Key Takeaways:
A federal judge upheld racketeering charges against Pump.fun's operator while clearing Solana Labs and the Solana Foundation from the landmark lawsuit.
Judge Colleen McMahon upheld RICO charges against Pump.fun operator Baton Corporation for wire fraud and unlicensed money transmission while clearing Solana Labs and the Solana Foundation in an Aug. 31 ruling.
The court found that knowing Pump.fun was a highly active memecoin platform is not the same as knowing it was giving favored promoters advance token information while representing its launches as fair, according to the opinion in Aguilar v. Baton Corporation Ltd. Crypto law firm founder Ariel Givner said the securities ruling does not mean all memecoins are exempt, stressing it applies only when a token does not offer a shared goal of profits rising for everybody.
The RICO claims that survived rest on wire-fraud predicates tied to three statements Cohen posted on X in late 2024 describing Pump.fun as an unruggable fair launch platform. The court also upheld the unlicensed money-transmission claim under 18 U.S.C. § 1960, finding Baton accepted one form of value and transmitted another as part of an exchange run for a fee without FinCEN registration. Plaintiffs estimate retail losses across the platform at $4 billion to $5.5 billion.
The ruling splits the case into two tracks: Baton Corporation and its three founders face RICO litigation, while Solana Labs and the Solana Foundation exit the case entirely. The surviving claims could set a precedent for how meme-coin launchpads are treated under federal racketeering and money-transmission statutes, with the next procedural milestone expected as the case proceeds toward discovery.
Plaintiffs Kendall Carnahan and Michael Okafor adequately pleaded both substantive RICO and RICO conspiracy claims against Baton Corporation, chief executive Alon Cohen, chief technology officer Dylan Kerler, and chief product officer Noah Tweedale. Diego Aguilar's claims were dismissed for failure to allege a domestic RICO injury.
For Tweedale, the court pointed to April 2024 Telegram messages reproduced in the complaint in which Cohen allegedly instructed him to reduce a promoter's early token position. For Kerler, it cited allegations that he built execution tools optimizing what plaintiffs call insider-first execution.
The gambling predicates were rejected entirely. The court held that a Pump.fun purchaser exchanged SOL for a token and received it immediately, and any later sale returned the price the curve dictated at that moment as consideration for giving up ownership, not as a payout triggered by a contingent event. Buying an asset does not become a wager merely because its resale value depends on uncertain future demand, the court held.
The Securities Act counts covered 20 tokens, but plaintiffs had class standing only for FRED and GRIFFAIN, the two they personally purchased. The other 18 were dismissed without prejudice on standing grounds.
On the merits, the court held the FRED and GRIFFAIN sales do not plausibly involve investment contracts under Howey because plaintiffs failed to plead a common enterprise. Pooling SOL in a token-specific bonding curve is not enough on its own. Horizontal commonality requires the pooled assets to fund some underlying venture whose success or failure determines purchasers' fortunes as a group, and the complaint alleged no such venture.
The judge noted that the plaintiffs' own theory defeats the argument. If insiders bought early, drove the price up, and exited before the collapse, that is the opposite of the shared fortunes a common venture requires. Baton collected its 1 percent fee on every trade regardless of whether the trader profited, placing it on the stockbroker side of the line rather than the investment-manager side.
The Solana defendants escaped the money-transmission count under the regulatory exclusion for parties providing only the network access services a money transmitter uses. On damages, trading losses failed RICO's proximate-cause requirement because calculating them would require reconstructing a counterfactual trading history. Execution losses and transaction fees survived.
The ruling establishes a legal precedent for the meme-coin launchpad sector on Solana. While the dismissal of claims against Solana Labs removes legal liability overhang from the ecosystem's core entities, the surviving RICO and money-transmission claims against Baton Corporation signal that launchpad operators face heightened regulatory scrutiny under federal racketeering statutes. The case now proceeds toward discovery, where plaintiffs will need to substantiate their allegations of insider-first execution and advance token information.
This article is for informational purposes only and does not constitute investment advice.
