SEC Commissioner Crenshaw Slams New Guidance on Meme Coins as a Dangerous Loophole, Accusing Issuers of Market Manipulation and the SEC of Failing Investors
SEC Commissioner Challenges Meme Coin Regulatory Loophole
U.S. Securities and Exchange Commission (SEC) Commissioner Caroline A. Crenshaw, a Democrat, has raised concerns over new guidance from the Division of Corporation Finance regarding meme coins, arguing that it misrepresents the agency’s jurisdiction. In her Feb. 27 statement, Crenshaw criticized the guidance for suggesting that meme coins may fall outside SEC oversight.
She questioned the lack of a clear legal definition for meme coins, stating: “The guidance offers no clear definition from law or even a basic dictionary. It generally describes a meme coin as an asset reflective of online or social trends, of speculative value, that tends to experience high volatility. But these are near universal hallmarks of crypto assets.” The commissioner warned:
The lack of a useful definition alone makes the value of this guidance questionable, except perhaps as a roadmap for crypto enterprises looking to evade oversight by labeling themselves as a meme coin.
Among popular meme coins are the TRUMP and MELANIA tokens, launched by President Donald Trump and First Lady Melania Trump, respectively. The TRUMP token debuted in January, reaching a market capitalization of approximately $15 billion shortly after its launch. Following this, Melania Trump introduced the MELANIA, which also garnered significant attention in the cryptocurrency market.
Crenshaw, who has long taken a skeptical and pro-regulatory stance on cryptocurrency, has consistently argued that many crypto assets function as securities under the Howey test and should be subject to SEC oversight. She has criticized the industry for noncompliance, stating that crypto firms often attempt to evade regulation rather than engage constructively with existing laws. Her recent statement on meme coins reinforced her position, rejecting SEC guidance that suggested meme coins might not be securities. She emphasized that meme coin promoters often profit at the expense of retail investors and dismissed claims that market sentiment alone drives their value. Crenshaw continues to push for stricter oversight and legal clarity in crypto markets, advocating for regulations that align digital assets with traditional financial laws.
Additionally, Crenshaw challenged the guidance’s assertion that meme coin prices are dictated solely by market sentiment rather than issuer actions. She highlighted that issuers often manipulate supply, use buybacks, and make explicit promises about future developments to attract buyers. Fraudulent schemes such as pump-and-dump tactics and rug pulls further demonstrate that meme coins are not necessarily distinct from other crypto assets.
The commissioner also questioned the thoroughness of the SEC’s analysis, stating: “Among the hundreds of self-proclaimed meme coins in the market, there is no doubt a continuum of offers and sales, some of which may be offers and sales of securities and some of which may not. But it seems far from clear that sophisticated efforts such as those described above, which may give rise to reasonable expectations of profits, are outside the norm.” She opined:
One wonders how many such coins were examined in order to draft the generalized descriptions of meme coins set out in the guidance.