Cryptocurrency tokens known as meme coins — such as the one promoted by President Donald Trump last month — are not subject to federal securities regulations, the Securities and Exchange Commission said Thursday.
Meme coins associated with Donald and Melania Trump soared shortly before Trump’s inauguration — likely netting companies affiliated with the coins millions in fees — before plummeting in recent weeks.
According to the SEC, the coins are more akin to “collectibles” and don’t fall under the category of securities under federal law, likely shielding companies like the one behind $TRUMP from potential litigation.
“Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. In this regard, meme coins are akin to collectibles,” the SEC said in a statement from its division of corporate finance.
Meme coins are a highly volatile slice of the crypto industry that may start as a joke but can become quite profitable for the individual promoter.
“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. As such, 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 or fall within one of the Securities Act’s exemptions from registration. Accordingly, neither meme coin purchasers nor holders are protected by the federal securities laws.”