Donald Trump’s recent foray into the world of cryptocurrency with the launch of his meme coin, TRUMP, has raised questions on its legality, sparking widespread debate. A comprehensive evaluation by Anonwassielawyer (@wassielawyer), a outstanding crypto and finance attorney, has make clear the problem, explaining why Trump’s launch, while unconventional, adheres to existing US securities laws.

Memecoins: Has Trump Used A Loophole In Securities Law?

Anonwassielawyer begins with a provocative summary: “Trump launched a memecoin that ran to over $70 billion from the US of A. Is crime legal now?” Based on his evaluation, the legal foundation for such launches has at all times existed, rooted in the excellence between securities and non-securities in US law. Memecoins, which lack inherent utility or revenue-sharing mechanisms, generally don’t meet the factors of an “investment contract” as outlined within the Howey Test.

For a token to be considered a security, it must meet specific criteria, including an investment of cash in a standard enterprise with an affordable expectation of profits derived from the efforts of others. Within the case of memecoins like TRUMP, these elements are conspicuously absent. The evaluation breaks this down with an example: if a token is sold with the promise that proceeds will fund a project expected to generate profits shared with investors, the token could be considered a security.

Nonetheless, if a token is sold purely as a speculative asset, with no underlying project or economic value, it falls outside this classification. TRUMP clearly belongs within the latter category. As Anonwassielawyer explains, “If I asked you to purchase a memecoin, we aren’t expecting the proceeds to go towards any project. It simply goes to the vendor who sells it because he thinks the value will go down. You might be simply buying it because you’re thinking that there’s a next marginal buyer who will take it from you at a better price. There is no such thing as a investment contract. There is no such thing as a underlying value. It’s pure speculation on attention. Thus—not a security.”

While the legal status of memecoins is comparatively straightforward, the broader implications for the crypto industry are more complex. Projects designed to create real value often face significantly higher regulatory hurdles. Tokens that accrue revenue, offer governance rights, or otherwise resemble traditional financial instruments are way more more likely to fall throughout the purview of securities law. This reality has led to growing frustration throughout the industry, particularly regarding the enforcement policies of regulators like SEC Chair Gary Gensler. As Anonwassielawyer notes, “A number of the hatred towards Gary Gensler isn’t because he enforced securities laws; it’s because he claimed every little thing was a security although they could not have been.”

The contrasting approaches taken with TRUMP and Trump’s other crypto initiative, World Liberty Finance (WLFI), illustrate this regulatory divide. While TRUMP operates as a speculative memecoin, WLFI adheres to a strict compliance framework designed to satisfy US securities laws. The WLFI token, as an example, is explicitly structured to be non-transferable for no less than 12 months, a safeguard to make sure compliance with Regulation D and Regulation S. These regulations govern sales to US accredited investors and non-US individuals, respectively.

The terms of WLFI explicitly state, “If transferability of WLFI is sought to be unlocked in the long run through protocol governance procedures, such unlock would only be permitted if determined to not contravene applicable law.”

One other layer of complexity involves using offshore structures, often misunderstood as tools for regulatory evasion. Anonwassielawyer clarifies that these entities serve legitimate purposes, primarily governance and tax optimization. Securities laws are territorial, meaning that establishing in offshore jurisdictions just like the Cayman Islands doesn’t exempt projects from compliance if their tokens are sold to US individuals. Nonetheless, offshore structures can provide tax benefits, particularly by deferring taxable events related to token generation and disposal until the assets are onshored.

For the crypto industry, the teachings from Trump’s initiatives are clear but sobering. Memecoins may represent the bottom common denominator of the market, but their simplicity shields them from regulatory scrutiny. Meanwhile, projects striving to deliver real utility must navigate an increasingly complex and inconsistent regulatory environment. Anonwassielawyer emphasizes this point, advising caution and compliance: “Memecoins are very cool but no fraud please. Securities evaluation ought to be sensible but is usually a bit more relaxed. We still need to watch out when selling tokens with security-like features and follow the same old frameworks for such.”

At press time, TRUMP traded at $39.26.

Featured image created with DALL.E, chart from TradingView.com