The US SEC recently issued a “Staff Statement on Meme Coins,”

Let’s look at some extracts:

• A “meme coin” is a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading. Although individual meme coins may have unique features, meme coins typically share certain characteristics. Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. In this regard, meme coins are akin to collectibles. Meme coins also typically have limited or no use or functionality. Given the speculative nature of meme coins, they tend to experience significant market price volatility, and often are accompanied by statements regarding their risks and lack of utility, other than for entertainment or other non-functional purposes.
• It is the Division’s view that transactions in the types of meme coins described in this statement, do not involve the offer and sale of securities under the federal securities laws. As such, persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission under the Securities Act of 1933 (“Securities Act”) or fall within one of the Securities Act’s exemptions from registration. Accordingly, neither meme coin purchasers nor holders are protected by the federal securities laws.
• … A meme coin does not constitute any of the common financial instruments specifically enumerated in the definition of “security” because, among other things, it does not generate a yield or convey rights to future income, profits, or assets of a business. In other words, a meme coin is not itself a security….
• The offer and sale of meme coins does not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. First, meme coin purchasers are not making an investment in an enterprise. That is, their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise. Second, any expectation of profits that meme coin purchasers have is not derived from the efforts of others. That is, the value of meme coins is derived from speculative trading and the collective sentiment of the market, like a collectible. Moreover, the promoters of meme coins are not undertaking (or indicating an intention to undertake) managerial and entrepreneurial efforts from which purchasers could reasonably expect profit.
• Notwithstanding the foregoing, this statement does not extend to the offer and sale of meme coins that are inconsistent with the descriptions set forth above, or products that are labeled “meme coins” in an effort to evade the application of the federal securities laws by disguising a product that otherwise would constitute a security.  As noted above, the Division will evaluate the economic realities of the particular transaction.
• Further, although the offer and sale of meme coins may not be subject to the federal securities laws, fraudulent conduct related to the offer and sale of meme coins may be subject to enforcement action or prosecution by other federal or state agencies under other federal and state laws.

As the New York Times pointed out, one of the more high-profile meme coins to date was issued by Trump during his pre-inaugural “festivities” in January, called $Trump, which “spurred controversy because it swung wildly in value and generated hefty trading fees for Mr. Trump.” The Times also pointed out that under the Biden-era SEC Chair, Gary Gensler, the old Supreme Court case on which some of the above analysis was based (SEC v. W.J. Howey Co.) was used to argue that most digital assets are securities and subject to regulation.

It seems to me that the S.E.C’s more traditional forms of regulation are indeed somewhat irrelevant and futile: there’s no form of audited financial reporting for instance that can cast light on the prospects of a particular meme coin. But that’s arguably an argument for more regulation and restriction rather than less. The comment that “fraudulent conduct related to the offer and sale of meme coins may be subject to enforcement action or prosecution” is rather hilarious in that the wealth generated from such items is almost entirely reaped from fraud, at least in the sense of inducing people to part from their money for no rational reason. In this sense they are indeed almost emblematically Trumpian in their hollow tempestuousness. The spectacle of the right wing going out of its way to shield and codify such activity is another bewildering instance of Trump’s apparently bottomless ability to bend and subvert reality as we thought we knew it…

The opinions expressed are solely those of the author.