US SEC Confirms Memecoins Are Not Securities, But Warns of Potential Fraud

Highlights:

• US SEC confirms memecoins like DOGE and SHIB are collectibles, not securities.
• SEC warns of fraud risks with memecoins and may enforce legal actions.
• Democrats plan MEME Act to ban government officials from profiting from memecoins.

In a statement issued on Feb. 27, the United States SEC’s Division of Corporation Finance confirmed that memecoins such as Dogecoin (DOGE), Shiba Inu (SHIB), Official Trump (TRUMP), and Official Melania (MELANIA) are not securities under federal securities laws. The agency called these digital assets collectibles, which people buy for enjoyment or investment. However, the SEC cautioned that fraudulent activities involving memecoins could face enforcement actions by state or federal authorities.

“As such, persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission,” the SEC said.

The financial regulator stated that meme tokens do not qualify as an “investment contract” under the Howey Test. Unlike stocks or investment contracts, these digital assets do not grant holders any rights to future income, profits, dividends, or ownership stakes in a company or entity. It added that memecoins value relies mainly on market speculation and social trends.

🚨NEW: The @SECGov Division of Corporation Finance has just put out guidance on memecoins saying they are NOT securities and are akin to collectibles.

“It is the Division’s view that transactions in the types of meme coins described in this statement, do not involve the offer…

— Eleanor Terrett (@EleanorTerrett) February 27, 2025

Many in the crypto community welcomed the agency’s statement for clarity. Crypto lawyer Ishmael Green said it might increase U.S. investment.

He stated:

“This will drive continued investment in the U.S. crypto space, as the vast majority of meme coins launched in the last 12 months with multibillion-dollar market caps have been released on Solana, an American blockchain.”

Meanwhile, the SEC’s stance on memecoins suggests they may have a higher chance of ETF approval. The previous SEC administration, however, rejected ETF filings for assets classified as securities.

SEC Warns Against Fraud

Although SEC’s Division of Corporation Finance said memecoins are not securities, it warned about fraud. Khurram Dara, a Bain Capital Crypto lawyer, said scams with memecoins can still face legal action. The SEC added that it will keep monitoring the crypto market for any rule violations.

The statement added:

“The offer and sale of meme coins do not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”

Democrats to Introduce MEME Act Against Political Memecoins

On February 27, California Representative Sam Liccardo told ABC News that House Democrats are preparing to introduce the Modern Emoluments and Malfeasance Enforcement (MEME) Act. This act will ban top US officials and their families from creating or profiting from personal memecoins.

Just days before entering the White House on January 20, Trump and First Lady Melania Trump launched their own memecoins. The launch faced criticism from crypto analysts and some of Trump’s supporters. According to CoinGecko, TRUMP has dropped nearly 80% from its peak, while MELANIA has declined by 90% from its highest value.

The Congressman believes government officials should not use their position for personal gain. He said Trump’s memecoins exploit the public and raise concerns about insider trading and outside influence on the government.