{"id":17108,"date":"2025-03-10T21:33:28","date_gmt":"2025-03-10T21:33:28","guid":{"rendered":"https:\/\/dogewisperer.com\/?p=17108"},"modified":"2025-03-10T21:33:28","modified_gmt":"2025-03-10T21:33:28","slug":"recent-sec-guidance-on-memecoins-suggests-broader-policy-change","status":"publish","type":"post","link":"https:\/\/dogewisperer.com\/?p=17108","title":{"rendered":"Recent SEC Guidance On Memecoins Suggests Broader Policy Change"},"content":{"rendered":"
\n

There is more to SEC\u2019s recent memecoin guidance<\/a> than meets the eye. On Feb. 27, the staff of the SEC\u2019s Division of Corporate Finance issued guidance<\/a> explaining that memecoins \u2014 which the SEC described as digital assets \u201cinspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community\u201d \u2014 are generally not sold as securities.<\/p>\n

This is consistent with the SEC\u2019s shift away from efforts under former Chair Gary Gensler to claim regulatory power over virtually the entire digital-asset industry, and it could have implications for the industry that go far beyond memecoins.<\/p>\n

The SEC\u2019s attempts to regulate digital assets during the Biden Administration largely hinged on the Supreme Court\u2019s so-called \u201cHowey test\u201d for determining whether a transaction involves an \u201cinvestment contract.\u201d Howey requires an investment of money in a common enterprise, with an expectation of profits from the efforts of others.<\/p>\n

In the SEC\u2019s enforcement actions against digital-asset exchanges, the defendants argued that secondary-market resales of digital assets lack the necessary \u201cinvestment of money in a common enterprise\u201d because investors\u2019 funds are not \u201cpooled\u201d by developers into a common fund and then used to further a business in which the investors share the profits. In the SEC\u2019s case against Kraken<\/a>, for example, the agency told a federal court that \u201cpooling of resale proceeds\u201d by a developer is not \u201crequired under Howey.\u201d<\/p>\n

The SEC\u2019s new guidance confirms the opposite. It says that purchasers of memecoins make no investment in a common enterprise because their funds \u201care not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise.\u201d The guidance also explains that memecoin purchasers do not expect profits derived from the efforts of others, another Howey requirement. Rather, the value of memecoins comes from \u201cspeculative trading and the collective sentiment of the market, like a collectible.\u201d<\/p>\n

The SEC\u2019s memecoin guidance is most obviously consequential for the sale and promotion of memecoins, which are the subject of recent private class-actions brought by individual plaintiffs. But it has broader implications for all secondary-market transactions in digital assets, including on exchanges. In secondary-market transactions on exchanges, purchasers\u2019 funds likewise \u201care not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise.\u201d Thus, the SEC now seems to recognize that under a proper application of the Howey test, those transactions are beyond the agency\u2019s reach, as defendants have consistently argued in the SEC\u2019s prior enforcement cases.<\/p>\n

This doctrinal reversal may be part of the impetus behind the SEC\u2019s recent decisions to voluntarily dismiss several cases involving secondary-market transactions, and to stay further proceedings in others.<\/p>\n

To be sure, the SEC\u2019s new guidance includes statements that it \u201crepresents the views of [agency] staff,\u201d not necessarily the SEC itself, and that the statement \u201chas no legal force or effect.\u201d The SEC also attempted to restrict the guidance to \u201cthe offer and sale of meme coins\u201d under the specific circumstances described elsewhere in the release.<\/p>\n

The agency could try to use those boilerplate recitals to wriggle out of the guidance at some point in the future. But constitutional principles of due process and fair notice may constrain the agency\u2019s ability to impose retroactive liability based on any future flip-flop. Moreover, although the SEC\u2019s guidance is not binding on courts, the SEC\u2019s change in position on pooling will make it difficult for private plaintiffs to credibly argue that most digital assets are sold as securities.<\/p>\n

The SEC\u2019s guidance on memecoins is consistent with the agency\u2019s other recent steps to pull back from the regulation-by-enforcement approach that plagued the industry under former Chair Gary Gensler. And the guidance offers welcome clarity from the agency in an area where the agency\u2019s prior approach had significantly muddied the waters. It is, in short, a significant step in the right direction for crypto law and policy in the United States.<\/p>\n<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

There is more to SEC\u2019s recent memecoin guidance than meets the eye. On Feb. 27, the staff of the SEC\u2019s Division of Corporate Finance issued guidance explaining that memecoins \u2014 which the SEC described as digital assets \u201cinspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"iawp_total_views":0,"footnotes":""},"categories":[2],"tags":[3,4,5],"class_list":["post-17108","post","type-post","status-publish","format-standard","hentry","category-news","tag-crypto","tag-doge","tag-news"],"_links":{"self":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts\/17108","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17108"}],"version-history":[{"count":0,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts\/17108\/revisions"}],"wp:attachment":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17108"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}