SEC Challenged Over Meme Coin Guidance as Lawmakers Demand Transparency on Political Ties

U.S. Senator Elizabeth Warren (D-MA) and U.S. Representative Jake Auchincloss (D-MA) formally challenged the Securities and Exchange Commission's (SEC) recent position on meme coins

U.S. lawmakers are demanding answers from the Securities and Exchange Commission (SEC) after the agency excluded meme coins from oversight, a move that comes as scams in the sector are soaring and former President Trump and the First Lady launched their own tokens.

In a letter to Acting SEC Chair Mark T. Uyeda on Friday, Senator Elizabeth Warren (D-MA) and Representative Jake Auchincloss (D-MA) challenged the Division of Corporate Finance’s Feb. 27 Staff Statement, which stated that meme coin transactions are not covered by federal securities law.

The timing of the announcement was questioned by the lawmakers, who stated: “The Staff Statement comes just weeks after President Trump and First Lady Melania Trump launched their own meme coins, TRUMP and MELANIA, and conveniently presents a legal interpretation that could shield the President’s and First Lady’s coins from regulatory scrutiny.”

While noting that Congress should provide the SEC with clear direction on how to regulate meme coins, they argued that the agency has a responsibility to take steps to protect consumers, not to serve the financial interests of political figures, especially given the prevalence of scams in meme coin markets.

The legislators highlighted several concerning statistics about consumer harm in the meme coin sector, asserting that: 40% of meme coin sales are related to market manipulation tactics, such as ‘pump-and-dump’ schemes, in which sellers inflate a coin’s price and then sell their holdings at the peak, causing the coin’s value to plummet for all other buyers; another 30% of meme coin sales are ‘rug-pull’ scams, a scheme in which a coin’s developers abandon the token after taking all users’ investment funds—consumers lost $500 million to this type of scheme in 2024; and meme coins are also frequently used for other fraudulent activity, including phishing scams and pyramid schemes.

Moreover, the lawmakers criticized the SEC for rolling back enforcement, stating that the Staff Statement is, notably, just one of many recent SEC actions aiming to arbitrarily deregulate the cryptocurrency industry. In just the past two months, for example, the SEC has dropped ten major lawsuits and investigations against cryptocurrency platforms such as Coinbase, Binance, and Kraken.

The lawmakers concluded by demanding detailed explanations from the SEC, including all communications between the agency and the White House or the President’s Working Group on Digital Asset Markets regarding the Staff Statement and whether the SEC had received any directives from that group; clarity on why the Division issued a Staff Statement instead of a formal rule or guidance; and whether the TRUMP and MELANIA coins qualify under the memo’s definition of meme coins. Additionally, they requested a list of tokens that were evaluated during the drafting process and asked the agency to define what separates meme coins from other cryptocurrencies. The lawmakers pressed for a response by March 28.