Legal and Tax Implications of Trump’s Meme Coin Launch: What You Need to Know

For some time now, Donald Trump has been attempting to position himself as a key figure in the crypto industry.

With the latest launch of his meme coin TRUMP, he’s become the first president to bring political influence into the meme coin market. However, this move raises several legal and tax challenges.

TRUMP Coin Raises Major Tax and Legal Questions

According to FinTax, a web3 financial management firm, one of the biggest concerns with TRUMP is whether the coin could be classified as a security. 

“First, there’s the question of whether this meme coin is a security. This is super important for its legality,” FinTax said.

Cryptocurrencies issued through Initial Coin Offerings (ICOs) are usually treated as securities. Still, TRUMP’s team has made it clear that the coin is not a security. The TRUMP website showed that it does not promise any future profits. 

This declaration, however, doesn’t fully eliminate the possibility of an SEC investigation, as the regulatory stance on meme coins remains unclear.

Another concern is the potential for political donation loopholes. The Federal Election Commission (FEC) has strict rules governing political donations. Launching a meme coin could allow for fundraising methods that bypass traditional regulations. 

If TRUMP is used to raise political funds, it might raise red flags and even lead to legal challenges. While there is no concrete evidence linking the coin to political donations yet, the potential for controversy remains high.

Beyond the legal questions, FinTax said there’s a tax issue surrounding the launch of TRUMP. According to the IRS, cryptocurrency profits are taxable, and understanding how taxes apply to TRUMP could be complicated. 

Trump’s team currently holds 80% of the total TRUMP supply. They will unlock this in stages over the next three years.

The question is whether unlocking the coins will trigger a taxable event. In general, capital gains tax is only triggered when assets are sold or traded. 

However, authorities could see unlocking the crypto as a taxable event, depending on how they treat it.

TRUMP Launch Stirs Up Speculation Over Tax Cuts

At the same time, crypto experts are weighing in on possible tax cuts following TRUMP’s launch. According to CoinGecko, Trump is now the third-largest meme coin with a market cap of $11.7 billion.

The crypto community is hoping that Donald Trump’s newfound crypto wealth could lead to some tax reforms.

“Trump is up around $20 billion on his token. That means an extra $5 billion in his pockets if he eliminates capital gains on crypto… The President of the United States now has a personal multi-billion dollar incentive to eliminate crypto capital gains tax,” crypto trader Gammichan noted.

Meanwhile, Mike Alfred, a crypto investor, pointed out a similar possibility of Trump slashing income taxes on crypto sales.

“Now that 80% of Trump’s wealth suddenly consists of crypto, you can expect an end to all federal income taxes on crypto sales within the year. This is how the game is played. Watch and learn (and buy some Bitcoin for the kids).”