California to Ban Officials from Launching Memecoins Starting in 2027

California legislators have approved a bill that will prohibit local officials and government employees from issuing memecoins starting in 2027, and will also ban crypto platforms from offering tokens linked to public figures to state residents.

The bill was introduced by California State Assemblymember Avelino Valencia of the Democratic Party. The initiative was approved by the Senate on August 26, after which the Assembly unanimously adopted the Senate amendments with a vote of 78 in favor and none against. Following approval by both chambers, the bill was sent to Governor Gavin Newsom for signature.

The document defines the issuance of a memecoin as the creation of a token available for public purchase, donation, or exchange for something of value, regardless of whether advertising is involved. The ban applies to any state officials and employees of local government bodies, including members of the California Legislature, as well as participants in boards, commissions, and committees with governmental authority. Special attention is given to agency employees who make decisions regarding procurement and contracts.

Avelino Valencia believes that the bill will prevent the abuse of governmental power for personal financial gain. The issuance of tokens by government employees can create conflicts of interest and increase the risks of corruption and foreign influence on the U.S. economy. The lawmaker fears that many crypto platforms have simplified the creation of memecoins, allowing unscrupulous users to bypass disclosure rules.

Specific provisions of the bill concern crypto companies serving California residents. Starting January 1, 2027, virtual asset service providers will be prohibited from selling memecoins to state residents if these tokens were created with the involvement of federal or local officials or if their promotional materials feature images of these officials.

The bill also provides a definition of memecoins: digital assets recognizable by their connection to internet memes, public figures, fictional characters, animals, cultural phenomena, events, humor, celebrities, or social trends. The value of such assets is determined primarily by public interest, the document notes.

In May, the California Department of Financial Protection and Innovation (DFPI) accused Hermes Bitcoin operator of violating consumer financial services protection laws and anti-money laundering (AML) regulations. The agency ordered Hermes Bitcoin to remove all its devices from the state.