A new class action lawsuit claims that Solana-based meme coin factory Pump.fun operated an illegal securities exchange by providing automated tools that helped creators launch over 50,000 unregistered tokens, potentially exposing the $50 billion meme coin market to heightened regulatory scrutiny.
Filed in New York’s Southern District Court, the complaint alleges that Pump.fun’s U.K.-based parent company Baton Corporation collected nearly $500 million through a mandatory 1% fee over every transaction while enabling widespread securities law violations.
Pump.fun co-founder and COO Alon Cohen declined to comment after Decrypt reached out with questions on how they plan to engage with the suit.
The two other co-founders, CTO Dylan Kerler and CEO Noah Tweedale, have not responded to Decrypt at press time.
What is this all about?
The lawsuit, Aguilar v. Baton Corp. Ltd., involves three tokens: First Convicted Raccoon (FRED), FWOG, and GRIFFAIN.
These tokens allegedly demonstrate how Pump.fun’s automated tools consistently produced securities under the Howey Test, a standard used to determine if a transaction can be considered as an investment contract.
If any amount of money is invested in a common enterprise with profits expected mostly from others’ efforts, that means it’s a security.
However, to be legally admissible, the Howey Test requires proving all four elements: the investment, the financial outcome, the expectation, and its source.
Allegations of centralized control
Court documents obtained by Decrypt allege that the platform maintained centralized control through mandatory templates, unified pricing mechanisms, and standardized liquidity management that applied identically to all tokens.
The case could set a precedent for whether automated token creation tools inherently produce securities.
Baton Corporation executives face additional scrutiny over their roles. Court filings allege Tweedale and Cohen directly profited from facilitating unregistered securities offerings through the platform’s fee structure.
Since these lawsuits began, the platform’s daily revenue has dropped to an average of roughly $4 million, according to a dashboard from Dune Analytics, despite some days showing between $9 to $15 million in total daily logs.
The platform has faced pushback from users before. In November last year, Decrypt covered how Pump.fun had played host to livestreamed content involving animal cruelty, self-harm, and threats of violence. Following this report, as well as coverage in other crypto media publications, Pump.fun disabled its livestream features.
Baton Corporation has until February 20 to respond to the allegations.
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