The United States Securities and Exchange Commission (SEC) outlined its policy towards meme coins on Feb. 27, 2025. As outlined by the SEC, meme coins are not securities. The Division of Corporation Finance announced this to inform the public regarding the enforcement of federal securities laws with respect to crypto assets.
Memecoins are digital tokens inspired by internet jokes, trends, or events. People buy them mainly for fun or as collectibles. Their value depends on market demand and speculation. They have little to no practical use. The SEC compared them to collectibles rather than financial instruments.
Why the SEC compares memecoins to collectibles
The SEC explained why memecoins fail to fit in accordance with the statutory meaning of securities. Securities generally return earnings or shares in an enterprise, while meme coins fail to return these benefits. Howey test to decide securities tests whether earnings arise through others’ labor. Buyers of meme coins expect earnings through market trends, not through work done by developers.
The SEC emphasized that meme coin buyers are not investing in companies. No guarantee to construct projects or manage money is given by the promoters. Value is dependent upon sentiment and hype. Buyers don’t rely upon someone to propel token value.
SEC highlights memecoin market risks
However, this ruling does not exclude all memecoins. Certain coins continue to be securities to the extent that their design is not based on conventional meme coin design. Scam memecoin schemes continue to be vulnerable to enforcement by other agencies. Federal agencies and agencies in the states can pursue scams or fraud schemes.
The SEC warned the public to be cautious. Memecoins have price fluctuations and the potential to lose money. Investors should note that memecoin holders have no protections under federal securities laws. The Office of Chief Counsel in the Division is ready to respond to further questions through the SEC website.
