SEC's Memecoin Guidance Signals a Major Shift in Crypto Regulation

The U.S. Securities and Exchange Commission (SEC) has taken a surprising turn in its approach to crypto regulation. On Feb. 27, the SEC’s Division of Corporate Finance issued guidance stating that memecoins—digital assets inspired by internet trends—are generally not classified as securities. This shift marks a departure from the aggressive enforcement seen under former Chair Gary Gensler, potentially impacting the broader crypto industry.

For years, the SEC relied on the Howey test to claim regulatory authority over digital assets, arguing that tokens sold in secondary markets represented investment contracts. However, the new guidance clarifies that memecoins do not meet Howey’s criteria since their value is driven by speculative trading rather than pooled investments managed by a promoter. This reasoning could extend to other digital assets, weakening the SEC’s previous stance against crypto exchanges.

This change may explain why the SEC has recently dismissed several cases involving secondary-market transactions and paused others. While the guidance is labeled as non-binding, it signals a potential policy shift that courts and private litigants may consider. The move also reduces regulatory uncertainty, reinforcing that many secondary-market transactions may not fall under the SEC’s jurisdiction.

Although the SEC could reverse its stance in the future, due process protections make retroactive enforcement difficult. With this updated position, the agency appears to be moving away from its previous regulation-by-enforcement strategy, offering much-needed clarity for the crypto industry. If this trend continues, it could reshape digital asset regulation in the U.S., providing a more favorable environment for crypto innovation and adoption.