The US Securities and Exchange Commission (SEC) has issued a staff statement explicitly declaring that meme coins generally do not qualify as securities under federal law.
Released on February 27, 2025, the statement provides clarity for the cryptocurrency sector after years of regulatory uncertainty surrounding token classifications.
In its guidance, the SEC clarified that meme coins typically “have limited or no functionality” and do not need to be registered with the Commission under securities laws.
SEC’s new stance provides clarity after years
The SEC’s new position on meme coins directly addresses long-standing questions about how these assets should be treated under federal securities laws.
In clear language, the regulatory body states that “a meme coin is not itself a security” because it does not “generate a yield or convey rights to future income, profits, or assets of a business.”
The guidance specifically points to the characteristics that separate meme coins from securities, noting they are “typically purchased for entertainment, social interaction, speculative purposes, and cultural relevance.”
By focusing on these use cases rather than investment expectations, the SEC has mentioned a framework that separates meme tokens from investment contracts under the Howey test.
The test has been the primary method for determining whether crypto assets qualify as securities.
However, the statement also includes important caveats and warnings. The SEC emphasizes that “meme coins typically have limited or no functionality” and explicitly notes that “neither meme coin purchasers nor holders are protected by the federal securities laws.”
The timing of this guidance is particularly notable as it comes amid increasing scrutiny of the meme coin sector following several high-profile incidents, including the $4 billion valuation spike of the Milei coin and the recent security breach at Pump.Fun that led to the promotion of fraudulent tokens.
Pump.Fun’s Revenue Collapses as Meme Coin Market Cools
Pump.Fun, once the epicenter of meme coin creation on Solana, has seen its daily revenue drop dramatically to just above $1 million.
This marks a major drop from its January 25 peak of $15.38 million, according to data from DefiLama.
The platform’s current revenue levels have dropped to figures last seen in early October 2024.
The platform’s activity metrics show a drop across all key indicators. In the past 24 hours, approximately 27,700 tokens were created on Pump.Fun, but only 0.88% were successfully launched.
Token launches have fallen from over 70,000 daily creations on January 23 to approximately 25,000 by February 26, based on Dune Analytics data.
This revenue collapse follows a period of growth for Pump.Fun throughout 2024, during which the platform helped in the launch of over 5.7 million new projects and generated more than $400 million in revenue.
Several factors have contributed to the current downturn. The LIBRA token incident involving Argentine President Javier Milei exposed problematic aspects of the meme coin ecosystem when its valuation quickly ballooned to $4 billion before collapsing.
This high-profile case damaged the perception that meme coins offered “fair launch” opportunities where retail investors could compete equally with larger players.
Security issues have further eroded confidence in the sector. On February 26, Pump.Fun’s X account was compromised and used to promote a fake governance token called PUMP along with other fraudulent coins.
Regulatory Clarity Comes as Investor Perception of Meme Coins Change
The SEC’s new stance on meme coins arrives during a shift in investor sentiment toward the once-booming sector.
While 2024 saw meme coins marketed as “fair launch” opportunities where retail investors could theoretically compete on equal footing with institutional players, recent events have challenged this notion.
The Milei- LIBRA coin incident proved damaging to the sector’s reputation. Market observers note that the initial appeal of meme coins started partly from their positioning as an alternative to venture capital-dominated token launches.
The SEC’s clarification that meme coin holders “are not protected by federal securities laws” serves as an important warning to investors at a time when the sector faces increased scrutiny.
Source: https://www.thecoinrepublic.com/2025/02/28/sec-says-meme-coins-not-securities-pump-fun-revenue-falls/