09-30-2025 
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Exploring the whats and whys of ‘memecoins’: how this contentious sub-category of digital assets started as a joke and became a $80 billion industry, why people are drawn to memecoins and why they have a questionable reputation, where the asset class stands in U.S. law, and, ultimately, is there such a thing as a ‘good’ memecoin?
- The problem with hype
- Hype vs substance
- Memecoin’s susceptibility to manipulation
- Are memecoins securities?
- CFTC’s memecoin endeavor
- CLARITY Act for digital assets
- One person’s right is another’s wrong
“People will go for anything they don’t understand if it’s got enough hype. They want to be hip, want always to be in on the new thing so they don’t look unhip.”― Miles Davis
Here, legendary jazz virtuoso Miles Davis describes how a thing without merit or substance can become popular and successful beyond reason―a phenomenon with which digital asset-space observers will be lamentably all too familiar.
Of course, Davis was speaking before the age of blockchain technology. His target was the popularity of fellow jazz performers Ornette and Don Cherry, whose “hype,” he felt, was papering over their lack of talent.
If Davis is correct, as well as being a damning appraisal of the Cherry’s talents from a legend of the genre, he’s also served up a perfect example of the problem with hype: it is often artificial, based on nothing more than enough people’s shared FOMO blinding them to the true substance of a thing.
The digital asset space has its own Don Cherry: a whole sub-sector based on being the new thing that the terminally online and crypto-bro-sphere are constantly scrambling to invest in… so they don’t look unhip; a thing that many people don’t understand but has created an industry worth upwards of $82 billion, not to mention numerous lost savings and lawsuits: ‘memecoins.’
Memecoins are a controversial sub-category of digital assets and blockchain technology based on internet memes and trends. Other than being created around fun’ memes,’ jokes, and fads, the defining feature of memecoin tokens is that they generally lack any utility beyond being a volatile store of value and, to a lesser extent, a tradeable asset.
Dr. Merav Ozair, leading expert on emerging technologies and responsible innovation and founder of Emerging Technologies Mastery, Inc., explains that this is distinct from the likes of BTC and Ethereum, which can be considered volatile stores of value but are also blockchains with some utility, particularly Ethereum.
Memecoins, explains Dr. Ozair, do not have this utility.
“The first one created, Dogecoin, was created as a joke, then others started to create all kinds of coins with all kinds of creatures, such as Shiba Inu,” says Ozair. “Basically, you can think about them as collectibles; they don’t have a function, a purpose, and are not treated as investments.”
Without the ability to offer any greater substance or utility, memecoins instead thrive on the desire to be included in the joke and often sell a sense of community to attract users. Generating enough hype, in the form of excitement and enthusiasm, is fundamental in getting these projects off the ground.
Unfortunately, the lie at the heart of this derivative form of digital asset is that it almost always promises—explicitly or implicitly—more than it can deliver, because substance-less hype is inherently temporary and unsustainable.
This is perhaps best summed up by academic David Krause, Emeritus Professor of the Finance Department at Marquette University in the U.S., whose 2025 paper on the ‘unfair meme coin ecosystem’ described the sector in the following unflattering terms:
“Meme coin markets have evolved into high-risk speculative environments driven by hype cycles, influencer endorsements, and algorithmic manipulation… these assets exploit cognitive biases, regulatory loopholes, and decentralized exchange anonymity to generate artificial demand and facilitate market manipulation.”
Hype and substance
“Anybody can play. The note is only 20 percent. The attitude of the motherfucker who plays it is 80 percent.”― Miles Davis
Many projects across sectors and industries, from entertainment to finance, find success through hype, whether artificially created or naturally developing, and then go on to sustained and greater success.
Music is the obvious example: Miles Davis, the Beatles, Bob Dylan, Elvis Presley—all artists with sudden and astronomical rises to fame and popularity, fueled by hype. The Beatles, for example, went from a residency at the Star-Club in Hamburg, Germany, playing to a max crowd of 2000 people a night at the end of 1962, to barely a year later starring on ‘Sunday Night at the London Palladium’ to an audience of 15 million television viewers, kicking off ‘Beatlemania.’
Marketing companies in the film industry also take advantage of hype. ‘Barbenheimer,’ the term coined for the dualling releases of the 2023 films Barbie and Oppenheimer, became a meme and cultural moment. Both films massively exceeded box office expectations, benefiting from mutual hype and audience excitement to be part of ‘a moment.’
Like memecoins, the music of Miles Davis or films of Christopher Nolan benefited from hype, but unlike most memecoins, they had the substance to back it up, leading to lasting success. Memecoins, barring a few notable exceptions, offer nothing beyond the initial fun, hype, and low barrier to entry.
“A lot of people who buy meme coins, the main reason is hype, but also it’s very easy to invest because the price is low,” explains Dr. Ozair. “The younger generation don’t have a lot of money and it is a place for them to start and be engaged in the crypto space, because they can buy 100 or a million of them with $1.00. It’s part of the reason why I think it got all the attention, an ability to engage.”
Dogecoin is currently the memecoin with the largest market cap ($36 billion), and its price is $0.23. By contrast, one Bitcoin will currently set you back $112,696 (at the time of writing). If you’re a young person with a few dollars, want to invest, and maybe have some fun in the process, there’s an obvious choice.
Beyond the fun, memecoins often sell themselves on being part of a community of fellow enthusiasts. But these communities usually fail to be fostered or maintained by the memecoin creators, leading to interest invariably waning. Or worse, the communities can be co-opted by bad actors looking to make a quick buck.
“With meme coins, the community around it loves it, writes about it on Reddit and other forums,” says Ozair. “That was the idea, but then people started to trade them and make money off them, suddenly people who are not really in the ‘meme spirit’ but want to make a profit get in, and the manipulation and speculation gets in, and that why it got a bad reputation.”
She suggests this is not a new phenomenon. Even Bitcoin, the benchmark for digital asset success, has a story of straying from the righteous path.
“Bitcoin was supposed to be a payment system which is for the people, by the people, no governments, no central bank, no intermediaries. It wasn’t supposed to be traded on exchanges,” says Ozair. “But these miners were sitting on piles of Bitcoins, and they wanted to do something with it. They couldn’t go and buy milk with it, so they created these exchanges and this is where it all started. Then other people got in, people who had nothing to do with the intended purpose, who just wanted to make money off it.”
Summing this up, she adds, “Everything starts with great intentions and then other people come into the space and change it.”
Despite BTC—according to some—having evolved from its intended use, it has undoubtedly developed a lasting purpose: as an investment or store of value.
While some memecoins evolve to include features or utility over time—such as Shiba Inu (SHIB), which launched in 2020 as a meme-based token but now enables dApps, NFTs, DeFi projects, and a mobile card game—most rely heavily on trends and influencer promotion.
In other words, digital assets like Bitcoin and Ethereum are built for enduring value and utility, while memecoins are driven by hype, humor, and community speculation, rather than the fundamental technology.
The design and operation of memecoins is also, unfortunately, why they are particularly susceptible to manipulation and fraud by these so-called ‘bad actors.’
Bad hype and bad actors
According to Ozair, memecoin’s susceptibility to manipulation is because “the volume is usually not high and there’s not much liquidity, meaning the prices can bounce up and down very quickly.”
“This is why it’s subject to all the speculation because only a little bit of trading can spike the price either way. It can go up 100% and down 100% in the same day, something that you will not see in Bitcoin today, or in any stock (other than maybe penny stocks) – it’s very hard. This increased movement and volatility comes from the traders trying to make a profit,” she explains.
One example is BullZilla, a memecoin built on the Ethereum blockchain based on a cartoon fire-breathing baby Godzilla. Currently, it’s in the pre-sale stage of investment, with a value of around $0.00005908 (at the time of writing). Thus far, BullZilla has raised $430k from the pre-sale of 26 billion tokens to an estimated 1500 holders.
Doing some quick math, if each of these holders had an equal amount of the tokens—a very unlikely scenario, as more realistically a handful of investors own the lion’s share—they would hold around 17 million each, having each invested only around $1000, or less, to buy those tokens. If BullZilla reaches its projected listing price of $0.00527, investors are looking at a minimum of around a 100 times profit on investment, more if they invested early.
Herein lies the problem. The profit margin on this kind of investment is so huge, with the barrier to entry so low, that it almost begs speculation, to the point that some such projects have now even dropped the pretense of being about fun and community. According to BullZilla’s website, “every $100k raised increases price,” wording clearly designed to encourage ‘investors,’ not fans of cartoon Godzillas.
In and of itself, this would not be the biggest crime. After all, there’s nothing inherently wrong with people wanting to make a profit—these projects are popular for a reason. However, it does make them appealing to more savvy and unscrupulous investors.
“Some of them will manipulate the market because meme coins are more susceptible to manipulation,” says Ozair. “Remember, it’s supposed to be a community. If it’s an open community you don’t have to show ID or anything. Whether on Reddit, Telegram, or any social platform, everyone can join. So, you find these speculators entering these communities and saying all kinds of things that start the market moving.”
She adds that these speculators are “making the profit, and the rest lose. I don’t know if you can regulate that process. Otherwise, you’d have to say: no one can create a community on Reddit or TikTok or whatever. No one wants that.”
Nonetheless, the memecoin market continues to grow in parallel with the digital asset space. A combination of celebrity memecoins and the overall buzz around the crypto industry propelled the market’s value to over $137 billion by January of this year, according to CoinMarketCap.
Also in January, however, President Trump was embroiled in controversy around the launch of the $TRUMP coin three days before his inauguration, which quickly shot up to $75 within a day before falling to just over $7 (as of September). Trump said of the coin: “I don’t know much about it other than I launched it, other than it was very successful.”
According to reports, only 20% of the token’s total supply is currently in circulation, with the remaining 80% held by Trump and his business partners. Trump and his business partners also profit from transaction fees every time $TRUMP is traded, earning almost $100 million after only a month.
Further south, a similar scandal unfolded in Argentina just a month later. President Javier Milei endorsed a memecoin called $LIBRA that ended in $251 million in losses for investors and an investigation into the President.Following this widely reported scandal, the memecoin sector deflated to just under $40 billion in April, before rising again to just over $80 billion (at time of writing).
However, this recovery could be partly attributed to a more broadly booming period for the digital asset space. In its 2025 Global Adoption Index, blockchain analytics firm Chainalysis reported growing adoption rates across almost all main jurisdictions, as well as across all income brackets.
Whatever the reason, the memecoin market remains strong. This is despite—or perhaps because of—an uncertainty in the U.S. around the legal status and regulation of the asset type, partly due to the regulator that previously claimed jurisdiction over the area, the Securities and Exchange Commission (SEC), declaring in February that memecoins are not securities, thus not its concern.
SEC washes their hands
In the U.S., determining which agency is responsible for overseeing an asset comes down to what type of asset it is, a ‘security’ or ‘commodity’. According to the Howey Test, used to determine an investment contract (and therefore a security) under U.S. law, there must be an investment of money in a common enterprise, with an expectation of profits, solely from the efforts of others.
The SEC traditionally has jurisdiction over ‘securities’ while the Commodity Futures Trading Commission (CFTC) has jurisdiction over commodities—a broad category representing goods or assets that can be traded or exchanged.
Until recently, the SEC claimed jurisdiction over much of the digital asset space, with the agency’s former chair, Gary Gensler, stating numerous times that all assets other than Bitcoin—and maybe Ethereum—are securities.
However, Gensler stepped down from his role in January, and a month later, the SEC published its February 2025 staff statement saying that it does not consider memecoins to be securities—one month after Trump took office and launched $TRUMP. Effectively, the SEC said that as memecoins were typically purchased for entertainment or social interaction, there was no reasonable expectation of profit based on the efforts of others as required by Howey.
This essentially classified the asset class as a commodity, putting it under the supervision of the CFTC. However, due to a lack of formal regulation in the U.S. explicitly outlining how memecoins should be treated, the CFTC has also failed to fully engage with memecoins, as it does not—currently—regulate spot markets or require registration for meme coin trading.
According to law firm A&O Sherman: “As with other commodities—including wheat, copper, oil, and bitcoin—the CFTC has authority to pursue cases of fraud and market manipulation in memecoin markets but does not engage in broader regulatory oversight as it does for derivatives markets.”
This means that memecoin projects are not required to register, do not need a license, and are essentially unregulated, other than anti-fraud and anti-manipulation rules.
CFTC not turning a blind eye
This situation has partly contributed to the bad reputation of memecoins, as they are a fruitful and potentially high-yielding investment with limited oversight until something goes wrong. Hence, according to data from digital asset intelligence platform Merkle Science, more than $500 million was lost to memecoin schemes and scams in 2024.
One type of scam that has become emblematic of the memecoin space and the scourge of the digital asset market more broadly is the ‘rug pull.’ This is a scheme whereby developers or insiders in a project, who hold a substantial amount of the tokens themselves, wait for the value to go up and then suddenly withdraw their funds and abandon the project.
A 2025 Marquette University paper on memecoin “insiderism” gave the example of the $JENNER meme coin, in which insiders controlled 38% of the total supply before public trading began, using 17 interconnected wallets.
“This ecosystem thrives on asymmetric information—insiders coordinate market manipulations through encrypted Telegram channels, while retail investors receive curated misinformation,” explained the paper. “Modern pump schemes employ industrialized hype production that blends psychological manipulation with technological amplification.”
Under commodities law, this scheme would constitute fraud and market manipulation. Specifically, CFTC Rule 180.1, which involves manipulating, misrepresenting, and omitting information or other deceptive practices in connection with a commodity transaction.
Despite the CTFC’s reputation in some circles as a softer touch when it comes to regulation, there is some precedence for it taking digital asset projects to task for breaching fraud and market manipulation rules.
One example was in March 2021 when the CFTC filed a complaint with the U.S. District Court for the Southern District of New York against businessman and computer programmer John McAfee and his former employee Jimmy Gale Watson, accusing the pair of “engaging in a manipulative and deceptive digital asset ‘pump-and-dump’ scheme.”
McAffee and Watson were accused of aggressively pumping up the market in specific digital assets, while they “secretly accumulated positions in digital assets in anticipation of price spikes following the misleading social media endorsements that touted the assets.” When the price had risen sufficiently, they dumped the assets, making a significant profit.
The CFTC alleged that this scheme constituted a fraud on the market and manipulation of a commodity, with the defendants eventually agreeing to disgorge over $146,000 in ill-gotten gains.
In another digital asset-related case, in 2018, the CTFC announced commodity fraud charges against ‘My Big Coin’, a purported digital asset and virtual payment services company headquartered in Las Vegas. Rather than the promise of buying into a burgeoning, fun meme-based community, My Big Coin was a more traditional digital asset that was falsely marketed as having more utility than it did.
These two scenarios—the first being more akin to a typical memecoin pump-and-dump scheme, while the latter a coin misrepresented as a token with wider utility—both show the willingness of the CFTC to follow through where evidence of market manipulation or fraud is present.
So, there is potentially some recourse in the U.S. if a memecoin goes wrong—if the CTFC is willing to act. And yet, until the regulatory boundaries of the digital asset space are more clearly enshrined in law, preventative measures and due diligence remain difficult to enforce on memecoin creators and traders.
Fortunately, this grey area status quo may change with the passage of a bill currently making its way through Congress.
Clarity
In May, U.S. Congressman French Hill (R-AR), chair of the House Financial Services Committee, introduced the CLARITY Act, which is designed—as the name suggests—to bring a certain amount of clarity to the digital asset space.
It addresses the regulatory turf war between the SEC and CFTC by granting the CFTC primary regulatory responsibility over spot digital commodities, which would include memecoins. Entities offering spot digital commodities must register with the CFTC as a digital commodity broker, a digital commodity dealer, or a digital commodity exchange. In addition, any time a regulated entity wants to offer a new digital asset commodity, it must certify to the CFTC that the asset complies with any applicable rules and include an analysis of whether the asset satisfies CFTC standards.
“I think what they’re saying in the CLARITY Act is pretty sensible. They’re saying that not everything is considered a security, based on the Howey test,” suggests Ozair. “If enacted, it will be very important because it gives guidelines on when something is considered a security, and when it might become a utility – something Gensler used to say was not possible. According to Gensler ‘If it’s security, it’s a security forever’.”
This latter point refers to another provision of the CLARITY Act aimed at further clearing up when a digital asset is treated as a security and when it is a commodity. Under the Act, if a digital asset is sold in an investment contract (i.e., to raise capital), it is temporarily treated like a security (under SEC oversight), but once it is traded secondarily by someone other than the issuer, it becomes a pure digital commodity (under CFTC oversight).
The House of Representatives passed the CLARITY Act in July, and it now awaits possible amendments and a further vote in the Senate.
In the meantime, the somewhat grey area in which memecoins exist in the U.S. remains. As such, it’s easy for anyone to start, advertise, and sell a project, with commodities rules only kicking in if and when fraud or market manipulation is a factor.
While this explains what can happen when a memecoin project goes wrong, an even bigger question still remains: is there such a thing as a good memecoin, and what would that look like?
One person’s right is another’s wrong
For some, the community aspect of memecoins can be an inherent good, says Ozair:
“If it’s just for a joke and for fun and people meet on Reddit or TikTok and talk about it, that’s still not a bad thing. We need this kind of fun, this type of community. The whole idea of crypto was a community that’s decentralized, everyone coming together in unity and sharing; that was the idea from the beginning. You don’t even have to know those people, as long as you’re sharing the same values, and following the rules of the community (i.e. consortium mechanisms).”
But people should be prepared to lose their investment and be aware of bad actors, warns Ozair. And the longevity of a pure memecoin is likely to be limited if there is nothing more substantial behind its community.
What might more substance look like? Dr. Ozair sets out two options.
“One option which people were playing with back in 2021 was using Dogecoin to purchase things,” says Ozair. “Mark Cuban, for example, who used to own the Dallas Mavericks, was contemplating using Dogecoin to buy tickets.”
In essence, find a way that allows the memecoin to be spent. This has been explored by established brands in the past: the likes of GameStop (NASDAQ: GME), Newegg (NASDAQ: NEGG), Nordstrom, Tesla (NASDAQ: TSLA), and AMC Entertainment (NASDAQ: AMC) have also considered accepting memecoins like Dogecoin and Shiba Inu as payments.
As Ozair notes, “if it’s a payment method that adds utility beyond the joke. If I can buy with it, whether a ticket or even a Starbuck’s coffee, that’s one type of utility.”
The second route to greater longevity and legitimacy for memecoins would be a kind of second generation of memecoin, made with greater utility already built into the model.
An example is ‘Bitcoin Hyper,’ a layer two of Bitcoin with lower fees and transaction time that attempts to add the fun meme element through a cartoon frog in a superhero outfit. Another example is called ‘Wall Street Pepe,’ a meme-driven token whose utility broadly serves as a bridge connecting liquidity and communities between Solana and Ethereum.
“Once you bring this kind of utility in, the speculation issue will be mitigated because it’s not just fun and people aren’t just holding it for the sake of having fun collectibles, they’re doing it because they all like this creature, whether it’s Pepe or Shiba Inu, they’re in sort of a club and the utility provides sustainable value, whether through payment or other utility.”
Therefore, looking to the future, two paths appear for memecoin creators and innovators: one leads to the same bad song playing on repeat, more of the get-rich-quick-and-get-out schemes that have dominated the space; the other, to a place of greater application and utility, where good-faith developers learn from their failures and realize that hype can give you a great start, but only substance can sustain success.
Perhaps, in this regard, the memecoin sector could do worse than heed another pearl of wisdom from the great Miles Davis: “It’s not the note you play that’s the wrong note – it’s the note you play afterwards that makes it right or wrong.”
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