The Growing Legal and Regulatory Risks in the Meme and Crypto Ecosystems

The speculative crypto ecosystem, particularly meme coins like Believe and Draggy, has long thrived on the fringes of regulatory scrutiny. However, 2025 marked a pivotal shift in the legal and compliance landscape, as global regulators intensified efforts to bring clarity-and control-to this volatile sector. While the U.S. Securities and Exchange Commission (SEC) has officially distanced itself from treating most meme coins as securities, the broader regulatory environment remains fraught with enforcement risks, compliance complexities, and evolving definitions of liability. For investors, the question is no longer whether these projects face regulatory challenges, but how they will adapt to a rapidly changing framework that prioritizes investor protection and financial stability.

The SEC's Rethinking of Meme Coins

In March 2025, the SEC issued a landmark statement clarifying that meme coins-cryptocurrencies inspired by internet memes and cultural trends-do not qualify as securities under federal law. This determination, rooted in the agency's interpretation of the Howey Test, hinges on the absence of a "reasonable expectation of profit" from the entrepreneurial or managerial efforts of others in most meme coin projects. While this reduces the likelihood of direct SEC enforcement actions for securities law violations, it does not eliminate all legal exposure.

Critics, including SEC Commissioner Caroline Crenshaw, argue that the agency's stance overlooks the role of promoters and influencers in driving value for meme coins, which could still meet the criteria for investment contracts in specific cases. Meanwhile, the Commodity Futures Trading Commission (CFTC) and Department of Justice (DOJ) have stepped into the void, with the CFTC asserting jurisdiction over meme coins classified as commodities and the DOJ targeting fraudulent practices such as bot-driven market manipulation. For instance, in October 2024, 17 individuals were charged in Massachusetts for allegedly using bots to inflate trading volumes of alt and meme coins.

Enforcement Trends and the "Project Crypto" Framework

Under SEC Chairman Paul Atkins, who took office in April 2025, enforcement priorities have shifted toward "clear-cut rule violations and traditional fraud" rather than technical infractions. This realignment has led to a sharp decline in public company enforcement actions, with only two of 56 actions in FY 2025 initiated post-Atkins. However, this does not signal a retreat from crypto oversight. Instead, the SEC's "Project Crypto" initiative aims to establish a "token taxonomy" that categorizes digital assets into commodities, network tokens, digital collectibles, and tools, with only tokenized securities falling under the SEC's purview.

For projects like Believe and Draggy, this framework introduces both clarity and risk. While the SEC's hands-off approach to meme coins reduces immediate regulatory pressure, it also shifts enforcement responsibilities to other agencies and jurisdictions. The CFTC's focus on commodity markets and the DOJ's emphasis on fraud mean that projects failing to address issues like market manipulation or misleading marketing could still face significant penalties.

Global Regulatory Convergence and Stablecoin Frameworks

The 2025 regulatory landscape is defined by a push for global coordination, particularly in stablecoin regulation. The U.S. passed the GENIUS Act, creating a federal framework for stablecoin issuance, while the EU finalized its Markets in Crypto-Assets (MiCA) regulation, imposing strict requirements on asset segregation and redemption standards. These developments have set benchmarks for jurisdictions worldwide, with Hong Kong, Singapore, and Japan advancing their own stablecoin rules.

For meme coins, the absence of stablecoin-like regulatory clarity remains a challenge. Unlike stablecoins, which are now subject to reserve requirements and transparency mandates, meme coins operate in a gray area where compliance expectations are less defined. This ambiguity is compounded by the rise of AI-driven governance tools, which regulators are increasingly scrutinizing for ethical and operational risks. Projects that fail to integrate robust compliance measures-such as real-time AML monitoring and third-party risk management-risk falling behind in a market where regulatory expectations are tightening.

The Long-Term Viability of Speculative Projects

The long-term viability of speculative crypto projects like Believe and Draggy depends on their ability to navigate these evolving risks. While the SEC's 2025 guidance provides a temporary reprieve, the broader enforcement environment remains hostile to projects that prioritize hype over transparency. For example, crypto exchanges have faced record penalties in 2025, with OKX and KuCoin collectively fined $801 million for AML deficiencies. These cases underscore the growing emphasis on accountability, with regulators increasingly targeting individuals rather than corporations.

Moreover, the rise of RegTech solutions-AI-powered tools for compliance monitoring-has raised the bar for operational standards. Projects that rely on community-driven growth without investing in compliance infrastructure may struggle to survive in a market where regulatory scrutiny is no longer a distant threat but a daily reality.

Conclusion

The meme and crypto ecosystems of 2025 are at a crossroads. While regulatory clarity has improved, the risks of enforcement actions, cross-jurisdictional conflicts, and reputational damage remain high. For projects like Believe and Draggy, the path forward requires a dual focus: leveraging the SEC's favorable stance on meme coins while proactively addressing the enforcement priorities of the CFTC, DOJ, and global regulators. Investors must weigh these factors carefully, recognizing that the era of unregulated speculation is giving way to a more structured, compliance-driven market.