Is $TRUMP Memecoin a Security? What the Howey Test Reveals

Key Takeaways

• The Howey Test dictates whether a crypto asset is a security, focusing on investment in a common enterprise with an expectation of profits from others’ efforts.
• Coins have their own independent blockchains, serving as native currencies, while tokens operate on existing blockchains, representing varied functionalities.
• The SEC primarily targets ICOs and tokens as unregistered securities, especially when profits are tied to a central team’s efforts.
• Although the $Trump memecoin will likely satisfy all Howey Test elements, it is unclear how regulatory authorities will tackle it.

The world of crypto is varied. From the early days of Bitcoin to the rise of politically themed memecoins like $TRUMP, the legal status of cryptocurrencies has been a contentious debate that has heated up in recent years due to their increased adoption and usage. 

But how exactly do regulators, specifically the U.S. Securities and Exchange Commission (SEC), decide what is what, especially when a digital asset is tied to one of the most important political figures in the world, the U.S. President? 

This article explores this question by detailing the Howey Test, differentiating coins and tokens, and applying these frameworks to the $TRUMP memecoin.

What Makes a Token a Security? The Howey Test

The Howey Test , established by the U.S. Supreme Court in 1946, determines if an asset is a security. The SEC states it “applies to any contract, scheme, or transaction, regardless of whether it has any of the characteristics of typical securities.”

According to it, a transaction is considered a security if it meets all four following criteria:

• There is an investment of money
• In a common enterprise
• With an expectation of profits
• Profits from the efforts of others

This applies even if the asset is a cryptocurrency or token. For this reason, the SEC has already labeled specific Initial Coin Offerings (ICOs), tokens, and projects as unregistered securities. 

For example, consider the following:

• XRP: The SEC sued Ripple in 2020, saying its XRP sales, especially those sold to institutions, counted as unregistered securities. A court ruling in 2023 backed that view for those institutional sales. However, in March 2025, the SEC dropped its appeal. It concluded that programmatic XRP sales were not securities, ending the lawsuit with a reduced fine of $50 million.
• Telegram’s TON (Gram): In 2019, the SEC stopped Telegram’s $1.7 billion token sale. The agency said the Gram tokens met the Howey Test and were unregistered securities. The Telegram case set a precedent for SEC enforcement against ICOs despite Telegram halting the project.
• Block.one (EOS): Block.one raised $4 billion through an ICO. In 2019, it paid a $24 million fine to settle with the SEC for selling unregistered securities. As of June 2025, EOS has not faced any further penalties.
• Unicoin (UNIC): In 2025, the SEC charged Unicoin and its executives with misleading investors by selling unregistered securities. The agency disputes Unicoin’s claims of raising $3 billion and backing the tokens with real estate and equity assets.
• Other cases: The SEC also took action against BitConnect, PlexCorps, and Kik’s Kin token. Each case involved unregistered token sales.

The SEC says most ICOs and tokens count as securities when users expect profits from a project team. The agency is likely to continue enforcing registration rules under U.S. securities law. However, the Trump administration has taken a more relaxed approach.

What Is the Difference Between Coins and Tokens?

Before examining the case of $TRUMP, it is important to clarify a basic point: Coins and tokens are different, even though many in the industry use the terms interchangeably. For example, many people call $TRUMP a TrumpCoin, but that label does not reflect how the asset works.

A coin operates on its own blockchain. Bitcoin (BTC), Ethereum (ETH), XRP on the XRP  Ledger, and Solana (SOL) are coins because they support and secure their own networks. They serve as the native currency of those systems. Users pay network fees with them, and miners or validators receive them as rewards.

On the other hand, tokens are built on top of existing blockchains. Tokens do not have their own infrastructure but instead rely on another network, usually Ethereum or Solana, for security and transaction processing. Tokens can represent access rights, voting power, or simply speculative value.

For example:

• UNI is a governance token running on Ethereum that gives holders voting power over the Uniswap decentralized exchange (DEX); 
• USDC is a stablecoin also on Ethereum (and other chains) that represents a dollar on the blockchain, used for reliable value transfer.
• BONK is a meme token running on Solana whose value is purely speculative, driven by community hype and viral trends.

This difference between tokens and coins matters when regulators decide how to treat digital assets. Classifying an asset as a token or coin can affect how legal frameworks like the Howey Test apply. 

Applying the Howey Test to $TRUMP

To analyze whether $TRUMP qualifies as a security, it must meet all four elements of the Howey Test. Based on the analysis by Professor David Krause and publicly available information, each element can be analyzed as follows.

Investment of Money

Buyers must invest capital, which can be crypto or fiat, to acquire $TRUMP tokens. This fulfills the first condition, as participation in the ecosystem requires a financial contribution that can be considered an investment.

Common Enterprise

Entities such as Fight Fight Fight and CIC Digital, tied to the Trump Organization, reportedly control 800 million of the 1 billion tokens. 

The token’s market performance, driven by coordinated events and promotions, connects investor outcomes to these issuers. Therefore, investors and the issuing entities have a clear common enterprise.

Expectation of Profits

Buyers likely expect returns from price increases or exclusive perks, including access to the exclusive dinner with Trump in May 2025. The token surged 50% after the official dinner announcement, which said that top holders would get seats at the event. Additionally, it was full of expensive perks, including Tourbillon gemstone-encrusted watches worth up to $1,000,000. 

These benefits offer more than symbolic value. Although labeled a ‘digital collectible,’ the token acts like a speculative asset. 

Courts have viewed similar setups as possible investment contracts. In Friel v. Dapper Labs, the U.S. District Court for the Southern District of New York said NBA Top Shot Moments NFTs could be securities under the Howey test. Buyers expected profits based on Dapper Labs’ control over the marketplace and blockchain, even though the NFTs were sold as collectibles.

Profits From the Efforts of Others

The token’s value depends on Trump’s brand and the promotional activities of affiliated groups. These efforts shape public perception and drive market value. While holders can trade freely, they rely on outside parties to influence price and utility, meeting this final requirement.

Additionally, the structured perks and centralized control raise legal risks. Krause notes that tokens like this could enable paid political access without real oversight.

Opponents might compare $TRUMP to trading cards, but the issuer’s direct involvement and management weaken that defense. If a court agrees, the token may require SEC registration.

As a result, $TRUMP likely satisfies all four Howey Test elements. Investors pay to join a managed system, expect gains, and rely on the actions of Trump-affiliated entities. 

Criticisms about $TRUMP and its ties with the president are part of a heated debate.

The legal status remains unclear without a court judgment, but the structure could suggest substantial grounds for SEC scrutiny.

Where Do Political Tokens Stand?

$TRUMP isn’t the only politically-themed token in the market, and it may not be the last. As meme culture intersects with public figures and political branding, other tokens tied to prominent individuals or movements could emerge.

According to White House crypto czar David Sacks, Trump’s token has been compared to a collectible. He claims it poses no conflict of interest.

This trend introduces questions around regulatory boundaries. When a token offers potential perks like access to political events or merchandise while being openly traded for profit, it can raise issues around how such assets are categorized. 

Depending on how it’s structured and marketed, the line between a digital collectible and a financial instrument may begin to blur.

That said, the SEC has not made any public statements or taken enforcement action against $TRUMP at this time. While some observers argue that tokens offering “pay-for-access” features might fall within securities law, regulators have yet to weigh in formally on this specific category of tokens.

More broadly, politically-themed tokens present emerging challenges: how to balance freedom of expression and innovation with investor protection and compliance. These tokens may eventually prompt new legal interpretations as they continue to gain visibility in both crypto and political spheres.

Conclusion

$TRUMP likely meets all four parts of the Howey Test. Buyers invest money, depend on a common enterprise tied to Trump-linked entities, expect profits, and rely on those entities to shape value through promotions and perks. 

While labeled a collectible, the token behaves like a speculative asset. Without a court ruling, its legal status remains uncertain, but its structure might raise clear regulatory concerns. Whether they are going to be tackled or not during Trump’s administration is a different matter. 

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