Law & Policy

The SEC just issued a major clarification on meme coins 👀

tl;dr most memecoins aren’t securities under federal law

What does that mean?
➡️ No registration required.
➡️ No investor protections under securities laws

But there’s a catch (thread👇)

general counsel @ 1kx // co-founder @ thing3 // summoner @ hydra ventures

First a quick recap - the Howey test says that something is an investment contract if there's an investment of money in a common enterprise with a reasonable expectation of profit derived from the effort of others

How does the SEC view memecoins under each of these criteria?

Meme coins fail the “investment contract” criteria because:

- No pooled funds for enterprise development
- Value driven by hype/speculation (eg beanie babies)
- Promoters aren’t doing “managerial efforts” to generate profits

Love or hate memecoins, that's the right answer

BUT!

This statement is a big deal! 

First, it's actual SEC guidance. The thing we've been begging for. This provides insight into how the staff will evaluate tokens in general. 

It also clears the air for organic, community-driven tokens. Vibes FTW!

One last note: 

Remember that this is a staff statement - not official rulemaking. The guidance could be withdrawn, and any applicable future rules would overrule this.

All the same, let's take our wins! It's amazing we're finally getting them!

Full statement:

One last note: 

Remember that this is a staff statement - not official rulemaking. The guidance could be withdrawn, and any applicable future rules would overrule this.

All the same, let's take our wins! It's amazing we're finally getting them!

Full statement: https://www.sec.gov/newsroom/speeches-statements/staff-statement-meme-coins

Just calling it a memecoin doesn't mean it's a free pass

The SEC expressly says they'll target projects that disguise securities by calling them memecoins

Fraud (rug pulls & PnDs) will still face actions, whether by the SEC, DOJ or other agencies