Written by: Aaron Krowne, Esq.
The SEC made news on February 27, 2025, by releasing a favorable statement regarding memecoin issuances. Close SEC-watchers in the crypto world already expected that the new SEC leadership (as part of the dramatic political change in Executive Branch administration) was likely to have a more favorable stance towards memecoins – however, this was the first official word from the agency to that effect. The SEC stated:
A “meme coin” is a type of crypto asset 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… Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. In this regard, meme coins are akin to collectibles. Meme coins also typically have limited or no use or functionality. Given the speculative nature of meme coins, they tend to experience significant market price volatility, and often are accompanied by statements regarding their risks and lack of utility, other than for entertainment or other non-functional purposes.
Nevertheless, beyond serving as a general representation of more welcoming sentiment and providing some broad contours of (presumably-not-to-be-regulated) memecoins out there in the market, the SEC statement does not provide many specifics. More frustrating for would-be memecoin-issuers, it certainly does not represent or establish “a safe harbor” – a set of specific requirements a project can meet to qualify for a regulatory exemption or exclusion (examples of existing, popular SEC safe harbors are the Regulation S exclusion for non-U.S. issuances of securities, and the Regulation D, Rule 506(c) exemption for U.S. accredited investor sales of securities). Finally, the SEC explicitly reserves the right to take regulatory action against fraud and misrepresentation in and in relation to the issuance of memecoins – in essence, a kind of warning. This leaves a gap between the SEC’s overall sentiment, and any practical notion of what memecoin issuers can and can’t do.
To fill this gap with more practical details, as part of our mainstay crypto legal work, we have reviewed prominent memecoin legal cases and have distilled some of the key take-aways into a set of informal (and not intended to be comprehensive) “do’s” and “don’ts” for memecoin issuance, presented below.
Establishing Legitimate Foundations
When issuing a memecoin, prioritize genuine utility in your token design – or be clear about there being no utility. This means clearly articulating what function your token serves in your ecosystem, or explicitly stating that it has no utility beyond being a collectible or “entertainment” token. Cases like those against Pump.fun, SafeMoon, and Saitama have demonstrated this by attracting charges for allegedly not focusing on utility rather than speculative trading.
Decentralization of control is pivotal in reducing liability. By distributing governance over tokenomics, liquidity pools, and pricing mechanisms across a broad community of stakeholders, you help reduce the risk of being classified as a security offering (cases such as the one against Pump.fun teach this, in the negative). This decentralization should be genuine and verifiable, not merely claimed in marketing materials.
Transparent Communication
Clear risk disclosure is non-negotiable. Projects like LGBCoin, Pump.fun, SafeMoon, and Saitama have faced legal challenges when their marketing materials allegedly contained misleading information or omitted significant risks. Your communications should explicitly outline all potential risks associated with purchasing and holding your token.
Establish clear and publicly available terms of service for all token purchasers, as LGBCoin allegedly failed to do adequately. These terms should outline the relationship between token holders and the project, establishing clear expectations and limitations.
Touting and Claims of Profits
Avoid making profit-based claims in any marketing materials, and certainly do not promote them as “investments” or “investment opportunities” (implicitly, or by any other language). Projects including $HAWK, Pepe, LGBCoin, Pump.fun, SafeMoon, and Saitama have encountered legal issues when their marketing allegedly implied or promised financial returns. Focus instead on community, entertainment value, utility/technology, or other non-financial benefits.
All influencer promotions must comply with FTC disclosure rules. SEC disclosure rules can apply as well, conditioned on whether an issued instrument is deemed a security. Projects like $HAWK, LGBCoin, and Pump.fun faced legal challenges when their influencer marketing allegedly lacked proper disclosures about compensation or relationships. Ensure that any promotional content clearly indicates when it is paid or sponsored.
Disclaimers and General Regulatory Compliance
Include disclaimers in all marketing efforts, particularly when using influencers. Saitama’s case in particular highlights the importance of ensuring that all promotional materials contain appropriate disclaimers about risk and the nature of the token.
Implement robust KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance measures. Projects like Pump.fun, SafeMoon, and Saitama faced issues when they allegedly failed to prevent sales to restricted jurisdictions or didn’t adequately screen participants. These compliance measures are essential for preventing unintentional regulatory violations.
Tokenomics and Market-Making
Maintain complete transparency in tokenomics, insider holdings, and project governance. For example, when Saitama allegedly failed to disclose insider token allocations, it created significant legal exposure. Document and publish all token allocations, vesting schedules, and governance procedures.
Avoid direct market-making activities, token sales, and active solicitation of investors. Pump.fun’s legal issues demonstrate the risks of these practices. Instead, focus on building community interest organically and allowing market dynamics to develop naturally without direct intervention.
And for sure, avoid all pump-and-dump activities. Projects like LGBCoin, Pump.fun, and Saitama faced severe penalties for allegedly artificially inflating prices before insiders sold their holdings. Market manipulation tactics are illegal and can result in significant liability.
Additional Practices to Avoid
Do not misrepresent partnerships or affiliations. LGBCoin’s case demonstrates the serious consequences of suggesting endorsements or relationships with brands, organizations, or influencers that allegedly don’t actually exist or haven’t been formalized.
Never claim that token holders are “shareholders” or have financial stakes in the project. $HAWK’s case shows the risks of language that suggests a security-like relationship. Be precise in your terminology and avoid terms associated with regulated financial instruments.
Do not control liquidity pools while claiming they are secure or decentralized. SafeMoon’s allegedly-deceptive practices regarding liquidity management created substantial legal exposure. If you maintain control over liquidity, disclose this fact transparently.
Avoid misleading statements about token security features. SafeMoon’s alleged claims about “locked liquidity” were demonstrably false when funds remained accessible to developers, resulting in regulatory action.
Never use investor funds for personal expenses. SafeMoon’s alleged misappropriation of funds for luxury purchases led to serious legal claims. Maintain strict separation between project funds and personal finances.
Avoid exaggerated claims about future value. Saitama’s alleged social media hype created unrealistic expectations that could not be met, leading to regulatory scrutiny. Keep communications focused on facts rather than speculative predictions.
Do not hire third parties to artificially inflate trading volume or create the illusion of market demand. Saitama’s allegedly-deceptive market activities resulted in significant legal exposure. Allow genuine market interest to develop organically.
Never attempt to evade U.S. securities laws through offshore structures while failing to block U.S. purchasers. All the cited projects ($HAWK, Pepe, LGBCoin, Pump.fun, SafeMoon, Saitama) encountered serious legal consequences for attempting regulatory arbitrage without effective geographic restrictions.
Conclusion
While there still remains no specific SEC safe harbor for memecoin issuance, the agency has at least signaled an attitude of reasonable forbearance towards the sector. This suggests that, by carefully adhering to the above guidelines and working with competent legal counsel to fine-tune and implement their approach, memecoin projects can significantly reduce their regulatory and legal risks while fostering vibrant communities around their tokens.
