On 27 February 2025, United States Securities and Exchange Commission (US SEC) Commissioner Caroline Anne Crenshaw issued a response statement to the Division of Corporation Finance’s Staff Statement on Meme Coins, strongly criticising its legal reasoning and conclusions. The response challenges the Division’s assertion that meme coins are not securities under federal law, arguing that the guidance lacks a clear legal definition of meme coins and may inadvertently provide a loophole for crypto issuers to evade regulation.
Commissioner Crenshaw disputes the Division of Corporation Finance’s application of the Howey test, the US Supreme Court precedent that determines whether an asset qualifies as an investment contract under securities laws. She reasoned, ‘Howey demands a facts and circumstances analysis of the “economic realities” of an offer or sale. Today’s statement paints meme coins as cultural projects whose purpose is entertainment and social engagement. The reality is that meme coins, like any financial product, are issued to make money. Promoters make money from selling the coin, and often also from retaining and holding a significant portion of the token supply as its value increases. The linked fortunes of purchasers and promoters – who will both make money as the coin value goes up – may itself satisfy Howey’s requirement of a “common enterprise.” According to her, the Division of Corporation Finance failed to properly analyse whether meme coin purchasers have a reasonable expectation of profits derived from the efforts of promoters.
Crenshaw stated the absence of a precise legal definition of meme coins in the guidance and pointed out that the description provided, assets influenced by social trends and speculative market demand, could apply broadly to many crypto assets, rendering the categorisation legally meaningless.
Commissioner Crenshaw’s response signals a conflict of views within the US SEC over how meme coins should be regulated. If the Division’s position remains unchallenged, meme coins may fall outside the scope of federal securities laws, limiting investor protections and reducing regulatory oversight. However, Crenshaw’s critique suggests that future judicial challenges or policy shifts could lead to a reassessment of meme coin classifications.
(Source: https://www.sec.gov/newsroom/speeches-statements/crenshaw-response-staff-statement-meme-coins-022725)
