US SEC Says Meme Coins Are “Akin to Collectibles” With "No Use", Traders Not Protected by Securities Laws

SEC Declares Meme Coins Are Not Securities Under Federal Law

Meme coins, a volatile segment of the cryptocurrency market, have found themselves at the centre of attention following a ruling from the US Securities and Exchange Commission (SEC).

The agency has clarified that these digital assets, often created as jokes or for entertainment purposes, do not qualify as securities under federal law.

This means transactions involving meme coins, such as those linked to public figures or cultural phenomena, will not require registration with the SEC.

Meme Coins Compared to Collectibles by SEC

In its ruling, the SEC described meme coins as similar to "collectibles," emphasising that these digital assets lack any real-world functionality, yield, or backing from an enterprise.

They are primarily purchased for entertainment, social interaction, and cultural purposes, with their value driven largely by market speculation.

The SEC pointed out that meme coins do not offer ownership stakes, dividends, or rights to future profits, distinguishing them from traditional investments.

As such, buyers and holders of meme coins will not benefit from the protections afforded by federal securities laws.

Lack of Investment Contracts Means No SEC Oversight

The SEC’s decision hinges on the “Howey Test,” a legal framework used to determine whether an asset qualifies as a security.

According to the agency, meme coins fail this test for two main reasons.

First, buyers are not investing in a common enterprise, as their funds are not being managed by a team of developers or promoters for profit generation.

Secondly, any profits gained from meme coins are the result of speculative trading, not the efforts of a business or management team.

The SEC stressed that meme coin promoters do not engage in significant managerial or entrepreneurial actions that would directly affect the value of the tokens.

Fraudulent Conduct Can Still Lead to Legal Action

While the SEC’s ruling exempts meme coins from securities regulations, it also issued a cautionary note.

The agency made it clear that fraudulent activities related to the promotion or sale of these digital assets can still be prosecuted under other federal and state laws.

Ensuring that deceptive practices won’t go unchecked, the SEC warned,

“Fraudulent conduct related to the offer and sale of meme coins may be subject to enforcement action or prosecution by other federal or state agencies.”

Trump’s Meme Coin Involvement Faces Scrutiny

The SEC’s statement coincides with the release of a meme coin linked to President Donald Trump.

His token, which initially soared to over $74, has since fallen to around $11.32, drawing attention to the speculative nature of meme coins.

The rise and subsequent decline of the Trump-linked coin have sparked debate over the ethics of such digital assets.

With meme coins often becoming profitable for promoters, critics argue that they serve as a form of financial exploitation.

Democratic lawmakers have also weighed in, with Representative Sam Liccardo from California leading the charge on proposed legislation that would prevent elected officials and their families from profiting off meme coins.

Liccardo expressed concerns over potential insider trading and foreign influence, arguing,

“Our public offices belong to the public, not the officeholders, nor should they leverage their political authority for financial gain.”

As meme coins continue to generate both significant attention and volatility, the SEC’s stance ensures that the regulatory landscape remains complex, with digital asset transactions largely unprotected under existing securities laws.

However, the ruling also leaves room for legal action in cases of fraud or misconduct, making it clear that meme coins will not be entirely free from oversight.