SEC Clarifies Meme Coins Not Securities, Investors Face Higher Risk

The U.S. Securities and Exchange Commission (SEC) has formally clarified that meme coins, such as $TRUMP, do not fall under its regulatory purview and are therefore not considered securities. This announcement follows a decision made earlier this year confirming that these tokens do not meet the legal definition of securities under U.S. law. Commissioner Hester Peirce emphasized that while meme coins are part of a vibrant crypto niche, they do not fall under the agency’s regulatory purview. Peirce made the statement during the Bitcoin 2025 event in Las Vegas, noting that investors in meme coins should not expect traditional protections from the SEC.

Peirce drew comparisons between the current surge in meme coin interest and the NFT boom of 2021. Like NFTs, meme coins often fall outside regulatory frameworks, meaning buyers are engaging with minimal oversight or recourse in the event of fraud or volatility. The meme coin segment has grown substantially, with top tokens in this category including Dogecoin, Shiba Inu, Pepe, $TRUMP, and Bonk.

The $TRUMP token, launched in January shortly before the presidential inauguration, surged to $44.28 before stabilizing around $10.71. Notably, around 80% of its token supply is reportedly controlled by the Trump Organization and its affiliates, raising concerns over potential conflicts of interest. Lawmakers such as Senator Richard Blumenthal have raised ethical questions about the Trump family potentially profiting from crypto projects while holding political influence.

The SEC has also recently dropped its legal battle against Binance, a move many see as reflective of the current administration’s more crypto-friendly stance. While some speculate that these regulatory decisions may align with President Trump’s pro-crypto policies, Commissioner Peirce firmly denied any political motivation. “Our goal is to create a better regulatory environment for all participants,” she said. Peirce also defended the SEC’s decision to rescind Staff Accounting Bulletin 121, which previously restricted banks from offering crypto custody services.

While the SEC’s clarification offers legal clarity, it simultaneously underscores the risk for retail investors. Without regulatory protection, meme coin investments remain highly speculative. As this space continues to grow and intertwine with political narratives, it is increasingly important for investors to conduct due diligence, verify token ownership structures, and consider the broader implications of their investment choices.

The clarification from the SEC is part of a broader effort to define the regulatory landscape for cryptocurrencies. In February 2025, the agency explicitly stated that it does not view meme coins as securities, a stance that aligns with its recent clarification on crypto staking activities. The SEC's Division of Corporation Finance also clarified that crypto staking directly through Proof-of-Stake (PoS) protocols does not require registration under securities laws. This move aims to reduce regulatory uncertainty and provide clearer guidelines for the crypto industry.

The SEC's stance on meme coins and crypto staking activities is significant for investors and the broader crypto community. By confirming that these digital assets do not constitute securities, the SEC has effectively removed them from its regulatory oversight. This means that investors in meme coins like $TRUMP will not benefit from the legal protections typically associated with securities, such as disclosure requirements and anti-fraud provisions. The lack of regulatory oversight could potentially expose investors to higher risks, as there are no formal mechanisms in place to ensure transparency and accountability.

The clarification also comes at a time when the SEC is facing internal criticism and external scrutiny over its approach to crypto regulation. The agency has been under pressure to provide clearer guidelines for the industry, especially in light of the ongoing legal battle with Ripple. The end of this legal battle could further shape the regulatory landscape for cryptocurrencies, potentially leading to more definitive rules and regulations.

In summary, the SEC's clarification that meme coins like $TRUMP are not securities marks a significant development in the regulatory treatment of digital assets. While this move provides some clarity for the crypto industry, it also highlights the need for investors to exercise caution when engaging with these unregulated assets. The lack of legal safeguards means that investors must rely on their own due diligence and risk management strategies to navigate the complexities of the crypto market.