Bypassing US securities laws
First and foremost, let’s clear something up — the uselessness of memecoins is itself a particular use case. They get around the US securities regulations that squashed the ICO boom. In addition, memecoins specifically aren’t captured by the Australian Securities and Investment Commission’s proposed expanded crypto powers. How could they be? They don’t do anything.
“It’s actually safer to release a memecoin today with no use case, than it is to launch a token that’s useful,” wrote a16z Crypto managing partner Chris Dixon.
US securities law focuses on the Howey test to determine what constitutes an investment contract. Memecoins, which don’t represent anything more than an idea and do not promise any returns derived from the efforts of others, are not captured by the test. This regulatory friendliness has seen memecoins propagate like wildfires during the Great War on Crypto (2022–2024).
Memecoins were the biggest crypto narrative of 2024, accounting for 14.3% of the market share on CoinGecko in Q2. Will they fade out now that Donald Trump is the incoming president and presumptive new SEC boss Paul Atkins may allow “real” projects to raise money again via something like Hester Peirce’s 2020 “safe harbor” proposal?