While crypto enthusiasts celebrate the SEC‘s new guidance on meme coins, Commissioner Caroline Crenshaw isn’t having any of it. In a scathing critique, she called the guidance a dangerous loophole that could leave investors vulnerable to market manipulation.
The commissioner didn’t mince words. She accused the SEC of flat-out failing investors and questioned the Division of Corporation Finance’s approach. Her main beef? The guidance completely ignores the Howey test—you know, that little thing that’s been the gold standard for determining securities for decades.
Here’s the kicker: nobody can even define what a “meme coin” is. The guidance offers some vague gesturing toward online trends and volatility, but nothing concrete. Great job, everyone. A regulatory framework based on vibes.
Regulation based on internet lulz and price swings. The SEC’s meme coin framework: undefined, uncertain, unserious.
Crenshaw pointed out the obvious—meme coins, like any financial product, exist to make money. Promoters typically keep a chunk of tokens for themselves and manipulate supply to impact demand. Pump-and-dumps and rug pulls? Not exactly rare in this space.
Many meme coins are sold with promises of exchange listings or grand visions of ecosystems and technological improvements. Some even throw in buzzwords like “AI” for good measure.
But the guidance conveniently glosses over these managerial efforts that create reasonable profit expectations. The extreme price volatility of meme coins makes them particularly risky for average investors, with some seeing returns exceeding 1,300% in early 2024 alone. She calls for a comprehensive reevaluation of policies that would better protect investors from meme coin risks. Instead of clarity, the new approach raises more questions than answers. It’s basically a broad statement of principles that offers zero predictability for any specific coin’s regulatory status.
Crypto bros might be popping champagne, but Crenshaw sees a massive loophole for firms to dodge oversight. What’s needed, according to the commissioner, is an individualized inquiry that examines a sufficient number of self-proclaimed meme coins.
Not all are securities, but some definitely are. The focus should be on substance, not labels. This story, first reported by Bitcoin News Japan, highlights the growing tension between innovation and regulation in crypto markets. For now, investor protection takes a backseat while the SEC experiments with its new approach. What could possibly go wrong?
