- The SEC confirmed that meme coins are not securities, as they lack investment contracts and are driven by speculation.
- Meme coin buyers are not investing in an enterprise, and profits come from market hype, not managerial efforts.
- Fraudulent activities related to meme coins can still face legal action, including pump-and-dump schemes or deceptive marketing.
The SEC’s Division of Corporation Finance has issued new guidance on memecoins, confirming that they do not fall under federal securities laws—as long as they remain purely speculative, entertainment-based assets.
Meme coins, typically inspired by internet culture, trends, and online communities, are driven by market speculation rather than intrinsic value—making them closer to collectibles than securities.
Why Meme Coins Aren’t Considered Securities
The SEC applied the Howey test to meme coins and determined they fail to meet the criteria of an investment contract:
- Meme coin buyers are not investing in an enterprise, as funds aren’t pooled for development.
- Profits are not derived from managerial or entrepreneurial efforts, but rather from market speculation and hype.
- Meme coins generally lack utility or inherent value, existing primarily for entertainment and social engagement.
“These coins don’t generate yield, don’t grant rights to a company’s profits, and aren’t backed by any enterprise,” the statement explains.
However, the SEC warns that this ruling does not apply to projects disguising securities as “meme coins” to bypass regulations.
Fraud & Enforcement—Meme Coins Aren’t Off the Hook
While meme coins aren’t classified as securities, fraudulent activity surrounding them is still subject to legal action.
- Pump-and-dump schemes, false advertising, or deceptive marketing can still trigger enforcement from federal and state agencies.
- Projects claiming to provide long-term investment returns could still be investigated.
- The SEC will evaluate each case individually, focusing on the economic reality of the transaction rather than labels.
“Just because something is called a meme coin doesn’t mean it’s exempt from scrutiny,” an SEC official stated.
For now, meme coins remain in a legal gray area, but one thing is clear: they aren’t considered securities—unless bad actors try to turn them into one.
