Testing SEC Ethics And U.S. Regulatory Integrity: Trump’s Crypto Coins
The $TRUMP meme crypto coin web page is displayed on a mobile screen in this photo.
NurPhoto via Getty Images
FEBRUARY 27, 2025 – The U.S. Securities and Exchange Commission (SEC) issued a staff statement on clarifying its view that most meme coins do not constitute securities under federal law. Known as “akin to collectibles,” these tokens derive value primarily from social sentiment and speculative demand rather than profit expectations tied to managerial or entrepreneurial effort.
Marking a shift in the SEC’s regulatory posture, the Division of Corporation Finance, under Acting Chair Mark T. Uyeda, and pending Chair Paul Atkins, is embracing a more permissive, market-oriented approach. The SEC’s staff memo has legal and ethical implications amid the launch of Trump-branded meme coins, $TRUMP and $MELANIA, by the Trump family’s World Liberty Financial.
What Does A Presidential Meme Mean?
Days before his January 2025 inauguration, President Trump launched meme coins, $TRUMP and $MELANIA, through CIC Digital LLC, an affiliate of the Trump Organization. While marketed as community expressions rather than investments, the market response was substantial, with profits of $6.6 billion and significant losses.
CIC Digital LLC and Fight Fight Fight LLC retained control over 80% of the token supply, leading to significant gains for Trump-linked businesses. Trump’s expanding crypto portfolio includes NFTs, DeFi projects, stablecoin, and Bitcoin mining, nearing a value of $1 billion despite market volatility.
The SEC memo offers regulatory cover for projects like these if not marketed with profit guarantees, raising ethical and governance concerns due to a sitting president’s involvement in speculative digital assets.
Ethics And National Security Concerns
Multiple ethics experts raised concerns about Trump meme coins, characterizing the project as a financial conflict of interest and raising national security concerns over a president’s direct involvement in an industry where he has a personal stake.
Representative Waters and Congressman Liccardo introduced the MEME Act to restrict federal officials and families from benefiting from digital assets like $TRUMP, citing the project as an abuse of public office for personal gain, posing risks from decentralized markets and foreign actors.
Regulatory Legitimacy Or Market Capture?
Industry voices defend the Trump tokens as digital innovation, while tech leaders express frustration over Trump’s crypto entanglements and mounting concerns about exploiting political access for personal gain, threatening free enterprise and public trust.
Government naming specific tokens influencing markets is seen as picking winners and losers, prompting a growing conservative view that Trump’s alignment with speculative digital assets threatens public trust and free enterprise.
A Legal Safe Zone, An Ethical Minefield
The SEC’s guidance offers clarity for market participants, but the rise of $TRUMP illustrates how interpretation can exceed original scope, highlighting the limits of a legalistic approach to crypto governance. Compliance with the Howey test does not negate risks of concentrated ownership, inadequate disclosures, and public confusion over legitimacy.
University of Sussex finance professor notes that $TRUMP tokens resemble fan tokens but are tied to a presidency with regulatory control over the market, presenting normative issues.
A Test Case For The Post-Gensler SEC
The April 17, 2025 unlock of $TRUMP offers a case study in regulatory ambiguity meeting political self-interest, highlighting constitutional and normative issues of a head of state benefiting from the market he oversees. A broader reckoning is needed with the merging of market speculation and political influence in the era of crypto governance by personality.
Financial regulation rests on public trust, institutional independence, and exercising restraint in power, indicating a need for a wider discussion on the implications of blending market speculation with political influence in the crypto governance landscape.
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