In 2024, meme coins became one of the most traded and discussed aspects of the cryptocurrency sector. Critics argue they give the industry a bad image. Others enjoy the gambling thrills and, at times, mind-boggling returns. If and when the U.S. government steps in to regulate this controversial industry, what will the outcome look like?

When the crypto sector earned the moniker “Wild West,” meme coins were to blame. Thousands of new tokens are created daily via platforms like Pump.Fun. Investors — a mix of retail traders, crypto insiders, influencers, and sometimes institutional players — all hope to get an unlikely jackpot.

Meme coin opponents also blame the space for being a distraction from the higher-quality projects across the crypto sector. For example, the pre-inauguration launch of the Official Trump (TRUMP) token exemplifies this trend.

“The crypto sector put someone in power whose first act is to emphasize and take advantage of the opportunity for grift within crypto,” Angela Walch, a crypto researcher, told Time. “And that’s just embarrassing.”

The meshing of meme coins and politics isn’t exclusive to the U.S. In Argentina, President Javier Milei promoted the Libra token, which rose to $4.50 before plummeting in value.

As Lyn Alden, the founder of Lyn Alden Investment Strategy, put it in January: “The same bearish [traditional finance] accounts that dismissed bitcoin due to mostly unrelated ICOs, DeFi, and NFTs, will now dismiss it due to meme coins.”

Democrats speak up

Feb. 27 was marked with two important events in the meme coins space. First, the U.S. Securities and Exchange Commission (SEC) said that the securities regulations will not adhere to meme coins.

Second, the MEME Act proposal from Democrats aims to block American officials from launching their own meme coins, as Trump did before the inauguration. Are these events conflicting, and are meme coins so problematic? Let’s break it down.

The Official Trump token launch was controversial. Some saw it as a bold signal from the then-president-elect that he was ready to embrace crypto. However, many in the crypto community booed the move as a blatant “grift” considering the price dropped in value within just a few days.

The New York Times names $2 billion collectively lost by over 800,000 people who invested in the Trump coin.

Another important point of criticism was that the Official Trump token could line Trump’s pockets. Foreign political actors may bribe him effortlessly by buying TRUMP tokens in bulk (Trump signed an executive order freezing enforcement of the Foreign Corrupt Practices Act).

Various Democratic representatives are speaking up. California Democrat Rep. Sam Liccardo introduced the bill aimed to stop U.S. officials from creating tokens. Liccardo stressed that Trump’s meme coin “raises concerns about transparency, insider trading, and improper foreign influence.”

Commissioner Mark Uyeda will take over running the U.S. Securities and Exchange Commission as the agency awaits the Senate confirmation on President Donald Trump’s pick for the permanent role, Paul Atkins.

Acting Chair Uyeda, who has been a clear supporter of relaxing the regulator’s pursuit of the crypto industry alongside fellow Republican Commissioner Hester Peirce, once served Atkins as a counsel at the agency. Atkins, who was formally nominated hours after Trump was sworn in on Monday, is a former commissioner who has developed ties to crypto in his Washington consulting business.

Uyeda has expressed his own strong views about the SEC’s role regarding digital assets. He’s routinely criticized the commission’s majority on moves to rein in crypto, such as the so-called Staff Accounting Bulletin 121 (SAB 121) that made it difficult for banks to maintain digital assets clients. He’s said he favors getting rid of it — a move that’s now within his authority.

The change of chairs hasn’t yet been officially announced at the agency, though the remaining commissioners — including Hester Peirce and Caroline Crenshaw — issued a joint statement on former Chair Gary Gensler’s exit.

“Although as Commissioners we approached policy issues from different perspectives, there was always dignity in our differences,” the commissioners said. “Chair Gensler has been committed to bipartisan engagement and a respectful exchange of ideas, which has helped facilitate our service to the American public.”

Gensler had previously announced he would resign at noon on Jan. 20 — the same time Trump was sworn into office.

Gensler had become the chief government antagonist for the crypto industry in recent years. He pursued enforcement cases, pushed controversial crypto accounting policy, favored tough rule proposals that threatened the industry’s business model and blocked — for a time — the establishment of spot crypto exchange traded funds (ETFs). On the latter point, a court ruling against the agency forced Gensler’s hand, and he eventually voted with the commission’s Republicans to clear the path for ETFs.

His agency argued in court that existing law was sufficient to categorize and regulate crypto assets. That stance was favored by some federal judges and opposed by others, and the central questions are still working its way through the courts.

Uyeda’s SEC, for however long his tenure lasts, is absent virtually all senior legal officials that worked under Gensler, including in the enforcement division and the general counsel’s office.

The acting chairman has the full authority of the office, but people in that position sometimes choose to defer to the incoming chair and wait on big decisions.

At the SEC’s sister agency, the Commodity Futures Trading Commission, Republican Commissioner Caroline Pham has been lifted to the acting chair role there, though Trump hasn’t yet named a permanent successor to the outgoing Democrat chair, Rostin Behnam.

Unlike the CFTC, which currently has a 2-2 split between the parties, the SEC’s Republicans outnumber the lone Democrat 2-1.