The U.S. Securities and Exchange Commission (SEC) has officially declared it will not regulate memecoins, including the Trump memecoin associated with former President Donald Trump. SEC Commissioner Hester Peirce emphasized in recent comments that these tokens are not seen as securities by the agency, thereby leaving investors without SEC protections.
The Trump memecoin had previously surged to a $15 billion market capitalization before crashing, with 80% of its supply reportedly held by Trump-affiliated entities. Critics have expressed concerns about conflicts of interest and a regulatory void as the Trump family profits from a financial product outside of SEC oversight.
Peirce compared the current state of memecoins to the 2021 NFT boom, noting that while NFTs were also unregulated as securities, they faced significant price volatility due to market speculation. She highlighted that despite various digital assets potentially being structured as securities, memecoins generally fall outside traditional regulatory safeguards.
Since the Trump administration began, the SEC shifted from the previous administration's aggressive regulatory posture, resulting in a more hands-off approach, particularly toward highly speculative assets like memecoins. Democratic lawmakers, including Senator Richard Blumenthal, have voiced concerns about potential conflicts stemming from ownership concentration in tokens linked to political figures.
Peirce stressed that investors must proceed with caution, as the SEC will not insure losses or provide recovery mechanisms for speculative investments such as memecoins. She urged thorough personal research and understanding of the speculative nature and inherent risks. The decentralized or pseudodecentralized nature of memecoins further complicates regulatory recourse in case of fraud or manipulation.
This development reflects the broader uncertain and fragmented regulatory landscape in the U.S. crypto sector, with overlapping jurisdictions and no definitive frameworks currently governing memecoins. The SEC's stance reinforces a 'buyer beware' environment for memecoin investors, underscoring their responsibility to conduct due diligence amid ongoing calls for clearer rules.