SEC Staff Clarifies the Application of Federal Securities Laws to Meme Coins

In an action that could have broad implications, U.S. Securities and Exchange Commission Staff (Staff) issued a statement on February 27, 2025

The U.S. Securities and Exchange Commission (SEC) Staff has issued a statement providing clarity on the application of federal securities laws to meme coins. The statement, which was released by the Division of Corporation Finance Staff (Staff) on February 27, 2025, offers crucial insights for crypto market participants and could signal a significant change in the SEC’s interpretation of what does and doesn't constitute a security.

Key Points from the SEC Staff Statement

The Staff’s statement provides much-needed clarity for the cryptocurrency market, especially for traders and issuers of meme coins; however, it is worth noting that projects building businesses and investors investing in businesses are not directly impacted by the Staff’s statement—as tokens that derive value based on the operations of the business (i.e., there is an expectation of profits derived from the efforts of others, through the lens of the Howey test) are not meme coins, and they may be considered “securities” pursuant to the Howey test.

Confirming that meme coins are not securities removes a regulatory overhang from meme coin–related transactions. However, this does not mean that meme coins are free from all legal scrutiny. Industry participants must remain vigilant against fraudulent practices, as these could still attract enforcement actions or private lawsuits under other legal frameworks.

Further, while the Staff statement only specifically applied to memecoins, the rationale articulated could also apply to other assets. For instance, the same rationale could apply to NFTs that only represent artwork or collectibles. In addition, it could apply to other speculative assets where the value of the asset does not rely on the efforts of others, such as sneakers and sports cards.

Ongoing Legal Considerations

Persons dealing with meme coins should still consider the following legal implications:

The statement on meme coins offers insight into the fundamental question of “Which crypto assets are securities?” It also signals a potential shift in how the SEC regulates the industry by proactively providing informal guidance. We see the statement as a sensible step towards regulatory clarity and a very overdue shift away from the SEC’s recent history of “regulation by enforcement” and “regulation by speechmaking” before that.