SEC’s Corporation Finance Staff says the offer and sale of “Meme Coins” does not fall under the Securities Act – the Meming of it all

On February 27, 2025, the staff of the Securities and Exchange Commission’s Division of Corporate Finance (the “staff”) released its views on “meme coins,” stating that under certain circumstances, the offer and sale of “meme coins” would not be considered an offer or sale of securities and therefore not require registration or an exemption from registration under the federal securities laws (the “Meme Coin Statement”). The staff’s statements are a departure from the Commission’s broad position under both Chairs Gensler[1] and Clayton[2] that most, if not all, fungible, and many non-fungible, digital assets were subject to regulation under the Securities Act. The Meme Coin Statement was released in the midst of a flurry of actions by the Commission that takes a generally friendlier and less hands-on regulatory approach to the issuance and trading of digital assets, adjusting its priorities and positions on digital assets, including dropping its civil complaints against crypto exchanges and market participants, announcing the closure of a number of prominent enforcement investigations, forming a new “Crypto Task Force”, and scheduling a roundtable with the public concerning the regulation of crypto assets.

In the Meme Coin Statement, the staff defined “meme coins” as a type of digital or crypto asset which makes reference or imitates a cultural trend, character, or current events. As with baseball cards, Beanie Babies™, and pogs of old, the staff reasoned that purchasers of “meme coins” may purchase them as a novelty collectible or, as has been frequently seen, as a means to speculate on the value of the “meme coin” for later resale. “Meme coins” are historically volatile instruments, subject to market fluctuations and numerous cases of fraud.

The staff, at a high-level, outlined why they believe “meme coins” do not constitute securities. As the staff stated, aside from falling outside the standard, “stock,” “note,” and “bond” definitions of a security in Section 2(a)(1) of the Securities Act, the staff stated that a “meme coin” does not fall within any of the common financial instruments in the definition of “security” because, among other things, meme coins do not generate yield or convey rights to future income, profits, or assets of a business.” The staff went on to state that under SEC v. W.J. Howey Co., meme coins would generally not be considered securities because the “offer and sale of meme coins does not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.” In a footnote, the staff explained that, in their view, “hyping the meme coin on social media and online forums and getting the coin listed on crypto trading platforms” would not be enough to establish a meme coin as a security under the Howey test because there “are not likely to be sufficient indicia to establish that purchasers had a reasonable expectation of profits based on the efforts of the promoters.”

The staff was clear that simply labeling a product as a “meme coin” would not avoid the reach of the federal securities laws. Rather, if the facts and circumstances related to the offer and sale of “meme coins” indicated that the assets were securities, the Securities Act registration and exemption framework would apply. The staff’s statements were consistent with statements made by Commissioner Hester Peirce, the head of the newly created Crypto Task Force, who discussed her view on “meme coins” earlier in February 2025 during an interview with Bloomberg.[3]

Shortly following the release of the Meme Coin Statement, Democrat Commissioner Caroline A. Crenshaw levied harsh critique on the staff’s views, stating in part that “The guidance offers no clear definition from law or even a basic dictionary. . . . . The lack of a useful definition alone makes the value of this guidance questionable, except perhaps as a roadmap for crypto enterprises looking to evade oversight by labeling themselves as a meme coin.” Commissioner Crenshaw also released a parallel statement providing her views on the Commission’s rapid change in approach to crypto assets and intermediaries. [4]

Although the Meme Coin Statement is not a rule, regulation or statement of the Commission, the statement suggests that the current administration will not pursue enforcement actions in this area.

The Meme Coin Statement makes clear that it is not a “get out of jail free” card; rather, there may be facts and circumstances where merely labeling an asset a meme coin will be insufficient to avoid the reach of the securities laws. Further, the Commission is not the only regulator “meme coin” developers, distributors, and resellers should consider, with the CFTC, state securities and consumer finance regulators, and other regulators possibly having oversight and enforcement jurisdiction.

[1] “Courts have time and again agreed with the SEC, ruling that the securities laws apply when crypto assets or crypto-related investment schemes are offered or sold as investment contracts.” See Statement on the Financial Innovation and Technology for the 21st Century Act by Chair Gary Gensler, May 22, 2024, accessible at SEC.gov | Statement on the Financial Innovation and Technology for the 21st Century Act.

[2] “By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved.“ See Statement on Cryptocurrencies and Initial Coin Offerings by Chairman Jay Clayton, December 11, 2017, on SEC.gov | Statement on Cryptocurrencies and Initial Coin Offerings.

[3] Most Memecoins Not Under SEC Jurisdiction: Peirce

[4] SEC.gov | Response to Staff Statement on Meme Coins: What Does it Meme? and SEC.gov | Crypto 2.0: Regulatory Whiplash.