SEC's meme coin stance faces criticism

SEC Commissioner Caroline Crenshaw is dissenting the agency's recent guidance that classifies meme coins as non-securities.

Crenshaw argues that meme coins could meet the Howey test’s criteria, particularly regarding investors relying on developers' and promoters' managerial efforts for potential profits.

Crenshaw voiced her disapproval of the SEC's guidance, suggesting meme coins might fall outside the agency’s regulatory purview, deeming it fundamentally flawed.

She believes the guidance presents an oversimplified view and fails to fully consider the economic realities and motivations behind these digital assets.

Her biggest fear is that crypto firms could exploit this guidance by simply labeling their tokens as "meme coins" to sidestep crucial SEC regulation and oversight.

Crenshaw stresses that these coins, regardless of their branding, are created to generate profit and are financial products designed to make money for their issuers and early investors.

"Today’s statement paints meme coins as cultural projects whose purpose is entertainment and social engagement. The reality is that meme coins, like any financial product, are issued to make money," she stated.

The debate around meme coins has intensified following high-profile scams, hacks, and even a controversial presidential memecoin launch.

Democratic lawmakers are calling for investigations into potential ethics violations related to political token offerings.

Representative Sam Liccardo of California announced that House Democrats are preparing legislation to ban presidential meme coins.

The proposed Modern Emoluments and Malfeasance Enforcement (MEME) Act aims to prohibit U.S. lawmakers, their spouses, and dependents from issuing, endorsing, or profiting from digital assets.

Former CFTC attorney Elizabeth Davis suggested that if the CFTC is granted greater oversight of cryptocurrencies, meme coins could fall under its regulatory jurisdiction.

Davis also predicted clearer regulations on meme coins would emerge within the next year, bringing more clarity to the industry.