The inauguration of President Donald J. Trump has been widely celebrated as the dawn of the first pro-crypto presidential administration – a dramatic shift from the Biden administration’s antagonistic stance on crypto. But the road ahead might not be as smooth as it seems.
Sure, there’s reason for optimism. The excitement around Trump’s new approach reached its current peak when he unveiled his very own memecoin – $TRUMP – at the inaugural “Crypto Ball” in Washington, DC, on the night before his inauguration. And his early actions seem to back up the hype. He has replaced Gary Gensler, who became infamous in the crypto community for his enforcement-heavy approach as Securities and Exchange Commission (SEC) chair, with Paul Atkins, a crypto-friendly former SEC commissioner who served as an advisor to the Digital Chamber of Commerce. Reports also suggest that the SEC is now drafting new, more supportive guidance and considering how to scale back or drop crypto cases that don’t involve fraud.
But while these moves might seem like a green light for the industry, it’s still far too early to declare victory. For one, private plaintiffs’ attorneys aren’t taking their foot off the gas; new lawsuits continue to pop up, raising aggressive arguments to challenge new crypto projects. State attorneys general – especially in places like California and New York – also are poised to ramp up enforcement. And even a more friendly federal government is unlikely to give crypto projects a pass if they are viewed as a threat to national security or financial stability.
So, while the change in tone from the new administration is promising, crypto companies should remain cautious and proactive. In this article, we explore recent litigation trends and offer practical strategies for navigating the shifting litigation landscape under the new administration.
Memecoins
Memecoins, in their simplest form, aren’t much like securities. They lack practical utility and are more like collectibles that capture the latest cultural zeitgeist – akin to Beanie Babies, for example. They may hold value and foster community but clearly aren’t securities under the Howey test. However, where the issuer of a memecoin goes heavy on marketing, works to get the tokens listed on secondary markets or holds onto a significant stash of tokens on the company balance sheet,1 plaintiffs’ lawyers may argue that purchasers are relying on the issuer to drive profits.
Just before Trump’s inauguration, the plaintiffs’ firm Burwick Law filed two class action lawsuits targeting major memecoin projects. This could signal a new wave of memecoin litigation yet to come.
