SEC Clarifies: Memecoins Are Collectibles, Not Securities

The U.S. Securities and Exchange Commission (SEC) has clarified its stance on memecoins, aligning with comments made by Commissioner Hester Peirce. In a staff statement published on Thursday, the SEC defined memecoins as crypto assets inspired by internet memes, characters, or trends, designed to attract an enthusiastic online community for trading purposes. The regulator concluded that these memecoins are more akin to collectibles than securities, as they have limited or no use or functionality, and thus do not meet the definition of a security under the Howey Test.

This formalization echoes Peirce's earlier comments, where she stated that many memecoins fall outside the SEC's jurisdiction. In her roadmap for crypto regulation, Peirce emphasized that investors should be responsible for their own due diligence when purchasing tokens, as they may lack a clear long-term value proposition. She also stressed that the American expectation is for individuals to make decisions for themselves, rather than relying on government intervention or bailouts.

While the SEC's staff statement does not carry the weight of formal regulation, industries overseen by the agency tend to follow such statements closely. In the past, guidance from the SEC's accounting staff, such as Staff Accounting Bulletin No. 121 (SAB 121), has caused significant impact on the crypto sector and banking industry. However, the current SEC leadership has since rescinded some of these guidelines. In this case, the staff memecoin statement is not a rule, regulation, guidance, or statement approved by the commission.

The SEC has not ruled out the possibility of enforcing securities laws in cases where memecoins are used to evade regulations. The staff statement noted that it does not extend to memecoins that do not fit the given description or products labeled as "meme coins" to disguise securities. The Division will evaluate the economic realities of each transaction on a case-by-case basis.