SEC Releases Statement on Meme Coins

The staff in the SEC’s Division of Corporation Finance (the “Division”) has released a statement to share some of its views on “meme coins,” which the statement broadly defines as “a type of crypto asset [footnote omitted] inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading.” The Division clarifies its position that the federal securities laws generally do not apply to meme coins because they typically do not meet the definition of a “security” under the Securities Exchange Act of 1934. Therefore, transactions involving the sale or offer of meme coins generally do not need to be registered with the SEC, nor do the federal securities laws provide protections for purchasers or holders of such coins.

The statement cautions, however, that these views may not apply to meme coin transactions that are “inconsistent with the descriptions” in the statement, including fraudulent activity such as “products that are labeled ‘meme coins’ in an effort to evade the application of the federal securities laws by disguising a product that otherwise would constitute a security.” Further, the staff notes that, although meme coins are generally outside the scope of the securities laws, the evaluation of whether this is the case may ultimately depend on “the economic realities of the particular transaction.”