The U.S. Securities and Exchange Commission (SEC) has officially stated that meme coins do not qualify as securities, triggering a wave of mixed reactions from both regulators and investors.
While the move sidesteps legal entanglements—especially concerning the controversial $TRUMP meme coin—it also raises pressing concerns about speculation and potential fraud within the crypto space.
Meme Coins Under the Spotlight: Rogan and Musk Weigh In
The debate surrounding meme coins reached new heights last week when Joe Rogan and Elon Musk discussed their legitimacy. Rogan voiced strong skepticism, likening meme coin trading to pyramid schemes due to rampant pump-and-dump tactics. Meanwhile, Musk offered a more laid-back perspective, comparing them to casinos—places where only disposable income should be risked.
“It’s so bananas that people dump real money into these coins and then just pump them up and sell them,” Rogan remarked.
Musk responded, “It’s like musical chairs. Whoever’s the last to sit down loses.”
SEC’s Meme Coin Classification: Strategic Move or Regulatory Blind Spot?
In its official statement, the SEC classified meme coins as collectibles rather than investments, stating:
“Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation.”
The SEC emphasized that meme coins lack intrinsic utility and are subject to extreme price volatility, similar to digital collectibles. Because meme coins do not meet the criteria outlined in the Howey Test—used to determine what constitutes a security—the agency concluded they fall outside its jurisdiction.
This decision effectively shifts regulatory oversight away from the SEC and toward agencies like the Department of Justice (DOJ) for fraud enforcement. However, SEC Commissioner Caroline Crenshaw issued a sharp dissent, warning that this move could serve as a loophole for crypto projects looking to dodge regulations by branding themselves as meme coins.
Commissioner Crenshaw Sounds the Alarm: A Dangerous Precedent?
Commissioner Crenshaw pushed back against the SEC’s stance, arguing that the classification lacks legal grounding and could enable market manipulation. She pointed to common deceptive tactics used in the crypto space, including:
- Pump-and-dump schemes that leave retail investors at a loss.
- Supply control through strategic token burns and buybacks.
- Exchange listings that involve managerial oversight and planning.
Crenshaw also questioned the SEC’s broader approach to crypto enforcement, highlighting the agency’s decision to drop cases against major crypto firms before providing clear guidelines on securities classification.
“How can we pursue fraudulent conduct while casting doubt on our regulatory jurisdiction?” she asked.
What’s Next for Meme Coins?
The SEC’s ruling marks a pivotal moment in crypto regulation, granting meme coins a semblance of legitimacy while placing the burden of due diligence squarely on investors. However, concerns surrounding manipulation, speculative trading, and regulatory ambiguity remain unresolved. As meme coins continue to surge in popularity, the legal and ethical debates surrounding their classification are far from over.
Reece Conner
Reece Conner is a leading expert in the cryptocurrency industry, known for delivering cutting-edge insights and practical guidance to both newcomers and seasoned investors. With a background in finance and technology, Conner bridges the gap between complex blockchain concepts and real-world applications.