S.E.C. States that Memecoins are Exempt from Regulation

The Securities and Exchange Commission stated on Thursday that memecoins, novelty digital assets, are not regulated as securities. This decision has significant implications for the cryptocurrency industry and President Trump, who launched his own memecoin around his inauguration.

The S.E.C.’s stance on memecoins aligns with the less stringent regulatory approach Trump pledged towards the crypto industry. Trump and his family’s association with digital currencies, particularly through World Liberty Financial, further demonstrates his interest in digital assets. The $Trump memecoin, introduced by Trump before his inauguration, attracted attention for its fluctuating value and high trading fees.

While the S.E.C.’s policy statement does not mention Trump’s memecoin specifically, it highlights the risks associated with such products and the potential for fraudulent conduct. Despite not regulating memecoins under federal securities laws, the S.E.C. warns that fraudulent activities related to these coins may still face enforcement actions by other agencies.

The S.E.C.’s decision was based on an old Supreme Court ruling that memecoins should not be classified as investment contracts subject to regulation. This marks a departure from former S.E.C. Chair Gary Gensler’s approach to considering most digital assets as securities.

The S.E.C. also expressed concerns about traders exploiting the memecoin classification to bypass regulation, stating they will scrutinize any new product claiming to be a memecoin. The agency’s recent actions signal a shift away from Gensler’s strict enforcement of cryptocurrency regulations, which had incited backlash from the industry and its supporters.

In addition, the S.E.C. dropped its enforcement lawsuit against Coinbase and has ceased investigations into several crypto companies. They are seeking a settlement in a civil fraud case against Justin Sun, a crypto investor affiliated with World Liberty Financial but not implicated in its alleged fraudulent activities.

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