SEC Clarifies: Meme Coins Like Dogecoin and Shiba Inu Not Securities
1min read The U.S. Securities and Exchange Commission (SEC) has clarified that cryptocurrencies such as Dogecoin (DOGE) and Shiba Inu (SHIB), along with TRUMP and MELANIA coins, do not fall under the classification of securities. The ruling positions them in the collectible category, where people purchase either for entertainment factors or cultural motives instead of traditional investments with ownership potential and future profit expectations.
The SEC has based its decisions about security status on the "Howey Test," which serves as a legal criterion for classifying assets. For an investment to qualify as a security, it must fulfill four main requirements: it should be funded by monetary contributions, involve a shared enterprise, and produce profits. The SEC claims meme coins do not pass the regulatory securities evaluation through various inspection points. First, the buyers make no investments in enterprises that developers operate to generate profits. Secondly, speculative trading gains attributed to hype and social trends do not stem from development team entrepreneurship and management activities. The SEC views meme coins as collectibles instead of investments because they have no practical utility, earning abilities, or developer-backed enterprise framework. Thus, memecoin investors receive no federal securities protections since the SEC prohibits intervention during their loss experience.
Memecoin projects can take advantage of this new classification because of its potential benefits. The exemption removes them from security regulations, allowing for more innovation and increased adoption potential. However, the SEC has officially stated that it intends to file legal charges against all fraudulent memecoin activities. Despite lacking security status under the regulatory statutes, scams and deceptive practices remain enforceable by governmental authorities. This means that although meme coins enjoy regulatory exemptions for their status as investments, they can become target areas for strict government oversight about their actual use.
California Representative Sam Liccardo told ABC News that House Democrats are preparing to introduce the Modern Emoluments and Malfeasance Enforcement (MEME) Act. This act will ban top US officials and their families from creating or profiting from personal meme coins. According to Liccardo, public officials must refrain from leveraging their offices to gain personal benefits. He also doubts these coins' effects on insider trading and monopoly control. The MEME Act recognizes expanding worries about abusive practices while emphasizing essential ethical standards for cases where politics intersects with meme coins.
