SEC Clarifies: Meme Coins Not Securities, No Protections

The U.S. Securities and Exchange Commission (SEC) has clarified its stance on meme coins, stating that they are not considered securities under federal laws. In a statement released on Feb. 27, the agency's Division of Corporation Finance explained that meme coins do not involve the offer and sale of securities, making them more akin to collectibles. This means that individuals engaging in the sale of meme coins are not required to register their transactions with the SEC.

However, the SEC warned that meme coin holders will not receive the protections typically granted under U.S. securities laws. The agency also pointed out that any fraudulent issuance or sale of meme coins could still result in enforcement actions from other federal or state agencies. This statement comes as part of the SEC's ongoing effort to clarify the application of securities laws to digital assets.

Meme coins, which often lack functionality or utility and are highly volatile, do not fall under the common financial instruments listed in the definition of a security, such as stocks or bonds. They do not provide yields or rights to a business's income, profits, or assets, and fail to meet the criteria of an investment contract under the Howey test. Despite this stance, the SEC acknowledged that its statement does not apply to digital assets misclassified as meme coins in an attempt to evade securities regulations. The agency will continue assessing transactions based on their economic realities rather than labels.

As the debate over meme coin regulation continues, calls for the Commodity Futures Trading Commission (CFTC) to regulate these assets have gained traction. Elizabeth Davis, a former chief attorney at the CFTC, believes the agency is best suited to oversee meme coins due to its focus on protecting retail investors from fraud and manipulation. The ongoing regulatory uncertainty surrounding meme coins has led to growing frustration among investors, particularly as high-profile individuals like U.S. President Donald Trump and Argentine President Javier Milei continue to launch these digital assets.

Meanwhile, U.S. lawmakers are pushing legislation to ban public officials from issuing meme coins due to financial exploitation concerns. House Democrats are expected to introduce the Modern Emoluments and Malfeasance Enforcement (MEME) Act, which will prevent public officials from profiting from digital assets. The proposed legislation comes as the meme coin market faces increasing scrutiny and mounting legal uncertainty surrounding digital assets. Trump launched his TRUMP token just days before assuming office, and openly encouraged his supporters