The Corporate Finance division of the U.S. Securities and Exchange Commission (SEC) division has made it clear that Memecoin does not constitute securities under federal law, showing a prominent attitude towards the crypto market sector driven by speculation and internet culture.
In a staff statement on February 27, the SEC emphasized that it is usually inspired by online trends and a considerable amount of utility, and does not meet the definition of an “investment agreement” under the Howey Test. This is the legal standard used to determine whether a transaction is eligible for security.
The statement emphasized that Memecoin transactions do not include any important factors determining pooled investor funds from centralized entities, management efforts, or security status.
According to the statement:
“Memecoin is purchased primarily for entertainment, social interaction, and cultural engagement, and its value is driven by market sentiment, not by other managers or entrepreneurs.”
The SEC also compared memecoin to collectibles, highlighting its speculative nature and price volatility.
The SEC position releases promoters and traders of registration requirements for MemeCoin under the Securities Act of 1933, but the agency warned that fraudulent activities, including Memecoin, could cause enforcement action under other federal and state laws.
The statement emphasized that labeling financial instruments as “Memocoin” is not exempt from securities regulations if economic reality indicates that they are not.
This clarification has actively pursued enforcement measures against crypto projects deemed to have violated securities laws after years of regulatory oversight on digital assets.
But often created as jokes and social experiments, Memecoin remains in the legal gray realm despite its presence in the online trading community.
Legal experts view the SEC’s stance as a potential change in the regulatory environment and set precedents on how speculative digital assets are treated under federal law. The statement does not have legal weight, but it shows a deviation from previous enforcement patterns targeting token issuances that are perceived as securities.
The SEC announcement could have broad meaning in the crypto market, where Memocoin has evolved from internet novelties to billions of dollars assets.
Despite the statement, uncertainty remains regarding future regulatory development, particularly as lawmakers and agencies continue to discuss a comprehensive framework for digital assets.
The SEC reaffirmed its commitment to assess crypto products on a case-by-case basis, warning that new variations of memecoin, designed to circumvent securities laws, are still subject to regulatory scrutiny.
Investors and crypto enthusiasts welcomed clarification and viewed it as a step towards regulatory consistency. However, the agency’s warnings against fraudulent schemes have reinforced the need for market participants to remain cautious amidst the memecoin speculation.
