How The SEC’s Ruling Could Set Back Crypto

On February 27, 2025, the U.S. Securities and Exchange Commission announced that meme coins, cryptocurrencies inspired by internet memes, jokes, and trends, are not considered securities.

The news follows a series of dismissed cases by the SEC against crypto companies, sparking further debate about the role of meme coins in the broader crypto ecosystem. While this decision provides much-needed clarity, it may embolden a growing trend that undermines the legitimacy and future of cryptocurrency as a whole.

Meme Coins Evolve from Joke to Risky Speculative Trend

The rise of meme coins began innocuously with Dogecoin, a digital asset launched in 2013 as a joke. However, over the years, it has transformed into a phenomenon, inspiring countless other coins with little more than memes or cultural references as their value propositions.

The problem with meme coins is glaring: They lack any inherent utility and function primarily as speculative gambling vehicles.

Essentially, they are nothing more than pump-and-dump schemes, with their value inflated by hype and media buzz before inevitably crashing, leaving investors with worthless assets.

The recent launch of Donald Trump’s self-proclaimed $TRUMP meme coin, which appeared to be an attempt to capitalize on his second inauguration, only reinforced the absurdity of this trend. The $MELANIA coin followed closely behind and eventually even a meme coin inspired by Binance’s former CEO, CZ’s dog, “Broccoli.”

The last few months have witnessed a surge in similar projects, most of them created with little to no foundational purpose, underlining the troubling direction the meme coin “industry” is headed.

SEC Declares Meme Coins Outside Its Jurisdiction Despite Risks

The SEC, one of the world’s most diligent regulatory bodies, seems to be turning a blind eye to this trend.

Hester Peirce, a prominent SEC commissioner and head of the crypto task force, commented on the issue. Peirce argued that meme coins, lacking any real business purpose or investment promise, do not meet the criteria of a security and thus fall outside the SEC’s jurisdiction.

As a result, transactions involving these tokens do not require SEC registration. Despite acknowledging that these coins lack intrinsic value and often fall victim to fraudulent practices, Peirce emphasized that the commission does not consider them securities due to their fundamentally speculative nature.

The noteworthy clarification provides an official stance on meme coins, asserting that these tokens function more like collectibles than investment instruments.

The Division of Corporation Finance outlined that their value is mainly driven by market demand, social media-driven hype, and pure speculation. This underscores that meme coins do not meet the characteristics of traditional securities like stocks or bonds, which generate income or represent ownership in a company. It also acknowledged the possibility of fraudulent activities within the meme coin space but clarified that such actions could be addressed under other laws.

While this clarification may provide temporary peace of mind to the crypto market, it raises several critical questions about the long-term consequences of meme coins on the industry.

Meme Coins Threaten Crypto’s Integrity

Meme coins represent the antithesis of cryptocurrencies’ original intent. They were designed as decentralized assets with real-world use cases and tangible value.

Buyers hoping to capitalize on meme coins are often lured by the promise of massive short-term gains, only to be left holding the bag when the hype inevitably dies down. Moreover, many meme coin creators employ dangerous tactics such as “rug pulls,” where the developers pull the liquidity from the coin, leaving investors high and dry.

Even projects with legitimate-looking intentions are often too volatile, frequently abandoned, or manipulated to serve the interests of early investors.

This culture of hype, manipulation, and fraud is not only harmful to investors but to the credibility of the entire cryptocurrency ecosystem.

The Meme Coin Risk

As meme coins become more prevalent and widely accepted, they risk turning cryptocurrency into a sideshow, overshadowing more serious and stable projects.

It is an industry-wide problem that the SEC’s decision inadvertently fuels, perpetuating a cycle of speculation that could ultimately result in significant financial losses for uninformed investors.

The ruling may have aimed to clarify regulatory guidelines, but it does little to address the fundamental issue at hand, the proliferation of assets that are little more than a form of digital gambling.