SEC clarifies meme coins do not fall under federal securities laws

The SEC noted in a statement that federal securities laws do not bind meme coins.

The agency clarified that securities laws protect neither meme coin purchasers nor holders.

House Democrats are set to introduce a bill that prevents political figures from launching meme coins.

The Securities & Exchange Commission (SEC) released an official statement on its website on Thursday, clarifying that meme coins are not subject to federal securities laws.

Meanwhile, House Democrats are seeking to introduce a Modern Emoluments and Malfeasance Enforcement (MEME) bill prohibiting political figures and their families from launching meme coins.

SEC says meme coins are not securities, Democrats to introduce MEME bill

The SEC's Division of Corporation Finance stated in a press release that it does not consider meme coins as securities under federal law.

"It is the Division's view that transactions in the types of meme coins described in this statement, do not involve the offer and sale of securities under the federal securities laws," highlighted the SEC.

Due to their nature, the agency clarified that meme coins are not bound by the Securities Act of 1933.

The SEC views meme coins generally as "collectibles" bought for social interaction and entertainment as they do not fall under any common financial instruments outlined in securities laws.

It also stated that this class of cryptocurrencies is majorly driven by market demand and speculation. As such, the agency clarified that federal securities laws do not bind meme coin holders and purchasers.

"Persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission under the Securities Act of 1933 ("Securities Act") or fall within one of the Securities Act's exemptions from registration," the SEC added.

However, Khurram Dara, a lawyer at Bain Capital Crypto, pointed out a caveat in the SEC's statement.

"Fraudulent conduct related to the offer and sale of meme coins may be subject to enforcement action or prosecution by other federal or state agencies under other federal and state laws," the SEC concluded.

The SEC's statement comes amid House Democrats' plans to introduce a new bill prohibiting politicians and their families from issuing meme coins.

California Rep Sam Liccardo — who currently spearheads the new legislation — stated in an interview with ABC News that he is set to launch a MEME bill.

The bill aims to influence all political offices, including the presidential office, from "exploiting the public for personal gain."

Rep Liccardo is allegedly targeting the actions of President Donald Trump, who participated in the TRUMP meme coin launch a few days before his inauguration.

The rapid success of the TRUMP meme coin was quickly faced with sell-offs. The token has declined over 50% in the past month, stirring criticisms among crypto community members toward the president.

However, Crypto Czar David Sacks told Fox Business last month that he viewed the TRUMP meme coin as a collectible.