SHIB, DOGE, PEPE Unclassified As SEC Securities: Here’s Why
The U.S. Securities and Exchange Commission (SEC) recently stated that meme coins such as Shiba Inu (SHIB), Dogecoin (DOGE), and Pepe (PEPE) are not considered securities under federal law. Instead, the SEC classifies these memecoins as collectibles, since they often have little or no specific use or function.
Reasons for this classification:
- Lack of corporate structure: Memecoins do not represent an investment in a common enterprise. Memecoin buyers are not funding a structured project as they would when buying stock in a company.
- No reasonable expectation of return from a third party: The value of memecoins is driven primarily by speculation and market demand, with no management team working to ensure future returns.
The SEC also emphasized that transactions involving memecoins do not need to be registered under the Securities Act of 1933, as they do not generate profits or transfer rights to future earnings, profits, or assets of a business.
Impact on the memecoin market:
- Growth of new memecoins: Without being classified as securities, many developers may feel freer to launch new memecoin projects.
- Lack of investor protection: While this decision promotes market growth, investors will not be protected under federal securities laws in the event of fraud or market manipulation.
However, the SEC warns that fraudulent acts involving memecoins may still be prosecuted by other regulators at the state or federal level. Therefore, investors should exercise caution and assess their own risks when participating in the memecoin market.