Critics claim that memecoins should be banned by regulators because they are being sold as unregistered securities. After countless scams the need to protect investors (i.e buyers of the memecoins) has also been called to attention.
In February 27, 2025, the US SEC (Securities And Exchange Commission) announced that they do not view memecoins as securities. However, the SEC emphasized that it will continue to police activities like scams involving these cryptocurrencies, especially if they fall under the securities law for digital assets.
According to the SEC statement:
memecoins “do not involve the offer and sale of securities under the federal securities laws” and “meme coins are akin to collectibles.”
As collectibles, memecoins can be sold and traded just like baseball cards, which do not require the SEC to monitor. They are not securities which constitute a contract that is offered with a future expectation of profit. Memecoins do not require a contract, even though they can have a higher future price value. They are sold as is from the seller with no obligation of higher price value in the future to the buyer.
The agency’s stance is that while memecoins may not fall under the regulatory framework for securities, any fraudulent schemes or deceptive practices related to them will still be subject to enforcement actions. This clarification aims to address the growing concerns with memecoins, but not all the issues surrounding it.
The SEC's stance on memecoins, specifically declaring them as non-securities, carries significant implications for the cryptocurrency market. If memecoins are deemed non-securities, they fall outside the SEC's primary regulatory purview. This means less stringent oversight compared to traditional securities, and does not extend protection that would otherwise be available to users.
The main concern here is that with less regulatory oversight, the memecoin market could experience even greater volatility. This could amplify the risks of pump-and-dump schemes and other manipulative practices. Instead of preventing more of these schemes, it could exacerbate it.
A rogue team can just mint a new token that is marketed as a legitimate project. They will not be subject to any SEC regulations for issuing a token sale, and then later dumping on the market once users buy the hype. It allows them to get away with it, but now it will be up to other agencies to enforce the law regarding this matter.
Without SEC protections, investors may have limited recourse in cases of fraud or market manipulation. The number of rug pull cases can rise which usually affects newcomers to this space. This underscores the importance of due diligence and risk awareness for those participating in the memecoin market.
Some memecoins have avoided oversight prior to the SEC ruling. Many were sold on decentralized exchanges which do not fall under regulatory authorities. This is also not under the SEC's control, thus memecoins can still be sold without any form of regulation.
While a less restrictive regulatory environment could foster innovation in the memecoin space, it also increases the risk of unchecked growth and potential market instability. With less regulatory protection, user education required will be greater than ever. If they want to invest in cryptocurrency like memecoins they need to understand what they are buying and the risks associated with it.
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Disclaimer: This is not financial advice regarding cryptocurrency. Please do your own research always for education and further understanding.
