What are we to do about fartcoin? About what?

For those not deeply steeped in the world of meme coins, fartcoin is a joke cryptocurrency, created around Halloween of last year. Now trading at around a quarter, it enjoyed a gaseous rise and exceeded $2 around the time of President Trump’s inauguration (along with many other meme coins) – ultimately reaching a market cap over $2 billion.

Fartcoin’s market cap rapidly ran out of gas, and has fallen almost 90% from that high. Still, hundreds of millions of dollars’ worth of the currency can trade daily. Its success led to the creation of various copycat flatulence-based tokens, including Unicorn Fart Dust (which reached a multi-hundred million dollar market capitalization – although it is now about a tenth of its peak), and Fartboy (whose market cap once approached $200m).

Regulators have begun to pay attention. On February 27, 2025, the SEC’s Division of Corporate Finance (CorpFin) issued a statement that meme coins did “not involve the offer and sale of securities under the federal securities laws” and that as a result, “persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission under the Securities Act of 1933.”

Consequently, CorpFin stated that “neither meme coin purchasers nor holders are protected by the federal securities laws.” While this statement only represents the view of CorpFin and does not prevent the Division of Enforcement from taking a contrary view, in practice these statements tend to carry significant weight, and it is indicative of the SEC’s newly adopted permissive view towards some digital assets.

With CorpFin weighing in, does that mean that compliance professionals and others in financial services – or in government – can safely ignore the meme coin phenomenon? Is this simply an internet fad? While it is easy to deride the world of meme coins such as fartcoin, given the billions of dollars of total trading volume, the volatility in asset values, and the numbers of people who participate in this market, we do so at our peril.

What is a meme coin?

A meme coin is typically described as a digital asset created on a blockchain that has no utility. That is, it cannot be used in a digital ecosphere and is not mined (like, for example, bitcoin) over time – instead, all coins are created all at once and issued (often with the creator retaining some portion). They are often derivative of internet memes or, like fartcoin, are purely humorous with no effort at making an argument about usefulness.

In the words of the CorpFin release: “Meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. In this regard, meme coins are akin to collectibles. Meme coins also typically have limited or no use or functionality.”

Policy implications

Even among finance professionals, many have very little to no familiarity with meme coins. Many have heard of dogecoin, mainly from jokes made by Elon Musk. But few take this market sector seriously – perhaps a view shared by most government regulators. Now that CorpFin has opined that meme coins are not securities, does that mean there is no role for government regulation?  Maybe there is.

First, this is a significant market – especially for younger investors. Each day, trading volume in meme coins is in the billions of dollars. Notwithstanding the significant volatility in asset values, millions of people participate in this market, which has a market capitalization exceeding $40 billion.

Moreover, the volatility of these coins can lead to significant losses. Some are familiar with the Trump coin, which the President issued a few days before his inauguration. But many are not aware that the market capitalization of the Trump coin exceeded $14 billion at one point, before losing 75% of that value, or that analysis indicates that Trump earned over $100m from transactions in his meme coin, or that hundreds of thousands of small investors reportedly lost billions of dollars in their investment.

Billions of dollars trade – and can be lost – in this corner of the digital marketplace. Recently, an investor committed suicide on a livestream on X purportedly because he had lost his savings in meme coin scams and asked that viewers commemorate his death by making a meme coin based on it (which they did).

Finally, this market has significant potential for fraud – often in the form of “rug pulls” where those who create and offer a coin quickly abandon it, often after selling their holdings quickly. These modern variants of pump-and-dumps are often accompanied by social media hype campaigns. There are also pump-and-dump schemes where bad actors buy up coins, pump them up on social media, then dump into the frenzy.

Given these factors – the size of the market and the relative inexperience of its participants, the volatility of asset values, and the risk of fraud – it behooves regulators to address the risks inherent in this multibillion dollar market.

Regulatory disclosures

In order to protect investors, regulations addressing meme coins should, at the least, require clear disclosures. This would likely include disclosure on the website behind the coin that the meme coin has no utility, is intended solely for amusement, is akin to a collectible and is not to be viewed as an investment.

Regulators should also require disclosure of any fees involved in the offering and in any future transactions, the quantity of coins that are to be issued, what portion the organizers are retaining, and whether they intend to sell them back into the market. Given the prevalence of rug pulls, some kind of limitations on the amount of their retained holdings that organizers can sell immediately might also be advisable.

There is a tendency to dismiss the impact of the meme coin market given its appeal to absurdism – but like any multibillion dollar market, there are bad actors and misconduct that needs to be dealt with. Just because something is funny doesn’t mean it should not be taken seriously. Because the value of meme coins like fartcoin might dissipate into air, the stench of its passing might long linger, causing significant distress and economic harm. Any government regulation to mitigate that should be welcomed.

Howard Fischer is a partner in the litigation and white collar departments of Moses & Singer LLP. Howard is recognized as a leading expert and commentator on securities disputes, enforcement proceedings, and securities regulations, including related to digital assets. Isaac Greaney is a partner in Moses Singer’s Litigation practice group. Isaac focuses his practice on commercial litigation and disputes, with a concentration in securities litigation, and the defense of securities enforcement investigations.