U.S. Securities and Exchange Commission (SEC) officially ruled that meme coins were not securities

The U.S. Securities and Exchange Commission (SEC) officially ruled Thursday that meme coins were not securities, instead likening them to collectibles.

The U.S. Securities and Exchange Commission (SEC) ruled on Thursday that transactions in the types of meme coins described in its statement, do not involve the offer and sale of securities under the federal securities law.

Key features of the SEC statement

The SEC's reasoning for designating meme tokens as non-securities focus on the following aspects:

The agency provides this statement to clarify the application of the federal securities law to transactions in meme coins, which are typically sold in online platforms and are not subject to registration requirements.

The term “meme coin” is used in the industry to describe a type of cryptocurrency that is often named after a meme or internet cultural phenomenon.

The SEC's staff memo does not apply to coins that were not consistent with the descriptions mentioned in the statement.

It also does not apply to products labeled as meme coins “in an effort to evade the application of the federal securities laws by disguising a product that otherwise would constitute a security.”

Meme coin sector – an innovation with much frustration

The meme coin sector has a collective $56 billion market cap and has been down by over 8% in the last seven days.

Scams have also been rampant across the segment, with many of the incidents being rug pulls, or projects that aggressively promote a token only to “rug” on investors after they've bagged gains from price surges.

For instance, the team behind U.S. First Lady Melania Trump's Melania Meme (MELANIA) coin has dropped below $1 since its launch ahead of inauguration day last month.

Some people say investors who put their money on the meme asset were “scammed by the First Family.”

The more recent incident that caught the world by storm was the launch of the LIBRA meme coin, which Argentine President Javier Milei initially said should help drive the country's economic growth.

Blockchain analytics firm Nansen recently dove deep into the token's launch, revealing how the meme coin surged to a staggering $4.55 billion market cap only to plunge to around $200 million in two days after Milei pulled support for the coin.

Most of the traders in the coin ended up with realized losses, compared to just a few winners who were able to take home millions before the meme coin plummeted.