Calls are growing for the CFTC to regulate meme coins, with former officials arguing they fall under commodities law. Meanwhile, US lawmakers are pushing legislation to ban public officials from issuing meme coins due to financial exploitation concerns, particularly regarding Trump’s TRUMP and MELANIA tokens, which have suffered major losses. SEC Rules Out Meme Coins as Securities The United States Securities and Exchange Commission (SEC) clarified that it does not see meme coins as securities, though it warned that fraudulent tokens could still face enforcement actions from other regulatory bodies. The agency’s Division of Corporation Finance stated on Feb. 27 that meme coins do not involve the offer and sale of securities under federal laws and are more similar to collectibles. This means that people engaging in the sale of meme coins are not required to register their transactions with the SEC. Statement from the SEC However, the SEC still warned that meme coin holders will not receive the protections that are usually granted under US securities laws. It also pointed out that any fraudulent issuance or sale of meme coins could still result in enforcement actions from other federal or state agencies. The statement was issued as part of the SEC’s effort to clarify the application of securities laws to digital assets. The statement was made at a time when US President Donald Trump is busy reducing the SEC’s oversight of the crypto sector to fulfill his campaign promises. Last month, the agency also established a Crypto Task Force to create a regulatory framework for digital assets. Trump and First Lady Melania Trump themselves launched meme coins just before reentering the White House on Jan. 20, but this move attracted a lot of criticism from the crypto community and some of Trump’s supporters. According to the SEC, meme coins typically lack functionality or utility and are highly volatile. It explained that these tokens do not fall under the common financial instruments listed in the definition of a security, like stocks or bonds, because they do not provide yields or rights to a business’s income, profits, or assets. Additionally, meme coins fail to meet the criteria of an investment contract under the Howey test , as their sale does not involve an investment in an enterprise or a reasonable expectation of profit from the efforts of others. Despite its stance, the SEC still acknowledged that its statement does not apply to digital assets misclassified as meme coins in an attempt to evade securities regulations. The agency stated that it will continue assessing transactions based on their economic realities rather than labels. Calls for CFTC to Regulate Meme Coins Gain Traction A former chief attorney at the Commodity Futures Trading Commission (CFTC) believes the agency is best suited to regulate meme coins. Elizabeth Davis, a partner at the law firm Davis Wright Tremaine and a former chief trial attorney at the CFTC, stated that the agency’s focus on protecting retail investors from fraud and manipulation makes it the logical choice to regulate meme coins. According to Davis, the CFTC increasingly prioritized retail market participants, who are the primary users of these digital assets. The ongoing debate over meme coin regulation has been fueled by criticism from former CFTC Chair Chris Giancarlo, who previously blamed the SEC for the disorder in the meme coin market. Meanwhile, SEC Commissioner Hester Peirce, who leads the agency’s crypto task force, stated that meme coins do not fall within the SEC’s jurisdiction. The regulatory uncertainty surrounding these assets led to growing frustration among investors, particularly as meme coin launches by high-profile people like US President Donald Trump and Argentine President Javier Milei continue to dominate headlines. Davis suggested that the CFTC’s role in regulating meme coins will likely depend on broader developments in digital asset regulation. She said that if the agency gains jurisdiction over spot crypto markets, it will be well-positioned to include meme coins in its oversight. She is also very confident that US regulators will introduce clearer digital asset laws in the coming year, which will help define how meme coins are regulated and by whom. The current lack of regulatory clarity, she said, only contributed to confusion and uncertainty for market participants. The disagreement between US agencies over meme coin regulation shed some light on some of the broader challenges of defining oversight for digital assets. Davis pointed out that the CFTC took a more expansive view of the definition of a commodity under the Commodity Exchange Act and consistently applied this interpretation to digital assets. She argued that meme coins will likely be classified as commodities under this framework, giving the CFTC authority to address fraud and market manipulation related to these assets. While regulators debate the future of meme coin oversight, Zak Folkman , co-founder of Trump’s crypto venture World Liberty Financial, criticized investors for making reckless bets on these assets. He warned people against risking life savings on meme coins, and even described these kinds of investments as irresponsible. US Lawmakers Seek to Ban Politicians from Launching Meme Coins The US Congress is reportedly preparing to consider legislation that will ban public officials from issuing meme coins, including President Donald Trump’s TRUMP token. House Democrats are expected to introduce the Modern Emoluments and Malfeasance Enforcement (MEME) Act, which will prevent public officials from profiting from digital assets. California Representative Sam Liccardo, who confirmed the bill to ABC News on Feb. 27, stated that it will prohibit a broad range of government officials and their families from issuing, sponsoring, or endorsing any security, commodity, or digital asset. Liccardo argued that public office should not be used for financial gain. The MEME Act will apply to the president, vice president, members of Congress, senior executive branch officials, as well as their spouses and dependent children. With a dozen Democratic sponsors already backing the bill, Liccardo hopes to attract even more bipartisan support to push the legislation forward. He specifically criticized the Trumps’ issuance of meme coins, and stated that it financially exploits the public and raises concerns about insider trading and foreign influence over the executive branch. The proposed legislation happened due to the increasing scrutiny of the meme coin market and mounting legal uncertainty surrounding digital assets. Trump launched his TRUMP token just days before assuming office, and openly encouraged his supporters to buy in. Melania Trump followed with her own meme coin, MELANIA. Since their launch, both tokens suffered big losses, with TRUMP down 80+% from its peak and MELANIA dropping 90+%. TRUMP price action over the past month (Source: CoinMarketCap ) The MEME Act is not the only legislative effort currently targeting meme coins. On Feb. 20, Democratic Senator Cortez Masto proposed an amendment to an existing resolution that will prohibit federal employees or officials from issuing, promoting, or financially benefiting from meme coins linked to investments by the Chinese Communist Party. Some market analysts also believe that meme coins contributed to the ongoing cryptocurrency sell-off. According to Bitwise chief investment officer Matt Hougan , the crypto market is currently experiencing the end of the meme coin boom, which is a shift that added to the broader market turbulence.
