- Memecoins made headlines yesterday as House Democrats and the SEC both took action on them
- Democrats have introduced the MEME Act to prohibit high-ranking officials from promoting or launching cryptocurrencies
- The SEC has declared that memecoins are not considered securities under current regulations
Memecoins took center stage yesterday, with House Democrats and the U.S. Securities and Exchange Commission (SEC) making plays to clarify their status. Following the launch of the Donald and Melania Trump memecoins last month, House Democrats have introduced the MEME Act to prevent high-ranking officials from engaging with cryptocurrencies, while the SEC has clarified that memecoins do not fall under securities regulations. These moves underscore the increasing entanglement of digital assets within the U.S. political and regulatory landscape and show just how much they have grown in influence in recent months.
MEME Act Hopes to Avoid $TRUMP and $MELANIA repeat
On February 27, a group of House Democrats took aim at memecoins through the Modern Emoluments and Malfeasance Enforcement (MEME) Act. This legislation aims to prohibit the President, Vice President, members of Congress, senior Executive Branch officials, and their immediate families from issuing, sponsoring, or endorsing any security, commodity, future, or digital asset.
The bill seeks to impose criminal and civil penalties on officials who violate these provisions, even targeting those who profited from such activities prior to the bill’s enactment. This aspect directly addresses President Donald Trump’s launch of a memecoin in the days prior to taking office, which was followed shortly after by his wife, Melania, doing the same.
Representative Sam Liccardo (D-CA), the bill’s sponsor, stated, “The Trumps’ issuance of memecoins financially exploits the public for personal gain and raises the specter of insider trading and foreign influence over the Executive Branch.” Both coins have lost significant value from their highs: $TRUMP is down 84% while $MELANIA is down 94%.
SEC Gives Memecoins Clean Bill of Health
In a related development, the SEC yesterday gave memecoins a clean bill of health, announcing that the class of cryptocurrencies is not classified as securities under current regulatory frameworks as they don’t meet the Howey Test for securities:
The offer and sale of meme coins does not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. First, meme coin purchasers are not making an investment in an enterprise. That is, their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise. Second, any expectation of profits that meme coin purchasers have is not derived from the efforts of others. That is, the value of meme coins is derived from speculative trading and the collective sentiment of the market, like a collectible. Moreover, 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 SEC’s stance, which is mightily different from that of the prior administration, indicates a more nuanced approach to the rapidly evolving cryptocurrency market, distinguishing between different types of digital assets based on their characteristics and uses. It also likely has nothing to do with the scrutiny over the $TRUMP and $MELANIA memecoins. That’s probably just a coincidence.
