BREAKING NEWS: SEC Issues Statement on Memecoins – Positive Development, Spot ETFs on the Way?

According to breaking news, the SEC has released a statement regarding the regulation of memecoins. The SEC claims that memecoins are generally not securities under the law.

The announcement, published by the SEC’s Division of Corporate Finance, aims to provide greater regulatory clarity regarding the classification of crypto assets inspired by internet culture, trends, and social media engagement.

The SEC defines memecoins as a category of cryptocurrencies created primarily for entertainment, cultural expression, and speculative trading rather than for functional utility. Unlike traditional financial assets, memecoins do not yield returns, confer ownership rights, or grant holders a claim to future profits. Their value is largely driven by market sentiment and speculation, making them more like collectibles than investment vehicles.

The statement confirms that transactions involving memecoins, as commonly understood, do not constitute an “offer and sale of securities” under the Securities Act of 1933. This means that individuals trading memecoins do not need to register with the SEC or qualify for an exemption under existing securities laws.

Legally, Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Securities Exchange Act of 1934 define securities through a list of financial instruments, including stocks, bonds, and investment contracts. The SEC claims that memecoins do not meet these definitions and do not pass the Howey Test, a legal standard used to determine whether an asset qualifies as an investment contract. Memecoin transactions do not meet the criteria to be classified as a security because they do not involve pooled investments or managerial efforts aimed at generating profits for investors.

While the SEC recognizes that most memecoins fall outside the scope of securities regulations, it cautions that this classification does not exempt fraudulent activity related to their issuance or sale. The agency warns that deceptive practices in memecoin markets may be subject to enforcement actions by other federal and state agencies under applicable fraud and consumer protection laws.

Additionally, the SEC reserves the right to investigate specific cases where crypto projects attempt to disguise securities as memecoins to evade regulatory oversight. The agency says it will evaluate transactions based on their “economic reality,” not just their labels.

*This is not investment advice.