The top US securities regulator is officially announcing that memecoins do not fall under its purview, comparing the burgeoning crypto sector to “non-functional” collector’s items.
In a new statement, the U.S. Securities and Exchange Commission (SEC) is declaring that memecoins are officially not securities.
As defined by the SEC’s statement,
“A ‘meme coin’ is a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading.”
The SEC says memecoins are more like collectibles and entertainment items than securities.
According to the SEC, memecoins fail the Howey test, a litmus test for deciding whether or not something is a security.
“First, meme coin purchasers are not making an investment in an enterprise. That is, their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise.
Second, any expectation of profits that meme coin purchasers have is not derived from the efforts of others. That is, the value of meme coins is derived from speculative trading and the collective sentiment of the market, like a collectible.”
The SEC’s official statement echoes comments made by Commissioner Hester Peirce on memecoins earlier this month.
“Just because something is out there and it’s popular does not mean that it will fit within the SEC jurisdiction. So I just caution people not to assume that there’s going to be an SEC regulatory backstop to everything…”
The statement comes on the heels of an overhaul at the regulatory agency. In addition to the consolidation and creation of a new crypto task force, the Cyber and Emerging Technologies Unit (CETU), just last week, the SEC has also dropped several high-profile investigations as February comes to a close, including inquiries into Coinbase, Robinhood, OpenSea and MetaMask.
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