SEC Commissioner Caroline Crenshaw had disagreed with SEC’s recent stance on memecoins. The regulator insisted that the memecoins are not securities. The SEC had taken this stance in opposition. It had labeled the guidance as incomplete and lacking in basis in law.
Crenshaw criticized the SEC’s failure to define memecoins. The guidance described memecoins as assets driven by online trends and speculative value. Crenshaw argued this description fits most crypto assets. Without a clear definition, the guidance allows crypto projects to avoid oversight.
The Commissioner cited the Howey test. It is a legal benchmark for testing whether or not an asset is a security. It is based on the expectation of profit derived from someone else’s efforts. However, Crenshaw cautioned that memecoin marketers typically benefit when and if the currency appreciates in value. The link between marketers and buyers may qualify memecoins as being securities.
Additionally, she emphasized how memecoin marketers shape market demand. They produce scarcity based on buybacks and burning coins. Numerous ventures offer listings on exchanges and extended plans. Such offers are congruent with managerial strategies in line with the Howey test.
Memecoin Market Manipulation Ignored by SEC
Profit motives have been identified as characteristics of memecoins. Pump-and-dump and rug pulls are characteristic scams. The advice was criticized for overlooking meme coins’ underlying financial realities.
The Commissioner questioned the SEC method. The guidance failed to consider individual coins in context and based on circumstances. In addition, the exemption for memecoins is too general and waters down security laws, Crenshaw argued. It puts a vast majority of crypto assets out of regulators’ reach.
Moreover, in her dissenting opinion, she highlighted the necessity of a flexible structure. The Howey test applies to emerging financial schemes. She urged the SEC to guard investors. She cautioned that the new guidance creates as many questions as it does answers.
SEC’s blanket exemption faces scrutiny
Unclear exclusions and general definitions can create loopholes. The Commissioner stressed that sponsors’ investor expectations and behavior should be used to determine if an asset is a security. He called for a case-by-case review.
Crenshaw’s opposition raised concerns regarding market manipulation. She warned that the guidance would allow crypto businesses to escape being subject to regulations, and without increased scrutiny, investors remain vulnerable to scams.
However, the Commissioner urged the SEC to reverse course. Individualized analyses and plain terminology are essential. Nevertheless, Crenshaw’s stance is reflective of a trend towards tougher crypto controls for investor protection and market soundness.
