Why the SEC staff ruled out actions on meme coins

The latest: The U.S. Securities and Exchange Commission's Division of Corporate Finance put out a staff statement on Thursday that said, generally speaking, meme coins are not securities.

• The statement explains that, in general, meme coins look more like collectibles than something that falls under the SEC's purview.
• That is, at least when they are designed as described: tokens that represent an idea, whose value is driven by hype or enthusiasm, without other features familiar in something like the stock market.

What they're saying: The statement was issued as "part of an effort to provide some clarity about what is not in our jurisdiction," Peirce tells Axios.

• "That clarity, I think, is useful for people out there in the marketplace, so that they may know whether or not they're getting the protection of the securities laws. It's also useful for Congress, as Congress is thinking about what legislation should look like."
• What digital assets fall under SEC jurisdiction is a top priority for Congressional leaders.

The big picture: Peirce connected the staff statement to the SEC's recent decision to discontinue its nearly two-year old case against Coinbase, the country's largest crypto exchange.

• That, too, she said, was about using SEC resources judiciously. It's better, she said, for its policy division to craft its policy, rather than the way it has been operating.
• "With the Coinbase settlement, it enables us to stop using our enforcement division to try to write policy," she said. "It just doesn't make any sense."

Echoing Peirce's assessment, A&O Shearman partner Dario de Martino put out a blog post on the dismissal, noting a moment in which the courts had viewed the SEC's approach with skepticism, saying that the dismissal "underscores the challenges the agency faces in extending traditional securities regulations to digital assets through enforcement rather than rulemaking."

Not a "merit regulator"

The SEC's announcement comes as the air is rapidly coming out of the meme coin market. Traders are increasingly realizing that the odds were always against them.

• "There is this broader view that pops up periodically, which is, if anything terrible happens, people say, 'Well, where was the SEC?'" Peirce said.
• "We're not a merit regulator, and so the fact that a product goes live in our markets does not mean that the SEC has signed off and said, 'Hey, this is a great product,'" she noted. "We're not your investment advisor."

Peirce has been clear in the past and was clear again our interview that the flip side of the freedom to invest in just about whatever people want to invest in is the responsibility to accept losing money when a bet turns out to be ill advised.

Friction point: Inevitably, the SEC will be criticized for giving a pass to meme coins shortly after the new president and his wife released their own.

• "It makes sense for us to speak while people are focused on it," she said.
• It frustrated her that the prior SEC would see a phenomenon but not even say whether or not it felt the development was something it had jurisdiction over.
• "It doesn't really help to come in and say something too late," she said. "We're trying to say something while it's relevant."

What we're watching: Inevitably, some entrepreneur is going to come out with a complicated token that makes all kinds of promises, but tries to mask all that by calling it a meme coin — as if that language will now put it within some sort of anti-regulatory carapace.

• That probably won't work. "People could call something a 'meme coin,' but there could be some facts and circumstances there that make it very much a security," Peirce noted.

The latest: Peirce announced the staff for the crypto task force today.