The agency announced on Thursday that memecoins are not considered securities.

Updated Feb 28, 2025 14:09 UTC Published Feb 27, 2025 10:45 UTC

Key points:

• The U.S. Securities and Exchange Commission (SEC) has abandoned its informal practice regarding memecoins in the cryptocurrency space, noting that investors generally will not be protected if they suffer losses on such investments, which the SEC does not classify as securities.
• According to the new filing, SEC staff proposed defining memecoins as tokens that are associated with aspects such as memes, characters, current events, or trends.
• The guidance follows comments from Commissioner Hester Peirce earlier this month, when she indicated that “many” memecoins on the market do not qualify as securities.

The US Securities and Exchange Commission (SEC) is officially distancing itself from memecoins.

The federal securities regulator said memecoins — which it described as “a type of cryptoasset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an engaged online community to purchase and participate in trading the memecoin” — are more like collectibles than securities, according to a statement from the SEC’s Division of Corporate Finance staff released Thursday. Because memecoins have “limited or no use or functionality,” they do not meet the Howey Test’s criteria for being a security, and thus fall outside the SEC’s jurisdiction.

The statement formalizes comments made by Commissioner Hester Peirce — the head of the SEC’s newly formed cryptocurrency task force, which has led the charge to overhaul cryptocurrency regulation since its inception in January — in an interview with Bloomberg TV earlier this month. During the interview, Peirce noted that “many” meme coins in the market are outside the SEC’s jurisdiction.

“If people decide to buy a token or product that doesn’t have a clear long-term value proposition, they should be free to do so, but they shouldn’t be surprised if the price drops one day,” Peirce wrote in her roadmap for cryptocurrency regulation, published earlier this month. “In this country, people generally have the right to make their own decisions, but the opposite of that great American freedom is the equally great American expectation that people should make their own decisions, rather than waiting for the government to tell them what to do or not do, or to bail them out when they do something that turns out to be a failure.”

Such legal interpretations by the securities regulator do not carry the force of formal regulation, but industries overseen by the SEC and other federal agencies tend to pay close attention to such staff statements. The infamous Staff Accounting Bulletin No. 121 — known as SAB 121, which was proposed by the agency’s accounting staff — caused confusion in the crypto sector and among bankers who felt constrained by it until the bulletin was rescinded by current SEC leadership. In this case, a footnote in the staff statement on memcoins indicates that it is “not a rule, regulation, guidance, or statement” approved by the commission.

While Pierce made it clear that U.S. investors are responsible for conducting their own due diligence on the tokens they purchase, the Securities and Exchange Commission (SEC) has not ruled out the possibility of stepping in and using its enforcement powers if memecoins are used to circumvent securities laws.

“However, this statement does not apply to the offer and sale of meme coins that do not meet the above descriptions or products that are labeled as ‘meme coins’ for the purpose of evading the federal securities laws by disguising a product that would otherwise qualify as a security,” the staff statement said. “As noted, the Division will evaluate the economic realities

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