality of its offering rather than its branding. (Editor’s note: It is also based on the sale of the Florida Orange Glove in 1934, almost 100 years ago. It was designed for real estate, leaseback agreements and agricultural investments, rather than for blockchain-based digital assets.
Another important issue is the assumption that Memecoin prices move independently of management efforts.
She argued that the project team frequently influences market conditions through supply operations, buybacks and strategic marketing campaigns. Scam schemes such as pump and dump and lag pull remain common in the sector, underscoring the need for strong surveillance.
To conclude her remarks, Crenshaw said the SEC’s current approach does little to protect investors or protect financial market integrity. Instead, it introduces ambiguity, weakens enforcement efforts, and leaves room for regulatory gaps that bad actors can exploit.
She wrote:
“This guidance is not a reasonable interpretation of existing law. It raises more questions than answers about what memecoin is, whether it is a definable or useful classification for the purposes of existing securities law.”
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