SEC: Memecoin is not a security, is similar to collectibles

The statement comes at a time when Democrats are proposing to ban US officials from issuing or promoting digital assets, while the Trump administration wants to reduce the SEC's authority over crypto.

Memecoin "temporarily escapes" the security label

The US Securities and Exchange Commission (SEC) has just issued an important statement, affirming that memecoin is not considered a security under federal securities laws. In a statement on February 27, the SEC's Division of Corporate Finance emphasized:

"Memecoin does not involve the offering or sale of securities under the federal securities laws and is similar to collectibles."
This means that meme tokens such as Dogecoin (DOGE), Shiba Inu (SHIB) or memecoins issued by individuals and organizations do not need to be registered with the SEC to be traded legally. Investors or buyers of memecoins can freely buy and sell without being subject to the direct supervision of the SEC like traditional securities.

SOURCE: https://t.co/ErE09p2zCa

— DEGEN NEWS (@DegenerateNews) February 27, 2025

However, the SEC warns that fraudulent acts related to memecoins are still prosecuted by other regulatory agencies at the state or federal level. On the other hand, if there is a risk or fraud related to memecoins, buyers will not be protected under the provisions of US securities law.

The SEC explains why memecoins are not considered securities by citing the Howey Test - a legal standard for determining whether an asset is a security. Accordingly, an asset is considered a security if:

• There is an investment of money.

• Invested in a common enterprise.

• The investor has an expectation of profit.

• The profits come from third-party efforts

• According to the SEC, memecoins do not meet the above criteria because:

• They do not represent a public enterprise but are tokens issued by individuals or groups without a clear business model.

• Investors in memecoins do not have a financial interest in any organization or business.

• The profits from memecoins do not come from the efforts of a specific regulatory entity, but mainly from market trends and speculative psychology.

While not considering memecoins to be securities, the SEC has left open the possibility of handling related fraud. The Commission asserts that its statement does not apply in cases where:

Memecoin does not fit the SEC's definition - that is, a token that is labeled as a memecoin but is actually structured as a security.

A memecoin disguised as an asset to evade securities laws - refers to a project that uses memecoin as a cover for a product that is actually a security.

“We will evaluate each transaction based on the economic realities of each specific transaction,” the SEC said.

Commissioner Hester Peirce, who leads the SEC’s Crypto Task Force, also acknowledged that many memecoins should not fall under the commission’s purview under current law, but that fraud or deception involving memecoins will not be tolerated.

Trump Wants to Cut SEC’s Power Over Crypto

The SEC’s announcement comes as President Donald Trump seeks to reduce the SEC’s oversight of the crypto market.

During his campaign, Trump pledged to loosen regulations on digital assets and narrow the SEC’s role in the sector. The SEC established the Crypto Task Force last month to develop a separate legal framework for digital assets, rather than applying traditional securities laws as it does today.

Another notable point is that Trump and First Lady Melania also released their own memecoins just before the inauguration on January 20. However, these tokens have lost a lot of value since their launch.
Official Trump (TRUMP) is down nearly 85% from its peak, while Melania Meme (MELANIA) has lost 94% of its value from its peak.

This has created a lot of criticism in the crypto community, some of whom believe that these memecoins are purely speculative and have no real value.

Bill to ban US officials from issuing memecoins

In addition, on the same day that the SEC made the statement, ABC News reported that Democrats in the US House of Representatives are preparing a bill to ban public officials - not excluding the President - from issuing, sponsoring or promoting securities, commodities and digital assets, including memecoins.

If passed, the proposal would prevent government officials from using their positions to manipulate or profit from the crypto market.

According to some observers, memecoin is also a factor that “contributes” to the ongoing sell-off in the crypto market.