SEC Clarifies Memecoin Status: Not Typically Securities Under Federal Law

The U.S. Securities and Exchange Commission (SEC) recently clarified its stance on memecoins, stating they generally do not qualify as securities under federal law, as reported on Thursday. This announcement offers potential relief for memecoin enthusiasts and related exchange-traded funds (ETFs). The SEC's Division of Corporation Finance specified that memecoins, inspired by internet memes and cultural trends, primarily derive value from market demand and speculative trading, resembling collectibles rather than traditional investments. Since these digital assets typically lack substantial functionality beyond entertainment and do not provide rights to future income or profits, the SEC concluded that their transactions do not constitute the offer and sale of securities. This means sellers of memecoins are not required to register transactions under the Securities Act of 1933. However, the SEC cautioned that this classification does not apply universally, and fraudulent activities associated with memecoins could still be pursued under other federal or state laws.