SEC's memecoin statement marks the latest in a 'series' of actions since the Trump administration took office, sparking support and criticism

As memecoins' popularity takes off — with even President Donald Trump launching one of his own — the U.S. Securities and Exchange Commission stepped in to make it clear that those assets were not securities as the agency forges ahead on a path very different from its predecessor.

The SEC's staff released a statement last week that said memecoins are not securities, noting some caveats, including that fraud involving memecoins would still be subject to enforcement actions from other relevant federal or state agencies.

During the Biden administration, SEC Chair Gary Gensler said most cryptocurrencies, aside from bitcoin, were securities. However, with Gensler's exit and the Trump administration's arrival, the SEC has rapidly reversed course on several key crypto policies. In a matter of just a few weeks, it has rescinded controversial crypto accounting guidance, dropped enforcement actions against major crypto industry players, created a crypto task force and now issued its memecoin statement. 

Former SEC Commissioner Michael Piwowar said the SEC's statement was one in a "series" they've been making since January when Trump came into office and after Gensler left his post.

Memecoins were potentially an easy case for the SEC to solve, compared to other cryptocurrency-related issues, Piwowar said in an interview with The Block. Memecoins , which are cryptocurrencies often based on internet memes and pop culture references, have gained popularity over the years. Though they can yield significant returns, they are also super volatile. Memecoins are viewed quite differently from other cryptocurrencies with more established ecosystems such as bitcoin and ether.  

"I don't know why they [SEC] chose memecoins, other than it's kind of an easy case to think of or maybe because they're growing in popularity and there's a particular retail focus on that," Piwowar said. "Sometimes it just bubbles up from the staff in terms of like, hey this is something that would be helpful for the commission to say something on." 

The SEC is looking to provide clarity, but is still relying on the same law, Piwowar said. Over the years, the SEC has often cited the Howey Test, which some in the crypto industry have criticized for how it is applied. The Howey Test is based on a 1946 U.S. Supreme Court case frequently cited by the SEC to determine if an asset qualifies as an investment contract and, therefore, a security. 

In the SEC's memecoin statement, the agency again cited the Supreme Court case. 

"When I was at the commission, that was basically, that was the lens through which we looked at whether something was a security or not," Piwowar said. "So it was significant the fact, that they still believe that's the relevant test. Now Congress may provide additional clarity on that in the legislation, but for now, this is what they have."

Piwowar said memecoins could be considered commodities, but the Commodity Futures Trading Commission would have to state that publicly. The CFTC did not respond to a request for comment. 

"The definition of commodity is very broad, it's so broad that there's things that are exempted in there like onions and box office receipts and stuff like that," Piwowar said.

Expedited

The SEC can use various tools to give the industry guidance or help direct them, said Teresa Goody Guillén, a partner at BakerHostetler law firm and former SEC attorney, in an interview with The Block. She also said that a staff statement, such as the one used to define memecoins, is one of the "more expedient ways" to notify the public on how the agency is approaching or viewing specific areas that may or may not be under its jurisdiction. 

"There was a lot of discussion in the public forum about questioning the security status of memecoins, and this is a way to quickly let the public know how the commission staff is viewing it," she said.

However, the SEC's statement on memecoins is limited to just that and does not mean that the agency believes that other types of digital assets other than memecoins are not securities, Guillén said, adding that there are lots of different types of digital assets and memecoins have specific characteristics in how it is issued and how the Howey test is applied.

The SEC's statement also comes as the agency is weighing a number of crypto ETF proposals, from ones tied to Polkadot, XRP, Solana, Aptos and even Dogecoin. Dogecoin is one of the most popular memecoins. 

Federico Brokate, VP and head of U.S. Business at 21Shares, said that though the firm has not launched any memecoins products, they're studying the space. 

"We have not launched any memecoin products, in Europe or in the U.S.," Brokate told The Block. "Now, that said, we're fans of the space, and we are students of crypto markets more broadly."

Criticism flies

The SEC's statement drew criticism from one of its own, sole Democratic Commissioner Caroline Crenshaw, who released a statement shortly after the SEC's staff. Crenshaw disagreed with the staff's application of the Howey Test and said that memecoins were issued to make money. 

"Promoters make money from selling the coin, and often also from retaining and holding a significant portion of the token supply as its value increases," Crenshaw said in her statement . "The linked fortunes of purchasers and promoters – who will both make money as the coin value goes up – may itself satisfy Howey’s requirement of a 'common enterprise.'"

Trump, who has been favorable toward the crypto industry over the past year,  launched a TRUMP memecoin ahead of his Jan. 20 inauguration with his wife, Melania Trump , following suit with one of her own, both with billions of dollars in market cap. Trump's memecoin drew criticism from both crypto insiders and Washington leaders in January. 

Nonprofit Citizens for Responsibility and Ethics in Washington alluded to the timing with the SEC's statement and Trump's memecoin. 

"Nothing to see here, just the SEC saying memecoins are not subject to oversight a month after President Trump created a memecoin and made millions," the nonprofit said on March 2 in a post on X." No concerning conflicts whatsoever…"

In responding to the timing of the SEC's statement with Trump's memecoin, Goody Guillén said they're not tied.

"Memecoins have been a popular asset," she said. "I don't tie it to any single thing."