WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy for Better Markets, issued the following statement in connection with Better Markets’ new Fact Sheet, “Meme Coins are Like Penny Stocks. We Must Regulate Them That Way.”:
“This year marks the 35th anniversary of the Penny Stock Reform Act of 1990. Congress enacted the Penny Stock Reform Act to protect retail investors against abusive and fraudulent sales practices prevalent in the penny stock market such as pump-and-dump schemes. We need a similar legislative and regulatory response for meme coins.
“In August, Kanye West launched a meme coin that, after initially surging in value, quickly plummeted. 51,000 traders lost $74 million as a result. Unfortunately, this fact pattern, known as a rug pull in the world of crypto, is all too common when it comes to meme coins.
“This fact pattern also bears a striking similarity to penny stock pump-and-dumps. Yet despite the similarities, the regulatory treatment of meme coins and penny stocks couldn’t be more different. The SEC takes the view that meme coins are not securities but collectibles. Conversely, the SEC has long regulated penny stocks. In doing so, it has been aided by legislation designed to specifically address misconduct in the penny stock space.
“Our new fact sheet discusses the similarities between meme coins and penny stocks, the way that the SEC’s treatment of meme coins as collectibles endangers investors, and the cautionary tale that penny stocks offer if we fail to adequately regulate meme coins.”
The fact sheet is available online here.
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
