On 27 February 2025, the United States Securities and Exchange Commission (US SEC, issued a Staff Statement on Meme Coins through its Division of Corporation Finance. The statement elaborates on the Division’s position on the application of federal securities laws to meme coins and asserts that, in general, transactions involving meme coins do not constitute the offer and sale of securities under the Securities Act of 1933. As a result, the statement clarifies that meme coin purchasers and holders do not receive protections under federal securities laws.
According to the United States Division of Corporation Finance, ‘A “meme coin” is a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading. Although individual meme coins may have unique features, meme coins typically share certain characteristics. Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation.’ The Division defines meme coins as crypto assets inspired by internet memes, trends, or social phenomena, primarily driven by market speculation rather than intrinsic financial value. According to the United States Division of Corporation Finance assessment, these factors place meme coins outside the scope of securities regulation, similar to collectibles or other speculative assets.
Applying the Howey test, established in SEC v. W.J. Howey Co. (1946), the Division of Corporation Finance reasoned: ‘The offer and sale of meme coins does not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. First, meme coin purchasers are not making an investment in an enterprise. That is, their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise. Second, any expectation of profits that meme coin purchasers have is not derived from the efforts of others. That is, the value of meme coins is derived from speculative trading and the collective sentiment of the market, like a collectible. Moreover, the promoters of meme coins are not undertaking (or indicating an intention to undertake) managerial and entrepreneurial efforts from which purchasers could reasonably expect profit.’
The United States Securities and Exchange Commission’s Division of Corporation Finance clarified that its Staff Statement on Meme Coins does not constitute a rule, regulation, or formal guidance issued by the United States Securities and Exchange Commission. The US SEC has neither endorsed nor rejected the statement, and it does not hold legal authority or binding effect. The Division of Corporation Finance clarified that the statement does not modify existing laws or impose new legal obligations on any party. Instead, it represents the perspective of Division of Corporation Finance on the regulatory classification of meme coins, serving as an informational resource rather than an enforceable directive.
(Source: https://www.sec.gov/newsroom/speeches-statements/staff-statement-meme-coins)
