Trump’s Meme Coin: Loophole in Securities Law?

An Inconvenient Truth: Is Trump’s Cryptocurrency Strategy Shrouded in Irony?

“If I asked you to buy a memecoin, we aren’t expecting the proceeds to go towards any project. It simply goes to the seller who sells it because he thinks the price will go down. You are simply buying it because you think there’s a next marginal buyer who will take it from you at a higher price. There is no investment contract. There is no underlying value. It’s pure speculation on attention. Thus—not a security.”

Legality a cinch? Not quite. That’s because beyond this relatively black-and-white distinction lies a more complex landscape of regulation and enforcement. While the legal standing of memecoins is relatively clear cut, this situation highlights the frustration and dissatisfaction with how some regulatory enforcers like SEC Chair Gary Gensler have chosen to interpret and apply securities laws. As Anonwassielawyer pointed out, “A lot of the hatred towards Gary Gensler isn’t because he enforced securities laws; it’s because he claimed everything was a security even though they may not have been.”

The regulatory story doesn’t end there, capiche? Let’s consider Trump’s other crypto initiative, World Liberty Finance (WLFI). With this project, Trump has adopted stricter compliance measures to adhere to U.S. securities laws. WLFI is designed to satisfy Regulation D and Regulation S – for those of you not in the know, these gov regulations govern the sale to U.S. accredited investors and non-US persons, respectively. For the record, “If transferability of WLFI is sought to be unlocked in the future through protocol governance procedures, such unlock would only be permitted if determined not to contravene applicable law.”}

while memecoins may represent the simplest, lowest-common-denominator category of market evolution, they come with the luxury of escaped scrutiny. Projects on the other hand, aim to bring actual utility and complexity and must navigate an ever-evolving, highly inconsistent regulatory landscape. And yes, Anonwassielawyer throws light into it all: “Memecoins are very cool but no fraud, please. Securities analysis should be sensible, but can be a bit more relaxed. But we still have to be careful when selling tokens with security-like features and follow the usual frameworks for such.”