In this statement, the SEC staff took the position that typical meme coins — a category of crypto assets inspired by internet memes, pop culture, or trending jokes — do not constitute “securities” under federal law.
In the view of the Division, transactions in these meme coins need not be registered under the Securities Act of 1933, nor exempt from registration because they do not involve an “offer and sale” of securities.
This effectively signals a hands-off regulatory approach for genuine meme coins, while cautioning that investors in such tokens will not be protected by federal securities laws if the tokens fail or lose value.
The staff’s stance aligns with recent remarks by Commissioner Hester Peirce — who noted that many meme coins are likely not securities — and reflects the SEC’s effort to clarify how traditional securities law definitions apply in the rapidly evolving crypto market.
The Staff Statement defines a “meme coin” as a type of crypto asset driven largely by social media buzz and community speculation rather than any inherent utility or investment promise. These tokens are typically marketed for entertainment or cultural purposes, often explicitly disclaiming any expectation of profit or practical use beyond novelty or community engagement. Their market value tends to be highly volatile and based purely on demand and viral sentiment — characteristics the SEC staff likened to collectibles (e.g., digital art or trading cards) rather than investment instruments.
Critically, the statement emphasizes that this new guidance is only applicable to tokens fitting the specific profile described. In other words, simply labeling a product a “meme coin” will not excuse an offering that in economic reality involves a security. The SEC will look to the substance of the transaction: assets advertised as meme coins but entailing profit-sharing, ongoing development efforts, or other investment features remain subject to the full scope of securities regulation.
Statutory interpretation: why meme coins are outside the securities definition
The crux of the SEC staff’s analysis is a categorical conclusion that meme coins are not “securities” under the Securities Act of 1933 and the Securities Exchange Act of 1934, focusing, in particular, on the catch-all category of “investment contracts,” which has historically been used to determine whether novel financial arrangements are securities. Under the U.S. Supreme Court’s Howey test (from SEC v. W.J. Howey Co., 328 U.S. 293 (1946)), an “investment contract” exists: (1) if there is an investment of money, (2) in a common enterprise, (3) with a reasonable expectation of profits, (4) to be derived from the entrepreneurial or managerial efforts of others. This economic reality test has been the SEC’s primary tool for analyzing crypto tokens. Applying Howey, the Division concluded that standard meme coin offerings fail to satisfy the investment contract criteria on multiple grounds:
No investment in a common enterprise
Purchasers of meme coins are generally not investing in a business venture or pooled project. The funds paid for meme coins are not being aggregated to develop an underlying enterprise or platform managed by an active promoter. Instead, buyers are typically trading among themselves, akin to collectors swapping goods. There is no ongoing managerial effort deploying investors’ capital to drive future returns — a hallmark of a common enterprise.
No expectation of profit from others’ efforts
The SEC staff found that any profit expectations surrounding meme coins hinge on speculative market fluctuations and community sentiment, not on the successful management or efforts of a developer or company. Meme coin promoters generally do not promise to undertake business efforts or build functionality to increase the token’s value. In fact, many explicitly state that holders should not expect any profit and that no one will be working to generate value. Therefore, even if buyers hope the price will skyrocket due to viral popularity, this hope is not grounded in someone else’s managerial performance — it is more akin to hoping a collectible becomes trendy. This fails Howey’s “efforts of others” prong, as the value is driven by decentralized market hype rather than an issuer’s actions.
Commissioner Crenshaw’s dissent
Despite the clarity provided by the SEC, the guidance was not without controversy. Commissioner Caroline Crenshaw dissented, arguing that the statement lacked a statutory or even dictionary-based definition of “meme coin.” She described the value of the guidance as “questionable,” expressing concerns that meme coins encompass a diverse range of offerings and that the Howey test requires individualized analysis of each unique asset. Crenshaw’s opposition highlights ongoing regulatory division over digital asset classification, reinforcing the likelihood that legal scrutiny of crypto assets will persist.
The CFTC’s ongoing role
Notwithstanding the SEC’s determination that meme coins do not qualify as securities, these assets likely are commodities under the Commodity Exchange Act, thereby remaining within the enforcement jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC). As with other commodities—including wheat, copper, oil, and bitcoin—the CFTC has authority to pursue cases of fraud and market manipulation in meme coin markets but does not engage in broader regulatory oversight as it does for derivatives markets. Notably, derivatives contracts on certain meme coins have already been listed on CFTC-registered derivatives exchanges, further suggesting that the CFTC had already implicitly classified these assets as commodities prior to the SEC’s statement.
Looking ahead
With significant changes expected under the new Trump administration, regulatory oversight of digital assets remains in flux. While the SEC’s position on meme coins provides a degree of legal certainty, industry participants should remain vigilant as policy shifts, new regulatory appointments, and evolving enforcement priorities shape the next phase of crypto regulation.
We will continue to monitor developments closely and provide updates as the regulatory framework for digital assets continues to take shape.
