SEC Commissioner Warns Memecoin Investors No Protection

Memecoin investors should be aware that the U.S. Securities and Exchange Commission (SEC) will not provide protection if they lose their investments, according to Commissioner Hester Peirce. Peirce, who was appointed by Donald Trump in 2018 and leads the SEC’s Crypto Task Force, emphasized that memecoins fall outside the SEC’s regulatory scope. She noted that while it is possible to package almost anything into a securities transaction, most memecoins do not fall into this category. Therefore, investors should not expect SEC protection for memecoin investments.

Peirce’s remarks reiterate her earlier statements from February, where she indicated that many memecoins do not have a regulatory home under the current SEC guidelines. She highlighted the need for clear legislative guidelines to define the SEC’s regulatory scope and suggested that the U.S. Commodity Futures Trading Commission (CFTC) might be better suited to regulate these assets. Peirce likened the rising interest in memecoins, which have no intrinsic value, to that of non-fungible tokens (NFTs), which also lost significant value after initial interest waned.

Peirce’s comments echo those of David Sacks, the White House crypto czar, who suggested that memecoins should be treated as collectibles. This perspective underscores the SEC’s stance that memecoins are not securities and, therefore, do not fall under its regulatory purview. Investors in memecoins, including those who invested in the Official Trump memecoin, are on their own and should not expect any assistance or guidance from the SEC.

The Official Trump memecoin, for instance, soared to a market capitalization of $30 billion just before the inauguration but quickly crashed, leading to significant losses for small investors. Trump-linked entities, controlling over 80% of the memecoin’s supply, reportedly made at least $100 million in trading fees by Jan. 30. Similarly, insiders earned around $100 million by investing in the memecoin of Melania Trump, the U.S. First Lady, hours before its launch was made public. Trump’s deepening ties with the crypto world have raised concerns about potential conflicts of interest, as the sitting president stands to profit from his own policies. The White House, however, has dismissed all claims of conflict of interest.

Peirce’s comments indicate that the SEC has effectively distanced itself from memecoins, which are increasingly being used to perpetrate scams and rug-pulls. This leaves investors to fend for themselves, with no regulatory protection or guidance from the SEC. Investors in memecoins should be cautious and aware that they are entering a high-risk, unregulated market where losses are a real possibility.