Key Points

The SEC stated that memecoins are not considered securities under US federal law.
According to the regulator, memecoins have “limited or no use” and SEC registration is not required.

The US SEC released an official statement about memecoins as part of an effort to provider greater clarity on the application of the federal securities laws to crypto assets.

US SEC Doesn’t Consider Memecoins Securities Under Federal Law

In its official statement, the SEC said that memecoins are assets inspired by Internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to buy and trade them.

The notes stated that most memecoins share common features and they are purchased for:

Entertainment
Social interaction
Cultural purposes

Memecoins value is driven mainly by market demand and speculations, similar to collectibles.

As The Kobeissi Letter highlighted, the SEC said that memecoins have limited or no use and don’t have to be registered with the SEC.

The SEC also said that memecoins are not securities, as they don’t generate a yield or convey rights to future income, profits, or assets of a business, which means that they don’t fall under the securities laws.

Memecoin Buyers/Holders – Not Protected by Securities Laws

The SEC also stated that memecoins purchasers and holders are not protected by federal securities laws.

The regulator also said that considering the fact that memecoins are not securities, they conducted the analysis on whether a memecoin may be offered and sold as part of an investment contract under the investment contract set forth in SEC vs. W.J.Howey Co.

The Howey test analyzes whether certain instruments are investment contracts based on their “economic realities.”

The SEC also highlighted that its statements do not extend to the offer/sale of memecoins that are inconsistent with the previous descriptions or to products labeled as memecoins only in an effort to evade the applications of the securities laws.

The regulator concluded its statement by saying that even if the sale/offer of meemcoins may not be subject to securities laws, fraudulent conduct related to them may be subject to enforcement action or prosecution by federal agencies.

Memecoin Sector Drops Amidst Crypto Liquidations

Today, the memecoin sector fell sharply and it’s currently down by 8.6% in the past 24 hours, having a market cap of over $57 billion and a 24-hour trading volume of over $8,2 billion.

However, amidst the massive liquidations that dragged the crypto market down by over 7.8% today, some memecoins are still trading in the green.

The Martian Dog is the top gainer, being up by over 176% today, followed by RONKE, up by almost 125%.