SEC Claims Meme Tokens Are Not Securities

The U.S. Securities and Exchange Commission (SEC) issued a statement clarifying that meme tokens do not fall under the definition of securities. The document states that these assets do not generate income and do not provide the right to participate in future profits or business assets, which makes them an exception from the category of securities.

The SEC clarified that participants trading meme tokens are not required to register their transactions under the Securities Act of 1933. As a result, federal securities laws do not apply to the meme token market, which, according to the regulator, means the absence of appropriate legal guarantees for participants in this segment.

"The offering and sale of meme tokens does not imply investment in an enterprise and is not conducted with a reasonable expectation of profits to be derived from the entrepreneurial efforts of others," the SEC noted. This statement is based on the Howey Test, which is used to determine whether an asset is a security. According to this test, an asset is recognized as a security if investors expect profits from the activities of third parties, which typically occurs in the stock market.

At the same time, the SEC warned that not all meme tokens are exempt from securities laws. If a project disguises itself as a meme token to conceal the offering of unregistered securities, such tokens may still fall under regulatory norms.

Earlier this week, U.S. Representative from California, Democrat Sam Liccardo, introduced a bill that would prohibit high-ranking officials, their families, and relatives from issuing or promoting meme tokens and other cryptocurrencies. The bill was initiated after Donald Trump and his wife Melania issued meme tokens before his inauguration.