- Regulators clarified the definition of memecoins.
- The jokey offerings have saddled investors with mammoth losses.
- Trump's own memecoin is now deemed to be a collectible, not a security.
Memecoins aren’t just useless.
They also aren’t securities, the US Securities and Exchange Commission said on Thursday.
In a memorandum, the SEC explained that memecoins — ironic cryptocurrencies tied to celebrities, internet communities, or jokes — do not generate yield or promise holders future income.
As a result, they do not meet the definition of a security or investment contract under federal securities laws.
Instead, they behave more like baseball cards, collectible comic books, or vintage Beanie Babies.
“The value of meme coins is derived from speculative trading and the collective sentiment of the market, like a collectible,” the SEC’s memo reads.
While the definition sounds technical, it’s important because it establishes that the SEC, for its part, will not seek to force memecoins to adhere to the same rules that govern stocks, bonds, and other securities.
“Getting this off the shelf this early into the Trump administration is a big win.”
— Alon Levy, Pump.fun
That approach was at the heart of the SEC’s legal assault on the crypto industry under its former chair, Gary Gensler.
The SEC’s new guidance is good news for President Donald Trump and First Lady Melania Trump, both of whom released controversial memecoins in January.
Uncertainties
The SEC’s guidance appears to minimise the potential legal risk that has cast a pall over other cryptocurrencies that were deemed to be securities.
“Even minor uncertainties can come with significant consequences if the downside of these uncertainties can be major,” Alon Levy, the founder of the Solana-based memecoin launch pad Pump.fun, told DL News.
“Getting this off the shelf this early into the Trump administration is a big win.”
That doesn’t mean memecoins are off the hook.
Other authorities can still target fraudulent conduct related to memecoins with enforcement action or prosecution, the SEC warned.
Memecoin bill
Given the recent spate of money-burning memecoin launches this year, state agencies and lawmakers may take their own action.
Indeed, House Democrats on Thursday vowed to introduce a bill prohibiting members of Congress and officials in the executive branch from issuing or promoting digital assets.
“We’re going to make corruption criminal again,” said Representative Sam Liccardo, a California Democrat, in an X video on Thursday.
Along with similar meltdowns such as Hawk Tuah, the raunchy offering from internet personality Hailey Welch, two politically themed memecoins have damaged the crypto market, critics say.
Many in the industry decried the twin memecoins released by the Trumps as “radioactive.”
Then this month, Argentina President Javier Milei promoted a memecoin called Libra that soared to $4.5 billion in just a few hours before nosediving and leaving investors saddled with losses and feeling burned.
Milei has sought to distance himself from the fiasco but the episode was a blow to his credibility, especially in the local crypto community.
Liam Kelly is a Berlin-based reporter for DL News. Got a tip? Email him at liam@dlnews.com. Aleks Gilbert is DL News' New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.
