SEC Declares Memecoins Are Not Subject to Oversight
nytimes.com
nytimes.com
> 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. In this regard, meme coins are akin to collectibles. Meme coins also typically have limited or no use or functionality.
https://www.sec.gov/newsroom/speeches-statements/staff-state...
* It is an investment of money
* There is an expectation of profits from the investment
* The investment of money is in a common enterprise
* Any profit comes from the efforts of a promoter or third-party
https://www.findlaw.com/consumer/securities-law/what-is-the-...
If you read further in the SEC statement, they explain why typical meme coins fail the Howey Test.
> [T]he promoters of meme coins are not undertaking (or indicating an intention to undertake) managerial and entrepreneurial efforts from which purchasers could reasonably expect profit.
They should probably be regulated as a gambling game, though, and can sometimes be used as money laundering or bribery, as a way to pay the original sellers without revealing what they’re really paying for.
However, kicking them out under that legal theory doesn't mean that there's no other way to stop them. I'd say it just got a lot easier to prosecute anyone pitching a memecoin as a way to "get in on crypto" and make money just got a lot easier under the much less exotic legal theory of plain and simple fraud.
(Sometimes we ask for too many specific laws specifically outlawing this or that when all we really need is good ol' fashioned "fraud"; you said X to entice someone to buy a thing and X is a lie, here comes the hammer.)
I'm quite sympathetic to the SEC here. Theories about how BitCoin may gain or lose value, or the Ethereum chain or other contract chains, are one thing, but when the value proposition of a coin starts and ends with "It's named after a celebrity!", that's just so much vaporous nothing.
> A disclaimer said that the coin was "not intended to be, or the subject of" an investment opportunity or a security and was "not political and has nothing to do with" any political campaign, political office or government agency.[6] The terms of the offering prohibit coin buyers from joining any class-action lawsuits against the project and assert indemnity against any claims.[8] Trump promoted the coin on the night of its ICO while a "Crypto Ball" was underway.[9]
> After its launch, its price soared by over 300% overnight.[10] Within two days, it became the 19th most valuable form of cryptocurrency in the world, with a total trading value of nearly $13 billion, and a total of $29 billion worth of trades based on a $64 value of each of the 200 million tokens issued by the afternoon of January 19th. The New York Times reported that Trump affiliates controlled an additional 800 million tokens that, hypothetically, could be worth over $56 billion, potentially making Trump one of the richest people in the world at an estimated net worth of $63.8 billion.[11] On January 19, 2025, Trump's wife Melania launched her own meme coin, $Melania.
So the promoter of the meme coin, Trump, could not reasonably expect a profit? And because of this, he can make billions overnight on cryptocurrency without being subject to SEC regulations?
Anybody who wants to bypass SEC regulations just needs to base their cryptocurrency on a meme and claim no expectations of profits...
Edit: I'm wrong about the expectation of profits part. It's assumed that the purchaser should have no expectations of profits.
So the promoter essentially just need to claim the cryptocurrency is a joke to not be subject to SEC regulations.
Not that I would ever light my money on fire like that...
That's basically a circular definition of what a memecoin is, and doesn't encompass a lot of the tokens that have been created so far, especially if you weight them by their market cap. In other words, it doesn't cover the most relevant tokens (which you would still call memecoin without this new (re)definition).
Functions as designed.
https://www.web3isgoinggreat.com/?id=milei-memecoin-promotio...
https://www.latintimes.com/crypto-trader-shot-himself-live-x...
https://defector.com/the-hawk-tuah-memecoin-rug-pull-is-the-...
https://beincrypto.com/kanye-west-barkmeta-meme-coin-controv...
https://beincrypto.com/libra-meme-coin-linked-to-melania/
https://www.ccn.com/news/crypto/child-streamers-30k-crypto-r...
What gives you that impression? This article is about memecoins, not 'real' cryptos like ethereum or bitcoin.
This reads to me like "we won't treat your crypto like a security if you tie it to pop culture". Intent in purchasing crypto for novelty purposes doesn't change what it is or how people will use it.
Surely this would depend on use. There's nothing essentially different about memecoins that would imply a distinct outcome from say bitcoin. Of all the ways you could use this test, differentiating between "memecoins" and "legitcoins" seems like the worst possible scenario: there isn't actually any qualitative difference to find in the first place. Hence, why this will eventually fall on courts to figure out.
I've never even heard of the term "app coin" before but surely it's just yet another crypto token with similar constraints and lack of obvious use.
It's in the name. It's a token for use in an app. It derives value from the utility of that app and therefore the need to acquire the token to use the app. E.g. Filecoin. That pretty directly meets the Howey test.
A memecoin is explicitly pointless and of no utility. Its only purpose is to be a collectable associated with some pop culture. There is no expectation of value derived from its creator's efforts.
Bitcoin and ethereum are more complicated. Note that the SEC has previously ruled that bitcoin was not a security issuance, but ethereum was (though grandfathered in: the SEC declined to prosecute).
The interesting thing about corruption and frauds like this is that when people get conned and lose everything, they don't get angry at the person that stole from them, they get angry about the people that called out the fraud or enforced regulations meant to protect them from losing more money.
What's to stop foreign governments from doing the same thing, if they aren't already?
https://www.motherjones.com/politics/2025/02/sec-fraud-prose...
https://www.bloomberg.com/news/articles/2025-02-26/justin-su...
To bolster my point, one could face the same corruption issue we face today with baseball cards: Trump could own a limited-edition baseball card; foreign governments then could then buy all the other prints of the same card, lowering the supply and raising the demand of Trump’s collectible. One can thus see how anyone can use any collectible as a means to corruption in the same ways that meme coins can be used.
I am illustrating why the SEC ruling is not completely unfounded on first pass. However, I think meme coins have a higher chance of being used for scams (and corruption, but that is a separate point) because there is an implicit promise that this product will induce a return and because the coin is rarely an ends in itself. But how do you regulate people’s intention? You can’t read people’s minds and force people to not to buy a collectible for the sole purpose of making a return on investment. I think people would find it ridiculous to tell pawn shops to not buy a Pokémon card if the shop treated the item solely as a means to flip, for example. Moreover, such market participants are beneficial because they offer liquidity to more sincere buyers and sellers.
I am not sure what logically consistent and beneficial regulations around meme coins would look like, but with more thinking than I have been able to put into this topic, I am sure one could come up with some. My instinct is SEC regulating the tokenomics to maximize transparency and force the creators to release the tokens in a way that won’t allow them to “rug pull” would be a good starting point. I think I would not be opposed to such relegations in any collectibles market, making the regulations logically consistent.
Regarding the president of the United States, Jimmy Carter was forced to sell his peanut farm to avoid conflicts of interest. I think that anyone who becomes the president of the United States should have to liquidate their whole net worth — collectibles and all — and put it into an independent fund that they have no control over. They will then get a set percentage amount of money from this fund every year, and everything left over when they die goes to their presidential library. They are not allowed to take money from anywhere else ever again. That would fix this corruption problem for good and has the added benefit of deterring people from running who just want to use the office for their own personal gain.
> “Although the offer and sale of memecoins may not be subject to the federal securities laws, fraudulent conduct related to the offer and sale of memecoins may be subject to enforcement action or prosecution by other federal or state agencies,” said the statement, from the S.E.C.’s division of corporation finance.
Therefore, my counter proposal is that crypto should simply be treated as a PVP-enabled MMO.
Most MMOs don't let you convert your in-game currency back to real-world money. For those that do, is there actually a regulatory framework around that?
The game only thrives if there's a steady stream of new players to replace the numerous quitters. If there aren't enough, the middle-skilled will become the new bottom and start losing way more often. So they'll start quitting. When enough of them do, the griefers won't have as much fun and will leave. That just leaves the duelists in an otherwise empty world. It's not as fulfilling to say you're the best fighter in a dead game.
Then a new PvP MMO appears. Everyone is new, so the griefers aren't yet overpowered. New players flock to it. Eventually, the duelists from the first game see another game with a much more vibrant community. So they'll go there.
The parallels with crypto actually make sense.
And, just to say, that is exactly what the new administration is planning on doing.
If oversight was real and SEC investigated tokens earlier, they would have outlaw them way back then (translation - would have made all tokenbros comply with laws, thus rendering whole scheme worthless) and tokens wouldn't entrench as deep as they are now.
The actual decision is that memecoins are not "Securities", and therefor not subject to regulations that apply to Securities. This makes a lot of sense.
If you pick up a cool rock off the ground, and just sell it to someone, it's not a security. If people are buying and selling wheat, it doesn't make wheat a security.
As skybrian said, the US test for a security is the Howely test.
* It is an investment of money * There is an expectation of profits from the investment * The investment of money is in a common enterprise * Any profit comes from the efforts of a promoter or third-party
Memecoins don't fit it at all.
Plenty of memecoins have literally been the bitcoin code with a few strings and numbers changed.
This seems like dressing up intent in another phrase and treating it the same. Regardless of intent, crypto currencies mark avenues of mass transfers of economic value. Introducing intent just seems like an obvious way for people pushing crypto to avoid regulation despite pushing the same venues of mass transfers of economic value. It doesn't matter if people had good intents, the behavior itself still must be punished for guidelines to make any sense.
At the end of the institution of chattel slavery in the south, the justification wasn't economic, it was moral. (At least in popular, individual conception of the discourse.) To "free" enslaved people was to release uneducated, unprepared people to the world, unprepared to take care of themselves. It was clearly a moral motivation, even if extremely misguided and bigoted. Why would we particularly care about intent here when it's more difficult to come up with a plan for this "coin" where people are not obviously misled and misguided? Surely people would push that "great businessmen" or however you term rich people are better at guiding financial policy allegedly directed by democratic control. (Certainly, crypto offers basically no democratic control outside of control of crypto itself.)
"For the hardcore neo-reactionaries, democracy is not merely doomed, it is doom itself. Fleeing it approaches an ultimate imperative. [...] Predisposed, in any case, to perceive the politically awakened masses as a howling irrational mob, it conceives the dynamics of democratization as fundamentally degenerative: systematically consolidating and exacerbating private vices, resentments, and deficiencies until they reach the level of collective criminality and comprehensive social corruption. The democratic politician and the electorate are bound together by a circuit of reciprocal incitement, in which each side drives the other to ever more shameless extremities of hooting, prancing cannibalism, until the only alternative to shouting is being eaten."
SEC deals with oversight and regulation actions/cases against obstinant defendants all the time. That is hard because those folks know the law.
Trying to deal with a teenager or influencer who doesn't even have a concept of the securities law is not something they do regularly. It doesn't fit with their system of function, and would likely become an absolute doom spiral of wasted time and distracted effort. Imagine trying to do a deposition where every other response is 'skibidi'. Even if it worked what are they going to collect or recover? Other meme coins?
In short: Setting aside the fundamental logic of this position, the SEC is built to battle with Bobby Axelrod, not Huawk Tua girl and those are fundamentally different skillsets.
I guess that since some memecoins are now handled by high visibility people, the amount of fraud will soon be higher than securities fraud, especially since no entity deals with it.
(1) "PoopCoin" that is a copy paste of an existing cryptocurrency, repackaged with meme (!) marketing, and intentionally used for the creators to make quick money, and is bought ONLY for the purpose of flipping it for money.
(2) A serious cryptocurrency with a whitepaper, written by expert cryptographers, and serves a unique utility vs others, has a huge market cap, is used for real transactions.
There is no "utility" (the coin is not used to run some crypto system).
It's not attached to something that earns profits.
It's not even expected to retain value.
It's essentially a global apples to apples game. Those who are best at recognizing ahead of time what everyone else will find funny, get more money. In theory.
Meme coins seem like the perfect bribery system.
In the past we had to offload palettes of cheap Chinese-printed bibles or guilded sweatshop sneakers for the illusion of "selling collectibles".
Now we can skip the pretense of all that nasty physical-world foreplay and get straight to the cash. Need to grease the wheels of whatever deal you want to score with the US? Just drop a few MM onto some glorified digital pokemon cards. Not enough liquidity? Oh don't worry, the family-owned reserve spigot's about to open up with an announcement of The Greatest Coindrop of the month.
And now you need not be concerned about the SEC snooping around at your preference of pokemon card or who is buying them.
We've just made government corruption far more efficient.
Can QBT Qualified Blind Trusts own memecoins, or is that still a conflict of interest? https://news.ycombinator.com/item?id=43201808
What about CFTC and FTC and the CAT Consolidated Audit Trail; are collectibles over 10K exempt from KYC and AML there too?
(By comparison, banks put days-long holds on large checks.)
So the BOG isn't independent of the executive branch (it legally can't be), but the FOMC is partly independent since it's a mix of executive branch employees & private bank employees.
The core function of the Fed isn't an executive power. It's not enforcing the law, or interacting with foreign countries. It's a bank that lends to other banks, and influences the market through that economic function. That's not an executive power and doesn't need to be subject to executive control.
The Fed also performs some executive functions (promulgating and enforcing various regulations). I'd argue those must be under executive control. But that doesn't address the Fed's core interest-rate-setting function.
All lives matter.
List of causes of death by rate: https://en.wikipedia.org/wiki/List_of_causes_of_death_by_rat... :
> Substance abuse: 0.58 %
What about the the other 99.4 % of the causes of death, in terms of federal priorities?
What about NIH and NSF funding for medical sciences research?
/? tariff authorization: https://tinyurl.com/certainplansforusall
"Are Drinking Straws Dangerous? (2017)" https://news.ycombinator.com/item?id=43041625
/? plastic straws executive order: https://www.google.com/search?q=plastic+straws+executive+ord...
The recently proposed budget would increase the deficit by 16 trillion dollars on 40 trillion?
Define "Independent Agency"?
GSA General Services Administration: https://en.wikipedia.org/wiki/General_Services_Administratio... :
> The General Services Administration (GSA) is an independent agency of the United States government established in 1949 to help manage and support the basic functioning of federal agencies.
Independent agencies of the United States federal government: https://en.wikipedia.org/wiki/Independent_agencies_of_the_Un... :
> In the United States federal government, independent agencies are agencies that exist outside the federal executive departments (those headed by a Cabinet secretary) and the Executive Office of the President. [1] In a narrower sense, the term refers only to those independent agencies that, while considered part of the executive branch, have regulatory or rulemaking authority and are insulated from presidential control, usually because the president's power to dismiss the agency head or a member is limited.
> Established through separate statutes passed by Congress, each respective statutory grant of authority defines the goals the agency must work towards, as well as what substantive areas, if any, over which it may have the power of rulemaking. These agency rules (or regulations), when in force, have the power of federal law. [2]
However, like Acts of Congress and Executive Orders, such rules are not Constitutional Amendments.
> Examples of independent agencies: These agencies are not represented in the cabinet and are not part of the Executive Office of the president:
> [ Amtrak, CIA, FCC, FDIC, FEC, Federal Reserve, FERC, FTC, CFTC, SSA, TVA, NASA, NARA, OPM, ]
I said independent executive-branch agency. The very first sentence of Article II says: "The executive Power shall be vested in a President of the United States of America." Congress can't create an agency that exercises "the executive Power" that's independent of the President. In the same way that Congress can't create an unelected mini-Congress that enacts laws binding on citizens, and can't create courts outside the judiciary branch that can convict people for federal crimes.
> [ Amtrak, CIA, FCC, FDIC, FEC, Federal Reserve, FERC, FTC, CFTC, SSA, TVA, NASA, NARA, OPM, ]
These entities all differ in whether they're exercising "executive power" or not. Amtrak doesn't meaningfully exercise executive power. Congress can provide for Amtrak to be independent of the President's control. Or to use another example, Congress could probably create a bank that provides student loans that's independent of Presidential control.
But the SEC is a quintessential executive-branch agency. It enacts rules that interpret the securities laws and can prosecute people for violations of securities laws.
Congress must confirm candidate appointees to independent agencies, otherwise they are not independent of the Executive.
Can the President terminate Congressionally-approved nominations without regard for their service? They can.
Is the President totally immune? They are not.
When can't the executive pardon themselves?
These people do not have principles.
“Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.”
> Sophisticated people invest their money in stock portfolios.
> Rednecks invest their money in commemorative plates.
Are NFTs or memecoins more similar to (NASCAR) commemorative plates?
As I said before in the past regarding "Elephant in the room: Quantum computers will destroy Bitcoin" https://news.ycombinator.com/item?id=43188345#43188777 :
> The market does not appear to cost infosec value, risk, or technical debt into cryptoasset prices.
> PQ or non-PQ does not predict asset price in 2025-02.
But what about DOGE?
it's just astonishingly good value if you have no morals at all.
I suspect the folks who are interested in the cryptocurrency "ethos" as it was in the Bitcoin Whitepaper are not happy (although I think that ethos is exceptionally naive, I can at least respect it). I think they see the scams as real roadblocks to adoption and just a bad look / way to operate.
I do suspect that the vast majority of the crypto currency "community" are now just motivated by greed and/or other immoral activity like bribery, fraud, crime etc.
So yes I think some of the more thoughtful crypto community are disappointed .. but in reality much (in terms of dollars) of it really don't care.
the cryptocurrency industry love it and paid for it because it allows them to do unlimited crime against others with no consequences.
this isn't just a This Term Of Trump problem, either - letting these sociopaths get even richer now means they'll form a new layer of poison in the financial system for decades to come and have enormous influence regulation and politics.
At present I will acknowledge one great obligation to it, that is the Chapter sixth—of money page 21st “When these denominations are admitted & employed in transactions to diminish the quantity of metal to which they answer by an alteration of the real coins, is to steal, a theft of greater magnitude & still more ruinous is the making of paper. It is greater because in this money there is absolutely no real value. It is more ruinous because by its gradual depreciation during all the time of its existence it produces the effect which would be produced by an infinity of successive deteriorations of the coin.” That is to say an infinity of successive felonious larcenies. If this is true as I believe it is we Americans are the most thievish people that ever existed, we have been stealing from each other for an hundred & fifty years. If anything like health remains to me, you shall hear more upon this subject from your friend & humble servant.
-- John Adams
At worst, it's fraud, but I don't even believe that. Most people know the risks when they buy these coins. To them, it's a gamble the same as the as the lottery or sports betting. They know it has a negative expected value but they do it anyways because they find it fun.
Sports betting and lottery, while like gambling is legal in many states, is regulated.
Also, memecoins are unlike casino gambling, where there is a tiny chance of an outsider winning. That's where some of the "entertainment" in gambling comes from. In the case of sports betting there are also factors of chance outside the game that the game depends on. Again the adrenaline of betting on the unknown.
With memecoins, unless you are an insider, there is precisely 0 chance of winning. They are pure pump and dump schemes preying on the ignorant, or if the buyer is aware of how they work, they are no different from a bribery mechanism.
https://www.reddit.com/r/solana/comments/1gye9qf/cant_sell_m...
https://www.reddit.com/r/CryptoCurrency/comments/17zrvoj/hel...
https://www.reddit.com/r/solana/comments/1c3hxht/how_to_sell...
If you are buying this stuff retail, you are probably already too late to sell and make a gain, because insiders are ever innovating on strategies like "single sided liquidity" to get their money out before retail buyers can, i.e:
https://x.com/beaniemaxi/status/1891904092361879674
I suspect you were already aware of all that, though.
Also, casino gambling games are regulated.
Memecoins, like NFTs, are just a mechanism for exploitation of the uninformed and a channel for anonymous bribery of the powerful.
Also, lol at the reddit OP "I'm not the bagholder. I'm significantly in profit and want to take it. Any advice on the most cost effective way?"
Edit:
I dont have a lot of sympathy for cash strapped seniors who walking into a casino and blow their money.
NFT and meme coins have a Giant "CASINO" sign above them, and if someone goes in and get scammed or rug pulled before they can scam someone else, than that is on them.
There is a whole world of regulated markets. If you dont want to risk being scammed, dont go into the scam zone.
For all practical purposes, if you're not an insider, the timing of "probably too late" coincides with "precisely 0" and the availability of the memecoin for retail purchase.
> Also, lol at the reddit OP "I'm not the bagholder. I'm significantly in profit and want to take it. Any advice on the most cost effective way?"
I don't laugh at that person, because I don't know their circumstances. It's sad to see someone defrauded, regardless of what you or I might think about their level of knowledge.
Similarly, I also don't laugh at cash strapped fixed income seniors who fell for fraudulent financial products. The reason for regulation (and government departments like CFPB) is to protect such people from fraudsters.
I'm not sure it needs special regulations, different from those for buying and selling used cars, beanie babies etc. but should still be subject to basic stuff like don't steal your clients money.