While most regulators avoid rocking the boat, SEC Commissioner Caroline Crenshaw has thrown subtlety overboard. In a scathing critique, she lambasted recent SEC staff guidance on meme coins, calling it an “incomplete, unsupported view of law” that could create a dangerous regulatory loophole.
Crenshaw didn’t mince words. The guidance lacks a clear definition of what even constitutes a meme coin. Nice job, SEC staff. She emphasized that proper regulation requires individualized inquiry—not broad, sweeping exemptions that ignore economic realities.
At the heart of her criticism lies the guidance’s apparent contradiction of the established Howey test, which determines whether assets qualify as securities. The new approach conveniently overlooks the “economic reality” of meme coin transactions, disregarding reasonable profit expectations and the crucial role promoters play in influencing value. Surprise, surprise.
The implications for investor protection aren’t pretty. Without proper regulatory safeguards, investors face increased exposure to scams and pump-and-dump schemes. The SEC’s official position classifies meme coins as collectibles rather than securities, suggesting purchases are for entertainment purposes. The guidance fundamentally gives bad actors a playbook for exploitation while failing to address misleading marketing tactics. What could possibly go wrong?
Beyond immediate concerns, the guidance creates troubling precedent for other crypto assets and could impact future SEC enforcement actions. The statement issued on February 27, 2025 concludes that transactions in meme coins do not involve securities offerings, further complicating regulatory oversight. It’s already raising eyebrows about the SEC’s jurisdiction over crypto and affecting ongoing lawsuits against major firms.
The crypto community’s reaction has been predictably mixed. Some view it as a step toward clearer regulation, while others worry about increased market volatility. This controversy is particularly concerning given that pump-and-dump schemes affected 24% of new tokens in 2022, resulting in massive investor losses. U.S.-based blockchain projects might get a boost, and crypto trading platform shares saw a slight uptick.
This controversy unfolds amid a shifting regulatory landscape, following the SEC dropping lawsuits against major exchanges and coinciding with the proposed MEME Act targeting officials. The guidance reflects what might be a changing approach to crypto oversight, highlighting the ongoing struggle to properly classify digital assets.
The debate continues. Just don’t expect Commissioner Crenshaw to back down anytime soon.
