Meme coins may not fall under the purview of the United States Securities and Exchange Commission, as the agency considers most meme coins to be more like collectables than securities. According to a February 27 staff statement from the commission’s Division of Corporation Finance, meme coins may not qualify as securities because they don’t meet the Howey test , a legal standard introduced by the Supreme Court in 1946 to determine whether a transaction counts as an investment contract under US securities laws. The SEC wants to provide “greater clarity on the application of the federal securities laws to crypto assets” by clarifying its stance. Meme coins are like ‘collectables’ Rationalising its views, the regulator said meme coins lack the key elements of a security , particularly an investment in a common enterprise where profits come from the “entrepreneurial or managerial efforts of others.” Instead, the commission views meme coins as driven by “market demand and speculation,” with their value tied to hype rather than structured business growth. Unlike traditional investments, they don’t grant holders financial rights, such as ownership stakes or dividends. An excerpt from the SEC’s statement reads: Although individual meme coins may have unique features, meme coins typically share certain characteristics. Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. Further, the SEC noted that meme coins don’t fit within “any of the common financial instruments specifically enumerated in the definition of ‘security,’” such as stocks or bonds. Unlike traditional investments, they don’t generate yield or provide rights to “future income, profits, or assets of a business.” Since their trading activity doesn’t involve an investment in an enterprise, nor do buyers have a “reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others,” the SEC stated that meme coins fail to meet the Howey test’s criteria for an investment contract and concluded that “a meme coin is not itself a security.” The statement continued: Persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission under the Securities Act of 1933 or fall within one of the Securities Act’s exemptions from registration. Accordingly, neither meme coin purchasers nor holders are protected by the federal securities laws. However, the commission warned that its stance doesn’t cover all tokens labelled as meme coins. Any project disguising itself as a meme coin while functioning as a security could still face scrutiny. The SEC also said that its views aren’t a “rule, regulation, guidance, or statement” of the commission itself and emphasized that the statement carries “no legal force or effect.” Instead, the regulator wants to provide “greater clarity on the application of the federal securities laws to crypto assets” by clarifying its stance. Meme coins become a heated topic With tokens like Official Trump (TRUMP), launched by US President Donald Trump and Melania Meme (MELANIA), crashing noticeably from their all-time high prices, concerns have been raised over the unregulated nature of the market. As previously reported by Invezz , on the same day, House Democrats introduced the Modern Emoluments and Malfeasance Enforcement (MEME) Act, which seeks to block public officials and their kin from issuing, endorsing, or profiting from cryptocurrencies. The post US SEC says meme coins aren’t securities, compares them to ‘collectibles’ appeared first on Invezz
