The popular meme coin issuance platform Pump.Fun on Solana is facing new legal challenges, with a second class-action lawsuit filed in the Southern District Court of New York, alleging violations of U.S. securities laws. This legal action comes just two weeks after a previous lawsuit, placing greater regulatory pressure on the platform.
Pump.fun has facilitated the creation and trading of thousands of meme coins, but the platform is now accused of orchestrating operations involving securities law, potentially classifying its tokens as securities under U.S. law. The platform allows users to create tokens with very low technical barriers, which, while fostering the prosperity of the meme coin market, has also triggered serious legal challenges.
Accused of promoting the sale of unregistered securities
The latest lawsuit—Aguilar v. Baton Corp. Ltd.—was filed by plaintiff Diego Aguilar, who claims to have suffered losses from trading three tokens created by Pump.fun: FWOG, FRED, and GRIFFAIN. The lawsuit alleges that Pump.fun not only facilitated but actively promoted the sale of unregistered securities, accumulating nearly $500 million in revenue through a 1% transaction fee model.
The lawsuit claims that Pump.fun's automated token creation and trading tools essentially produce securities and cites the Howey Test to determine whether these transactions constitute investment contracts. The plaintiffs argue that the platform maintains a high degree of centralized control over token creation, pricing, and liquidity, thus should be regarded as a 'joint issuer' of these tokens.
This lawsuit could set a key precedent for U.S. regulation of meme coin platforms, especially as the new government takes office and the U.S. Securities and Exchange Commission (SEC) re-evaluates its stance on cryptocurrencies. If the lawsuit is successful, it could lead to stricter regulations for meme coin platforms, potentially forcing them to register their tokens as securities or face similar legal challenges.
The defendants include Baton Corporation Ltd. (the UK registered operating company of Pump.fun) and its three founders: Alon Cohen (Chief Operating Officer), Dylan Kerler (Chief Technology Officer), and Noah Tweedale (Chief Executive Officer). As of now, they have not publicly commented on this legal case.
Previous legal actions
This is not Pump.Fun's first legal dispute. A prior lawsuit accused the platform of being involved in a 'Pump-and-Dump' scheme, neglecting basic investor protections such as KYC (Know Your Customer) verification and even marketing to minors. The lawsuit was filed by Kendall Carnahan, focusing on the Peanut the Squirrel (PNUT) token, which experienced a rapid surge in market value but subsequently plummeted.
Market impact
Despite facing legal risks, Pump.fun continues to maintain significant revenue, with daily earnings still reaching millions of dollars according to analytics tools like Dune Analytics. However, these lawsuits have sparked widespread discussion within the crypto community, with many investors questioning the platform's sustainability and ethical standards.
The final rulings of these legal cases could have far-reaching implications for the entire crypto industry, particularly for trading platforms that allow users to freely issue tokens and lack traditional regulation. Investors and developers are closely monitoring the progress of this case, as a ruling against Pump.fun could usher in a stricter regulatory era for the meme coin market, directly impacting the meme coin sector.
The defendants are required to respond to the latest lawsuit by February 20. As the legal proceedings unfold, opinions within the crypto community have diverged—some see it as a necessary step towards compliance, while others view it as an excessive interference with the spirit of decentralization.
"Pump.fun faces a second class-action lawsuit, accused of violating U.S. securities laws" was first published in (Block客).
