When meme coins—crypto tokens that usually do not purport to have any utility but are often just a single digital image of a dog, frog, or celebrity—began to be popularized, many skeptics thought that they were a joke, primarily because there was no discernible value and because of the onslaught of seemingly bad actors who took advantage of small investors. This skepticism was most recently supported by the fiasco surrounding the “Hawktuah Girl” influencer, whose meme coin hit almost a half a billion dollars in market cap and then lost about 95% of its value within hours of reaching its peak, resulting in a lawsuit against her and the other promoters. Meanwhile, other meme coins, such as Dogecoin—an image of a cute dog—have enjoyed astronomical and sustained value, which, in the case of Dogecoin, is currently around $29 billion in market cap. President Trump’s organization sold a meme coin shortly before his second inauguration. He and his administration have been clear about seeking to create a more permissive, crypto industry-friendly regulatory framework in the U.S. Meme coins seem to be here to stay.

On February 27, 2025, the Division of Corporation Finance of the Securities and Exchange Commission (SEC) promulgated the division staff’s view that meme coins do not generally involve the offer and sale of securities under the federal securities laws. While the statement is merely a view of the SEC staff and is not thereby a law passed by Congress or a rule set by the Commission, this statement may signal the direction Congress and the administration intend to take on meme coins when legislation or rulemaking ultimately takes shape, as we expect this year.

The staff release defines a meme coin as “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 meme coin and engage in its trading.” The SEC division staff view is that meme coins are not securities under the Supreme Court’s 1946 Howey test because the value derived from meme coins comes from speculative trading and the collective sentiment of the market, and not from the “efforts of others,” meaning the management team, in most cases, under Howey. Rather, the staff views meme coins as akin to collectibles. The staff view relies on the argument that individuals who invest in meme coins understand the risk involved when purchasing these assets, and that it is not the same risk as that of a security. In the eyes of the staff, purchasing a meme coin is like buying a Pokémon card, so while the meme coin may become valuable, the value of it is derived from its limited supply, demand by consumers, and the independent interest factor associated with such memes. The staff says that buyers of meme coins do not rely on the promoter or the management of any entity, as “the promoters of meme coins are not undertaking (or indicating an intention to undertake) managerial and entrepreneurial efforts from which purchasers could reasonably expect profit.”

The staff comes to the conclusion that meme coins should not qualify as securities and therefore buyers of meme coins should not be protected by federal securities laws. However, even if purchasers or holders of meme coins end up not being protected by federal securities laws, that does not mean that bad actors who participate in pump-and-dump schemes could not be charged with other crimes, like ordinary fraud or racketeering.

It is also worth noting that the staff’s view does not fully settle the issue of whether a specific meme coin itself may be a security, as the determination requires the analysis of specific facts relating to each meme coin and the way such meme coin is commercialized. The release describes disqualifying characteristics as “the sale of meme coins that are inconsistent with the descriptions set forth above, or 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.” Therefore, would-be issuers of meme coins should seek qualified counsel to help guide them through the road map set forth in the release and should be mindful of deviating from what the SEC staff believes constitutes a non-security meme coin. We also note that even if federal law defines a meme coin as a non-security, state and foreign laws may not, and most meme coin issuances may be deemed to be made in multiple jurisdictions.

While meme coins may have been frequently marred by the controversy surrounding them, it seems as though they are here to stay. Meme coins seem to provide another avenue that enables celebrities and other public figures to connect with their fans. We believe it would be interesting to explore a meme coin that would have the benefits of fan and community support that drives the phenomenon but does not run the risk of crashing in value.