The SEC’s newly formed cryptocurrency task force will devote its first in a series of roundtables to divining the security status of digital assets. The panel announced the March 21, 2025, hearing shortly after commission staff declared so-called meme coins to be beyond the reach of securities laws.
The roundtable, entitled “How We Got Here and How We Get Out – Defining Security Status,” comes amid a sharp reversal by the commission under acting Chairman Mark Uyeda from his predecessor’s aggressive crypto market enforcement.
Uyeda’s fellow Republican commissioner, Hester Peirce, is leading the crypto task force. Peirce has long stood in opposition to the commission’s inclusion of a range of crypto tokens and platforms in its enforcement purview.
She and Uyeda were active dissenters on crypto enforcement actions during the tenure of former Chair Gary Gensler, which ended in January. Now, she is positioned to steer the SEC’s crypto policy at a time when the commission is already abandoning a raft of Gensler-era cases.
Gensler’s SEC broadly applied the so-called Howey Test established in the Supreme Court’s 1946 decision in SEC v. W.J. Howey Co. to label cryptos as investment contracts, and therefore securities within the scope of its enforcement.
Under the securities laws, investment contracts are listed a type of security alongside stocks and bonds. The designation has historically been used to sweep in transactions that don’t fit cleanly within those other categories.
Under Howey, an investment contract must involve an investment of money in a common enterprise with the expectation of profits from the efforts of a third party.
In a February 27 statement on meme coins, the Division of Corporation Finance (CorpFin) instead likened the cryptos to collectibles.
It described the assets as “inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading.”
CorpFin concluded that “the offer and sale of meme coins does not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”
Jason Mendro, co-chair of the securities litigation practice at Gibson, Dunn & Crutcher LLP, said that the statement provides needed clarity on a social and cultural trend.
He said that the staff statement includes a commonsense clarification about investment contacts as a category of securities.
“Investment contracts arise when one party pools and manages the investments of others to generate returns. Investment contracts don’t arise when people simply buy digital assets for entertainment, or even for speculation,” he said. “Meme coins are a cultural phenomenon. People buy them for fun. They don’t buy them with the expectation that they’re contracting with anyone to earn profits for them.”
Thus, he added that “the division’s statement is correct and a welcome step toward clarifying the SEC’s position on digital assets.”
But Commissioner Caroline Crenshaw, the lone remaining Democrat on the SEC, in a response criticized that staff statement for advancing “an incomplete, unsupported view of the law to suggest that an entire product category is outside the bounds of SEC jurisdiction.” Howey, she argued, requires an analysis of the fact and circumstances of the economic realities of an offer or sale, and the inquiry required under the test “simply cannot be reconciled with the staff’s conclusion that offers and sales of a vaguely defined category, consisting of hundreds of unique crypto assets, are generally not securities.”
“This guidance is not a reasoned interpretation of existing law,” Crenshaw said. “It raises more questions than it answers about what a meme coin is and whether that is a definable or useful categorization for purposes of the existing securities laws. It boils down to a broad statement of general principles that provide little clarity or predictability as to any given coin.”
Earlier this week, the SEC announced staffers for the crypto task force. They include Richard Gabbert as chief of staff; Michael Selig as chief counsel; Taylor Asher as chief policy advisor; and Sumeera Younis as chief of operations.
The upcoming roundtable will be moderated by Troy Paredes of Paredes Strategies LLC. Panelists are:
- Collins Belton, Brookwood P.C.
- Sarah Brennan, Delphi Ventures
- Chris Brummer, Georgetown Law
- Lewis Cohen, Cahill Gordon & Reindel LLP
- Coy Garrison, Steptoe LLP
- Teresa Goody Guillen, Baker & Hostetler LLP
- Miles Jennings, a16z
- Lee Reiners, Duke Financial Economic Center and Duke Law
- Benjamin Schiffrin, Better Markets
- Rodrigo Seria , Cooley LLP
- John Reed Stark, John Reed Stark Consulting LLC
The event at the SEC’s Washington headquarters is open to the public and will be streamed live on SEC.gov.
This article originally appeared in the March 7, 2025, edition of Accounting & Compliance Alert, available on Checkpoint.
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