The Securities and Exchange Commission (SEC) has announced that memecoins are generally not considered securities under the law.
Definition of Memecoins
The SEC defines memecoins as cryptocurrencies primarily created for entertainment, cultural expression, and speculative trading rather than functional utility. Their value is largely driven by market sentiment and speculation.
Legal Classification
The SEC confirms that transactions involving memecoins do not constitute an “offer and sale of securities” under the Securities Act of 1933. Memecoins do not pass the Howey Test and do not meet legal standards to be qualified as securities.
Fraud Warning
While most memecoins do not fall under securities regulation, the SEC warns of potential fraudulent activity in their markets. The agency is ready to investigate cases where crypto projects may disguise as memecoins to evade regulation.
The SEC's statement provides greater clarity regarding memecoins, reducing regulatory requirements for trading them but emphasizing the prevention of fraudulent practices.
