What Am Law 100 Firm Partners Say About the SEC’s New Views on Meme Coins
The U.S. Securities and Exchange Commission indicated that transactions involving a meme coin—a type of crypto asset inspired by internet memes, characters, current events or trends for which the promoter seeks to attract an enthusiastic online community to purchase the token and engage in trading—does not involve the offer and sale of securities under applicable law.
The SEC noted in the releases Thursday that meme coins tend to experience significant market price volatility and often are accompanied by statements regarding their risks and lack of utility other than for entertainment or other nonfunctional purposes. However, meme coins are not “investment contracts.”
“As such, persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission under the Securities Act of 1933 or fall within one of the Securities Act’s exemptions from registration,” the SEC’s division of corporation finance stated. “Accordingly, neither meme coin purchasers nor holders are protected by the federal securities laws.”
Meanwhile, Am Law 100 firm partners, whose specialties include crypto litigation, had much to say about the SEC’s new views on meme coins.
Jason Mendro, co-chair of Gibson, Dunn & Crutcher's securities litigation practice, said that the statement from the SEC provided much-needed clarity on an important social and cultural trend and offered attorneys and the public a commonsense clarification about a category of securities known as investment contracts, as set forth in SEC v. W.J. Howey Co.
“Investment contracts arise when one party pools and manages the investments of others to generate returns. Investment contracts don’t arise when people simply buy digital assets for entertainment or even for speculation,” Mendro said. “Meme coins are a cultural phenomenon. People buy them for fun. They don’t buy them with the expectation that they’re contracting with anyone to earn profits for them.”
The statements from the SEC follow a flurry of changes at the agency. Under the Biden administration, the former SEC chairperson, Gary Gensler, led what many in the industry termed regulation by enforcement. However, President Donald Trump campaigned to end the SEC’s regulatory “war on crypto" and promised industry players and investors a friendlier SEC.
“The SEC is making good on that promise, first by dismissing some of their actions against Coinbase and other prominent crypto players and, second, by starting to roll back the expansive definition of securities taken previously by the SEC,” said Mark E. Bini, a partner at Reed Smith.
Still, Christopher Capuzzi, a capital markets partner at Ropes & Gray, said, “Despite the seemingly definitive statement by the staff that meme coins are not ‘securities’ under the U.S. securities laws, the devil is always in the detail.”
For instance, as noted in the footnotes of the statement, Capuzzi said there are seemingly foreseeable instances in which promoters do take steps that go beyond the realm of permissible activities and could be viewed as offering and selling a security.
“With hindsight, it’s frequently easy to cast seemingly innocuous activity as securities fraud,” said Capuzzi, who is based in the Am Law 100 firm’s New York office. “It’s important to remember that until Congress acts, we continue to operate in somewhat murky waters with regards to meme coin, cryptocurrency and other digital assets.”
Likewise, Pillsbury Winthrop Shaw Pittman partner David Oliwenstein warned that market participants should note that, as SEC Commissioner Caroline A. Crenshaw points out in her response, the staff has not defined “meme coin” or explained why the category is not a security under Howey—the legal standard used to determine whether a digital asset is a security.
“The SEC’s release further points out that other enforcement authorities have many tools to pursue misconduct and, if the courts disagree with the SEC’s new view, private litigants may still have claims under the securities laws,” Oliwenstein said.
He added, “We might expect to see, for example, private litigants filing claims against meme coin issuers under Section 12(a)(1) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, even as the SEC adopts a position that no meme coin (however defined) is ever a security subject to SEC regulation.”
Joe Castelluccio, a partner at Mayer Brown and co-leader of the firm’s fintech and digital assets practices, warned that there is a significant risk that the staff statement is misinterpreted by some participants in crypto markets.
“In my view, the most important parts of the statement are the last three sentences—namely, that a meme coin isn’t a meme coin simply because someone says it is, and that meme coins are not exempt from the jurisdiction of any other regulators or prosecutors at either of the federal or state levels,” Castelluccio said.
For attorneys who advise clients who promote or deal with meme coins, Castelluccio said they must emphasize the continued risks that exist from other federal regulators and, perhaps to an even greater extent, state regulators.
He noted that Crenshaw’s response highlighted several devices promoted by promoters of coins that can result in harm to markets and coin holders, such as pump-and-dump schemes and rug pulls, which are and will continue to be the focus of state regulators. However, Castelluccio said he expects the SEC to further reveal its views of meme coins and other digital assets for attorneys and the public in the weeks and months ahead.
In doing so, Castelluccio added: “A separate question—one not directly addressed by either meme coin statement—is the extent to which the SEC will look to pursue enforcement against coins that it deems to be securities under its current leadership.”
Reprinted with permission from the February 28th edition of The National Law Journal © 2025 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.
