Original Title: SEC says memecoins aren't securities, but fraud will still be policed
Author: Jesse Coghlan, CoinTelegraph;
Translated by: Tong Deng, Jinse Finance
The U.S. Securities and Exchange Commission (SEC) has stated that it does not consider memecoins to be securities, but warned that any fraudulent tokens may still be subject to enforcement action by other regulatory agencies.
In a statement on February 27, the agency's Division of Corporation Finance said that in its view, memecoins "do not involve the issuance and sale of securities as defined under federal securities laws" and are "more akin to collectibles".
"Accordingly, persons involved in the issuance and sale of memecoins do not need to register such transactions with the Commission," the SEC stated.
It added that buyers and holders of memecoins will not be afforded the protections of U.S. securities laws, but said that "fraudulent issuance and sale of memecoins may be subject to enforcement action or prosecution by other federal or state agencies".
The SEC said it shared its views "as part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets."
Former U.S. President Donald Trump has taken steps to reduce the SEC's regulation of the cryptocurrency sector, hoping to fulfill one of his campaign promises. The agency established a crypto assets working group last month to develop a framework for digital assets.
Trump and former First Lady Melania Trump launched their own memecoins just days before taking office on January 20, drawing criticism from many crypto commentators and some Trump supporters.
According to CoinGecko, Donald Trump's memecoin Official Trump (TRUMP) has plunged nearly 83% from its peak, while Melania Trump's token Melania Meme (MELANIA) has dropped 93.5% from its high.
Prior to Trump's term, the daily trading price of the TRUMP memecoin reached a peak of $73.43, but is now trading around $12.66. Source: CoinGecko
Before the SEC's statement, ABC News reported that U.S. House Democrats plan to introduce a bill to ban public officials, including the president, from issuing, sponsoring or endorsing any securities, commodities or digital assets, including memecoins.
The SEC stated in its statement that memecoins "often have limited or no utility or functionality" and "tend to experience significant market price volatility".
It added that memecoins do not fit the "enumerated list of common financial instruments" that define a "security" - such as stocks or bonds - because they do not confer rights to "future income, profits or the assets of an enterprise".
The SEC said that memecoins do not meet the "investment contract" definition of the Howey Test for securities - funds invested in a common enterprise with an expectation of profits from the efforts of others.
"The issuance and sale of memecoins do not involve an investment in a business enterprise, nor do they contemplate a reasonable expectation of profits from the entrepreneurial or managerial efforts of others," the agency stated.
"In other words, memecoins themselves are not securities."
The SEC added that its statement does not apply to memecoins that are inconsistent with its description, nor to any products labeled as memecoins that attempt to "evade the securities laws by dressing up what would otherwise be a security".
"The Division will assess the economic realities of particular transactions," it said.
SEC Commissioner and head of the agency's crypto working group, Hester Peirce, said earlier this month that many memecoins "may not find a home within the SEC under our current regulatory framework".
