SEC Confirms Memecoins Generally Not Considered Securities Under Federal Laws
The US Securities and Exchange Commission (SEC) has clarified the classification of memecoins under federal securities laws. This clarification may benefit altcoins and ETFs filed with the SEC.
Key Points on Memecoins
- Memecoins are cryptocurrencies inspired by memes, cultural phenomena, or current events.
- They typically have no substantial functionality beyond entertainment and exhibit high price volatility based on market demand and speculative trading.
- The SEC determined that transactions involving memecoins do not qualify as securities under the Securities Act of 1933.
- Individuals selling memecoins are not required to register their transactions.
Regulatory Considerations
- Memecoins do not fit into traditional securities categories since they yield no income or rights to profits.
- The SEC applied the "Howey test" and found that purchasers are not investing in an enterprise; instead, value comes from speculation and public sentiment.
- This classification does not apply to all memecoins; offerings that deviate will be scrutinized.
- Fraudulent activities related to memecoins may still be prosecuted under other federal or state laws.
