On Friday, January 17, 2024, President Donald J. Trump announced the launch of the $TRUMP memecoin, which was organized and sold by CIC Digital, an affiliate of the Trump Organization. Within 60 hours, $TRUMP reportedly reached a fully diluted valuation (FDV) of $70 billion, placing it among the top 15 cryptocurrencies by market cap. This rapid ascent sparked debate across the crypto ecosystem—some have framed $TRUMP as a novel form of political expression, while others view it as a potential unregistered securities offering or raised other potential consumer protection issues. 

What Is a ‘Memecoin’? 

“Memecoin” is not a legally defined term, but generally “memecoin” refers to a token that: 

• Has no current or promised governance, protocol, or utility functions; 
• Is held primarily for “entertainment” or symbolic value, rather than any explicit or promised functional utility; and 
• May have an active community or individual promoting it. 

In many cases, memecoins are largely held by public participants rather than the core team that developed the token. 

Applying Existing Securities Law 

The rapid rise of $TRUMP has led some observers to express concern that federal securities oversight can be circumvented if a token is affiliated with a high-profile figure, such as President Trump, while some industry participants have pointed to $TRUMP as a signal that the rules applicable to digital asset sales no longer apply in the new administration. We will discuss another possibility: that $TRUMP has been a carefully designed attempt to align with well-established principles governing what constitutes an “investment contract,” as set forth in SEC v. W.J. Howey Co. (Howey). 

Congress has not yet enacted a law that expressly defines the circumstances under which a crypto asset may be covered by securities laws. The inquiry is instead governed by existing case law. Under Howey, a token offer or sale may be an “investment contract,” the residual statutory category for investments that do not fall under the list of per se securities such as corporate stock—and thus subject to the Securities Act of 1933—if all four elements are satisfied: 

1. An investment of money; 
2. In a common enterprise; 
3. With a reasonable expectation of profit; 
4. Derived solely or predominantly from the efforts of others. 

Below, we briefly assess how the initial offer of $TRUMP fares under each prong. This assessment is provided for informational purposes only and is not an attempt to predict how any court or the Securities and Exchange Commission (SEC) would assess this question. Rather, we present some plausible arguments the team behind $TRUMP might make in defense to a claim under federal securities laws. We limit our analysis to the federal securities laws as applicable to private persons. We do not consider the applicability of other potentially relevant sources of law (e.g., state “blue sky” or money transmission laws) or special concerns arising from $TRUMP’s association with the office of the President of the United States. Further, this assessment considers only the initial offer of $TRUMP by CIC Digital. The analysis is based only on publicly available communications and information. To the extent additional information becomes available, including any information that reveals plans by President Trump or his team to provide utility for $TRUMP, this analysis may change.  

1. Investment of Money: Likely met 

The first Howey element requires that purchasers invest “tangible and definable consideration” in a way that exposes them to financial risk.¹ Here, buyers paid fiat or cryptocurrency to obtain $TRUMP, whether directly from CIC Digital’s official website, GetTrumpMemes.com, or on various exchanges. This element is likely satisfied. 

2. Common Enterprise: Likely met 

Federal courts look for either “horizontal commonality” or “vertical commonality” to satisfy the “common enterprise” element.² Horizontal commonality is established when investors’ assets are pooled, and the fortunes of each investor are tied to the fortunes of other investors as well as the success of the overall enterprise. Vertical commonality is present when the fortunes of investors are tied to the fortunes of the promoter (but this test is accepted by fewer courts). 

Whether a “common enterprise” is found generally depends on how much of a token that participants in a token launch hold.³ According to GetTrumpMemes.com, there are 200 million $TRUMP memecoins currently in circulation, with an additional 800 million becoming available for sale over the next three years.⁴ The tokens that will be made available for sale later are likely held by the Trump Organization or an affiliate, suggesting that the Trump Organization holds a significant number of $TRUMP tokens upon launch—and tying token holders’ fortunes (if any) to the same enterprise under the prevailing horizontal commonality test.  

3. Reasonable Expectation of Profit: Possibly not met  

For the third Howey element, courts focus on whether a reasonable purchaser expects returns based primarily on the promoters’ efforts and representations. Courts conduct an objective inquiry of the promoters’ representations that does not examine a purchaser’s subjective motivations.⁵ A transaction does not fall within the scope of the securities laws when a reasonable purchaser is motivated to purchase by a consumptive (non-investment) intent.⁶  

Although, as evident from social media, many $TRUMP buyers harbor speculative hopes of investment gain, this would not suffice under an objective test that looks to the promises and statements of the offeror. Based on promotional statements by Trump and his affiliates, a court could conclude that the reasonable purchaser of $TRUMP at launch purchased for consumptive, rather than investment, purposes.  

• Promotional Statements: President Trump’s initial promotion on social media framed $TRUMP as a celebration of his community, urging supporters to “Have Fun!” and join the “very special Trump Community.”⁷ This statement is not a promise of financial returns. 
• Expressive Purpose: The official website’s terms of service refer to $TRUMP as “expressions of support” for certain ideals, and explicitly disclaims any intent to offer or sell an investment.⁸ 
• No Utility: $TRUMP has no current or promised governance, protocol-related function, or other utility. Instead, it appears intended to occupy a purely symbolic niche akin to a digital MAGA hat or bumper sticker. 

From these facts, it could be concluded that the primary aim is entertainment or expressive participation, not profit. That said, the SEC or a court could view the matter differently if a material portion of $TRUMP buyers were induced by promises of future price appreciation. Indeed, given the market understanding and discussion of tokens, a court could conceivably find that a reasonable purchaser implicitly understood $TRUMP as an investment notwithstanding President Trump’s efforts to avoid explicit promises.  

4. Derived from the Efforts of Others: Possibly not met 

The fourth prong concerns whether any profits depend predominantly on the launch team’s entrepreneurial or managerial efforts. In assessing this prong, courts scrutinize whether the promoter actively developed the token’s ecosystem or used deflationary strategies to raise its price.⁹ Here, there is no clear indication that Trump or CIC Digital is undertaking ongoing efforts to enhance $TRUMP’s utility or market value. 

• No Roadmap or Ecosystem: There is no public development plan for $TRUMP beyond issuing the tokens. 
• Entertainment vs. Development: Public statements from Trump’s tweets and the official website emphasize fun and symbolic display, as previously mentioned, rather than building a robust project infrastructure. 

Consequently, any speculative increase in $TRUMP prices would appear to derive from market forces such as media attention, traders’ hype, and other memetic factors, rather than from a significant managerial or entrepreneurial effort by the Trump team.  

However, some courts have also found the “efforts of others” element met where promoters are economically incentivized to continue to develop use cases for the token because they also hold the token.¹⁰ The Trump team’s decision to retain a significant portion of the supply may lead a court or the SEC to find this element met. Nevertheless, because the Howey test requires all four elements to be met, if no reasonable expectation of profit is found, $TRUMP would not be considered a security.  

Key Takeaways 

• The Public Positioning of $TRUMP Is “Be Expressive, Not Investment-Oriented.” From public statements to website disclaimers, $TRUMP is presented as a “digital MAGA hat,” a commemorative inaugural coin, or form of political expression, rather than a structured fundraising vehicle or investment with expectations of ROI. These characterizations make it less likely all four Howey elements will be met and as such, $TRUMP may not be considered a security under current law. 
• No Promises of Profit. President Trump and affiliated parties have not enticed purchasers with a direct statement, guarantee, or prediction that $TRUMP will appreciate in value. They also have taken no actions of the type traditionally understood to cause an appreciation in value, which also reduces the likelihood that $TRUMP would satisfy the “reasonable expectation of profit” prong under Howey. 
• Arguably Not a Security Under Existing Case Law. A court could conclude that $TRUMP fails to meet all elements of the Howey test and is not a security under current standards.  

While we cannot discount the possibility that the SEC or private plaintiffs will challenge $TRUMP under Howey, particularly if future facts emerge suggesting a different reality than is currently reflected in publicly available information, the $TRUMP launch appears to have been conducted in a manner consistent with a good faith interpretation of the federal securities laws. Notwithstanding conjecture that $TRUMP’s launch signals a change in the way securities laws apply to crypto, we assess that a court applying traditional Howey principles to $TRUMP may well determine that it is not an investment contract subject to securities laws. 

Still, the application of securities laws to crypto assets is in a state of flux, and many anticipate Congressional and regulatory action in the upcoming term. But under the current formulation of the law, there are several arguments that so-called “pure memecoins” like $TRUMP are not subject to federal securities laws.  

¹ Int’l Bhd. of Teamsters v. Daniel, 439 U.S. 551, 560 (1979). 

² See Revak v. SEC Realty Corp., 18 F.3d 81, 87-88 (2d Cir. 1994).  

³ For example, the Telegram court found strict vertical commonality where, “[a]fter launch, Telegram’s most valuable asset would be the TON Reserve, consisting of 28% of all Grams. . . . thereby linking the company’s financial fortunes to the price of Grams and the success of the TON Blockchain.” SEC v. Telegram Grp. Inc., 448 F. Supp. 3d 352, 370 (S.D.N.Y. 2020) (Telegram).  

⁴ Gettrumpmemes.com, (accessed Jan. 20, 2025), https://gettrumpmemes.com/#tokenomicsMemes. (“There are 200 million $TRUMP available on day one and will grow to a total of 1 billion $TRUMP over three years. Each group’s allocation are released on their own schedule over 3 years.”).  

⁵ E.g., SEC v. Binance Holdings Ltd, 2024 WL 3225974 at *14 (D.D.C. June 28, 2024) (Binance) (“The inquiry is an objective one focusing on the promises and offers made to investors; it is not a search for the precise motivation of each individual participant.” (quoting Telegram, 448 F. Supp. 3d at 371)); SEC v. Ripple, 682 F. Supp. 3d 308, 329 (S.D.N.Y. July 13, 2023) (“Of course, some Programmatic Buyers may have purchased XRP with the expectation of profits to be derived from Ripple’s efforts. However, ‘[t]he inquiry is an objective one focusing on the promises and offers made to investors; it is not a search for the precise motivation of each individual participant.’” (quoting Telegram, 448 F. Supp. 3d at 371)).

⁶ Telegram, 448 F. Supp. 3d at 37; Binance, 2024 WL 3225974, at *16 (finding “significant” the whitepaper’s inclusion of promises that users could pay for platform fees and receive discounts for transacting through the platform); but see SEC v. LBRY, Inc., 639 F. Supp. 3d 211, 220 (D.N.H. 2022) (“Nothing in the case law suggests that a token with both consumptive and speculative uses cannot be sold as an investment contract.”).   

⁷ Donald J. Trump @realDonaldTrump, X (Jan. 17, 2025), https://x.com/realDonaldTrump/status/1880446012168249386. 

⁸ Gettrumpmemes.com, (accessed Jan. 20, 2025), http://gettrumpmemes.com/terms.  

⁹ In analyzing this prong, the Telegram court adopted what is elsewhere known as the “Bahamas Test”: “The Court finds that if, . . . immediately after launch, Telegram and its team decamped to the British Virgin Islands, where Telegram is incorporated, and ceased all further efforts to support the TON Blockchain, the TON Blockchain and Grams would exist in some form but would likely lack the mass adoption, vibrancy, and utility that would enable the Initial Purchasers to earn their expected huge profits.” 448 F. Supp. 3d at 375.  

¹⁰ LBRY, 639 F. Supp. 3d at 220 (“[B]y retaining hundreds of millions of LBC for itself, LBRY also signaled that it was motivated to work tirelessly to improve the value of its blockchain for itself and any LBC purchasers. This structure, which any reasonable purchaser would understand, would lead purchasers of LBC to expect that they too would profit from their holdings of LBC as a result of LBRY’s assiduous efforts.”).