Meme Coins Escape SEC Oversight: $TRUMP Crash Exposes Investor Risks

The Securities and Exchange Commission (SEC) has declared that meme coins, including the high-profile $TRUMP token linked to President Donald Trump, do not qualify as securities, placing them outside the agency's regulatory reach.

SEC Commissioner Hester Peirce emphasized that "many of the memecoins out there probably do not have a home in the SEC under our current set of regulations." This stance follows a volatile period for the $TRUMP token, which surged to $75 post-launch before crashing 80% to around $15.50, according to real-time blockchain data.

The collapse wiped out over $2 billion in investor value across more than 810,000 crypto wallets, highlighting the risks of unregulated digital assets driven by speculation and sentiment.

SEC Defines Meme Coins as Non-Securities

In a February 2025 statement, the SEC's Division of Corporation Finance defined meme coins as crypto assets "inspired by internet memes, characters, current events, or trends," purchased primarily for entertainment and cultural engagement rather than investment.

Unlike securities, meme coins lack functionality and generate no yield, and their value hinges on market speculation rather than utility or business operations.

The SEC likened them to collectibles like digital art, noting their significant price volatility and explicit risk disclaimers. This classification exempts meme coins from federal securities laws, leaving investors vulnerable to fraud and deceptive practices without regulatory protections.

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$TRUMP Token Collapse Sparks Controversy

The $TRUMP memecoin, launched at $0.18, skyrocketed to $75 shortly after Trump's inauguration, only to plummet to approximately $15.50, per recent market data. Blockchain analytics reveal collective investor losses exceeding $2 billion, with over 810,000 wallets impacted.

Meanwhile, the Trump family and associates reportedly earned nearly $100 million in trading fees. A single anonymous wallet, purchasing 6 million tokens minutes after the token's announcement, sold for a $109 million profit, fueling insider trading allegations.

Critics argue that Trump's promotion of the token, alongside his influence over regulatory appointments, raises ethical concerns about conflicts of interest in the crypto space.

Did You Know?
The $TRUMP token's 80% price drop is one of the largest single-asset losses in crypto history, surpassing the 2022 collapse of TerraUSD, which lost $1.8 billion.

Howey Test Excludes Meme Coins

The SEC's determination rests on the Howey Test, a Supreme Court standard for defining securities. Meme coins like $TRUMP fail to meet this criterion, as they do not involve pooled funds for a common enterprise or profits derived from the entrepreneurial efforts of others. Instead, their value fluctuates based on speculative trading and community sentiment, akin to trendy collectibles.

This regulatory gap leaves oversight unclear, with speculation that the Commodities Futures Trading Commission (CFTC) may classify meme coins as commodities. The SEC's Crypto Task Force, led by Peirce since January 2025, marks this as the first major digital asset policy shift, raising questions about future regulation.