The US Securities and Exchange Commission (SEC) has clarified that meme coins do not qualify as securities under federal law, providing long-awaited regulatory guidance for the speculative crypto niche. According to a statement from the agency's Division of Corporation Finance on 27 February, meme coins fail to meet the legal definition of an 'investment contract' under the Howey test, which determines whether an asset falls under securities regulations.

Unlike traditional securities, meme coins are typically purchased for entertainment and social engagement rather than as structured investments, the SEC explained. The agency compared them to collectables, noting that their prices are driven by market sentiment rather than centralised management or pooled investor funds. However, it warned that fraudulent activities involving meme coins could still face enforcement actions under other financial laws.

This clarification marks a potential shift in the SEC's regulatory approach, as meme coins have long existed in a legal grey area despite their growing popularity in online trading. While the statement does not carry legal weight, experts believe it signals a more nuanced stance on speculative digital assets. Even with this regulatory relief, the SEC reaffirmed that new variations of meme coins designed to sidestep securities laws would still face scrutiny.