SEC Says Memecoins Are Not Securities

Memecoins are not considered securities.

Instead, they are “akin to collectables,” the Securities and Exchange Commission (SEC) said in a Feb. 28 statement.

Defining memecoins as “inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading,” the SEC made clear that it would no longer pursue securities law violations against promoters of this type of cryptocurrency.

It added that memecoins “typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation.”

The SEC was silent on the matter of altcoins, nearly all of which the agency has previously classified as securities.

“The SEC's declaration that meme coins are not securities marks one of the first big wins for an industry starving for regulatory clarity,” Todd Ruoff, CEO at Autonomys Network, told The Defiant. “The crypto community has long argued that such tokens are collectibles, not financial instruments.”

Significant Clarification

"The SEC’s statement that memecoins are not securities is a significant clarification, but it also highlights the broader regulatory uncertainty in the digital asset space,” said Alan Orwick, co-founder of Quai Network, via email. “While this ruling may provide short-term relief for retail traders and issuers of these tokens, it doesn’t address the core concerns around investor protection, market integrity, and the evolving definition of what constitutes a security in crypto.”

The lack of clear regulatory guidelines for more complex digital assets still “leaves open” the question of how innovators can scale up responsibly while keeping compliant with securities law, he added.

“This ruling should be seen as part of a larger conversation rather than a definitive stance on digital assets,” Orwick said.

Which Tokens are Securities?

The SEC said that memecoins fail the test of what is or isn’t a security, notably that they don’t “​​generate a yield or convey rights to future income, profits, or assets of a business.”

Another test it fails is that investors buy securities in expectation of a profit from the managerial or entrepreneurial efforts of others.

“Memes trade purely on investors’ speculative perception, versus yield generation or reliance on managerial efforts for profit,” said Ruoff. “While this decision will exempt them from registration requirements, investors must be conscious of the fact they’re also unprotected by federal securities laws. It’s caveat emptor and being careful what you wish for.”

Wenny Chai, a partner at SynFutures, said that in the absence of excessive regulation

“the community can further innovate organic self-protection mechanisms against malicious actors, ultimately strengthening the ecosystem through market-driven solutions rather than regulatory constraints.”

The SEC warned that its finding does not mean that tokens that are securities can avoid securities regulations simply by calling themselves memecoins. This suggests that the SEC still thinks some cryptocurrencies are securities.

“If memecoins are not securities, then all utility tokens should be classified as not securities as well, since neither promise any returns/profits, even if their value may go up or down over time,” said Titus Capilnean, vice president of go-to-market at Civic Technologies.

“The crypto space has been significantly crippled by this security uncertainty for seven-plus years now, especially in the U.S. This change is inherently positive for the industry if it goes beyond memecoins,” he added.