- The SEC has updated its guidance on meme coins, categorising them as collectibles rather than securities.
- This change coincides with the SEC freezing lawsuits against major crypto companies.
- The SEC clarified that meme coins do not generate yield or convey rights to business assets, meaning they do not require registration as securities.
The Securities and Exchange Commission has updated its guidance on meme coins after a controversial few months for the sector.
Under the Trump administration, the SEC is moving to provide regulatory clarity around the digital assets sector. One of their first changes, coming from the Division of Corporation Finance, was to categorise meme coins as collectibles, rather than securities.
The announcement comes as the new-look SEC drops a spate of lawsuits against major crypto actors such as Consensys, Gemini, OpenSea and Coinbase.
Related: Anti-Memecoin Law for US Politicians Proposed: Aptly Called MEME Act
Meme Coin Value ‘Derived From Speculative Trading’, SEC Says
In other words, a meme coin is not itself a security.
US Securities and Exchange CommissionThese are the official words from the SEC press release, dictating that meme coins avoid needing to register with the financial regulator, and exchanges offering them aren’t at risk of the infamous ‘unregistered securities’ lawsuit.
Simply, the Securities and Exchange Commission deemed that meme coins do not ‘generate a yield or convey rights to future income, profits or assets of a business’. Therefore, they should not be considered a security.
Rather, the SEC believes that the nature of a meme coin operates more like a collectible (for example Lego, or Hot Wheels) than a typical stock or bond.
…the value of meme coins is derived from speculative trading and the collective sentiment of the market, like a collectible.
US Securities and Exchange CommissionSEC Warns Of Minimal Investor Protection When Buying Meme Coins
Although the SEC wants to take a relatively hands-off approach when it comes to meme coins, their statement does contain some asterixes.
Primarily, the agency is concerned that bad actors may use this guidance to get around current securities laws, by obfuscating a security-like asset and calling it a meme coin.
This statement does not extend to the offer and sale of meme coins that are inconsistent with the descriptions…above…or products that are labeled “meme coins” in an effort to evade the application of the federal securities laws.
US Securities and Exchange CommissionThe SEC also warned that meme coins have ‘limited or no use or functionality’, are extremely volatile and their classification as a collectible means investors have very little financial protection when buying them.
Nevertheless, most will see the announcement as a win for the industry, following years of ‘regulation by enforcement’ painting cryptocurrencies as a security.
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