Major Win For Memecoins: SEC Affirms They Typically Do Not Qualify As Securities

This statement from the SEC clarifies that memecoins, which are cryptocurrencies inspired by internet memes and cultural phenomena, do not fall under federal securities laws. The SEC’s Division of Corporation Finance outlined that memecoins are primarily driven by market demand and speculative trading, lacking substantial functionality beyond entertainment. Therefore, transactions involving memecoins do not constitute the offer and sale of securities, and individuals participating in their sale do not need to register under securities laws.

However, the SEC emphasized that fraudulent activities related to memecoins are still subject to enforcement under other federal or state laws. While memecoins may not be classified as securities, offerings that deviate from the outlined characteristics or attempt to bypass securities laws will be scrutinized. The SEC’s analysis determined that memecoins do not meet the criteria of an investment contract under the “Howey test” and do not involve pooling of funds for development by promoters.

It is important to note that this classification may not apply universally to all memecoins, and any fraudulent activities associated with their sale will still be pursued. The SEC’s statement provides clarity on the regulatory landscape for memecoins and emphasizes the importance of compliance with applicable laws and regulations.