The Common Enterprise Exception: Solana Walks Free While Pump Fun Faces RICO

The asymmetry arrived in a single docket entry. Judge Lewis J. Liman dismissed all claims against Solana Labs, the Solana Foundation, and their named executives. The same order sustained Racketeer Influenced and Corrupt Organizations Act charges against Baton Corporation—the parent entity of Pump Fun—along with three of its operators. One layer of the stack walked. The other stayed. That split is not a legal accident. It is a structural verdict on where accountability actually lives in a token launch pipeline. The infrastructure layer received its shield. The application layer received a target. This ruling is the first significant U.S. federal decision to separate the network that settles meme coin trades from the platform that manufactures them. The legal boundary now drawn between these layers will influence how every L1 and launchpad structures itself. I have spent eighteen years watching protocol architecture and financial claims diverge. This is a case where the court did the tracing work that auditors usually do. The plaintiffs—holders of FRED and GRIFFAIN tokens—claimed a coordinated scheme. Their theory: Pump Fun designed the platform to manufacture tokens, Solana provided the rails, and a network of influencers promoted the assets to retail investors. The losses, they argued, flowed from a single enterprise. The court disaggregated the enterprise. That disaggregation is the core finding, and it deserves code-level scrutiny. Context: How the Case Was Constructed The lawsuit emerged from the meme coin cycle of late 2024. FRED and GRIFFAIN launched on Pump Fun's bonding curve platform on Solana. Both tokens surged, then collapsed, leaving retail holders with substantial losses. The plaintiffs filed a consolidated class action in the Southern District of New York, naming Pump Fun, Solana Labs, the Solana Foundation, and individual executives. Pump Fun's mechanism is worth understanding in technical terms before considering the legal outcome. The platform deploys an automated market maker with a bonding curve: early buyers acquire tokens at exponentially increasing prices as the supply on the curve expands. When a token reaches a specific market capitalization threshold—typically around $69,000 in the platform's standard configuration—the curve is exhausted, a portion of the liquidity is deposited into a decentralized exchange pool, and the token effectively graduates to open trading. The design creates a mechanistic lottery. Buyers are not investing in a cash-flow-generating enterprise. They are speculating on whether the curve will fill before enthusiasm dissipates. Burwick Law, representing the plaintiffs, argued a unified theory: Pump Fun built the machinery, Solana provided the infrastructure, and KOLs provided the distribution. Together, they constituted a single enterprise under RICO. The court rejected the unified theory for Solana. It did not reject it for Pump Fun. The charges survived against Pump Fun: wire fraud, illegal gambling, and unlicensed money transmission. The Securities Act claims were dismissed. The Howey analysis yielded a mixed result—the tokens themselves failed the common enterprise prong, but the platform's conduct remained actionable under RICO. The court also flagged a procedural anomaly: Burwick Law had not properly served twenty-five named KOLs. Judge Liman ordered the plaintiffs to explain the service status by September 10, 2025. That date is now a technical checkpoint. If the explanation fails, the KOL-related claims may collapse. Jito Labs appeared in the docket as a defendant, then disappeared. The plaintiffs initially added the Solana-based liquid staking and MEV firm, then withdrew. The pattern is consistent with a plaintiffs' firm probing the boundaries of the ecosystem, testing which parties could be swept into the enterprise theory. The court pushed back. Core Analysis: The Common Enterprise Finding and Its Contract-Level Logic The Howey Test requires four elements: investment of money, common enterprise, expectation of profits, and profits derived from the efforts of others. Judge Liman found that FRED and GRIFFAIN holders lacked the common enterprise element—specifically, the horizontal prong requiring a shared pool of profits or losses among investors. Horizontal commonality typically requires investors to share in the profits or losses of a single venture. In the context of meme coins, each holder trades independently on secondary markets. There is no pooled asset, no shared revenue stream, no dividend mechanism. The tokens are the asset, not a claim on an enterprise. The court found that Pump Fun's fee structure did not create a common enterprise between token holders, because the platform's revenue was not shared with FRED or GRIFFAIN holders. This is the part I want to emphasize, based on my audit background: the absence of a profit-sharing mechanism in the token contract is now a legal data point. The court effectively read the token's code architecture and found no horizontal commonality. No revenue share. No pooled treasury. No shared downside. Just independent speculation. Ariel Givner, a securities lawyer following the case, noted the narrowness: this ruling applies to meme coins that do not offer a unity of profit for all holders. That framing is precise and dangerous. It means the legal status of a token can shift with a single contract parameter. Add a staking reward funded by a treasury that pools user deposits? Horizontal commonality reappears. Implement a revenue-sharing buyback? The common enterprise prong is suddenly arguable. From my experience auditing leverage tokens and DeFi protocols, I know that most token teams do not think about how the Howey Test reads their contracts. They think about distribution curves and initial liquidity. This ruling changes the calculation: the contract's economic structure—not its marketing narrative—determines its securities status. The chain remembers what the ego forgets. The bonding curve architecture itself deserves deeper scrutiny. My prior work on 2x Capital's leverage token contracts taught me to cross-reference mathematical models against actual implementation. In Pump Fun's case, the curve mechanics create a zero-sum dynamic among buyers. Early purchasers are paid by later purchasers' higher curve entry points. When the curve graduates, liquidity is deposited into a decentralized exchange, and the earliest holders can dump on the late arrivals. That structure does not merely lack commonality with a shared enterprise; it actively creates adversarial positions between holders. The profits of early buyers come directly from the losses of late buyers. The court's finding of no common enterprise is therefore not just a legal technicality—it reflects the actual incentive architecture written into the contracts. Each holder is mining the next holder's entry. That is the opposite of a common undertaking. The RICO Survival: Gravity, Not Resolution The RICO claims against Pump Fun survived because the plaintiffs plausibly alleged a pattern of racketeering activity—wire fraud, illegal gambling, and unlicensed money transmission—tied to the launch and promotion of FRED and GRIFFAIN. The bar for surviving a motion to dismiss under RICO is lower than the bar for winning at trial. But the survival itself carries consequences. Pump Fun's legal team now faces discovery. RICO discovery is invasive. The plaintiffs can demand communication records, marketing contracts, KOL agreements, and internal analyses of token launch mechanics. The enterprise allegation—that Pump Fun coordinated with KOLs to manipulate token distribution—will be tested through emails, Signal logs, and payment records. This is where the case transforms from a legal argument into a forensic exercise. I have been on the other side of this process. When I audited protocol contracts for institutional clients, I found that discovery-level scrutiny of developer communication often reveals more than the code itself. Emails about launch timing, coordinated influencer payments, and private discussions about token distribution can substantiate an enterprise theory that the smart contract alone would not support. The gambling charge is notable. If Pump Fun's bonding curve mechanism is deemed a gambling device, the platform's entire business model becomes legally fragile. The definition of gambling under federal law varies, but the court's decision to keep the charge alive is significant. It suggests the bonding curve rapid-buy mechanics, which create a casino-like experience for users, might qualify as an unlicensed gambling operation. The design is structurally similar to a slot machine: users place small bets, watch a visual interface, and hope the curve fills before the token collapses. The house—Pump Fun—takes a fee on every transaction regardless of outcome. That fee dynamic is what separates a gambling operation from a neutral exchange. The court found this plausible enough to proceed. The unlicensed money transmission claim is equally serious. If Pump Fun is found to have acted as a money transmitter without proper state licensing, the platform could face civil penalties across multiple jurisdictions. The distinction between a software platform and a money transmitter is fact-intensive. Courts look at whether the platform exercises control over funds, whether it facilitates transfers on behalf of users, and whether it holds custody at any point. Pump Fun's architecture, which processes user deposits through its contracts before routing liquidity to a decentralized exchange, could plausibly fit the definition. The court's ruling does not confirm these allegations—it only finds them plausible enough to proceed. That is a meaningful distinction. But the survival of the claim creates an operational burden that will not disappear quickly. The KOL Problem: An Undelivered Legal Signal The court's demand for an explanation on KOL service is the most underappreciated development in this case. Twenty-five named influencers, allegedly paid to promote FRED and GRIFFAIN, have not been served. Judge Liman wants an explanation. There are only two plausible explanations: the plaintiffs failed to serve them, or the KOLs are evading service. The second scenario is more interesting. If KOLs are actively evading service, they know the risk. If the plaintiffs failed to serve them, the case against the KOLs is weak—and the RICO enterprise theory loses its distribution layer. Either way, the September 10 deadline is a forcing function. The KOL dimension represents the first major attempt to hold individual promoters liable for token losses under RICO. A successful outcome for the plaintiffs would reshape influencer marketing in crypto. The current practice—paid promotions with disclosure disclaimers buried in tweet threads—would become legally hazardous. The court's insistence on service documentation suggests it does not intend to let the KOL claims dissolve quietly. If the plaintiffs cannot demonstrate reasonable efforts to serve the influencers, the court may dismiss those claims. If the plaintiffs succeed, the KOLs become active participants in the litigation. They will face discovery requests for their promotion contracts, payment receipts, and communication histories with Pump Fun. We do not guess the crash; we trace the fault. The fault here leads to paid promoters. Contrarian Angles: The Protection That Invites More Risk The conventional reading is that this ruling is bullish for Solana and bearish for Pump Fun. That reading is incomplete. The Solana dismissal establishes a precedent that infrastructure providers are not responsible for application-level user losses. But precedent cuts both ways. If infrastructure is immune, then applications will proliferate without meaningful upstream scrutiny. The network effect that made Solana the center of the meme coin ecosystem will accelerate precisely because the legal risk has been externalized to the application layer. The result is that infrastructure tokens benefit from legal clarity while the application layer absorbs more risk. This is not a static equilibrium. It will drive more meme coin platforms to Solana, which will attract more attention from plaintiffs' firms, which will concentrate enforcement risk in a smaller set of application entities. The second contrarian point is more uncomfortable. The no common enterprise finding is not a clean win for meme coin legitimacy. It means token holders have no legal standing to assert common claims against issuers under securities law. The same finding that protects FRED and GRIFFAIN from securities classification also deprives their holders of a collective remedy. Their only remaining path is RICO—a much higher bar—or common law fraud claims. The court has effectively told retail meme coin holders: you bought independently, you lost independently, and you will litigate independently. Verification precedes trust, every single time. The verification here is sobering. The third contrarian observation relates to the KOL accountability gap. By dismissing Solana and focusing on Pump Fun and its influencers, the ruling creates an incentive for KOLs to relocate their promotion activities to offshore platforms or anonymous accounts. The very individuals most responsible for meme coin distribution—the personalities with hundreds of thousands of followers—can restructure their operations to avoid U.S. jurisdiction. The result is reduced deterrence, not increased protection. The platforms that remain in the United States face concentrated scrutiny while the actual promotional networks become more opaque. Technical analysis of on-chain traffic already shows that a significant fraction of meme coin promotion originates from accounts with VPN usage and offshore exchange funding. The legal system will struggle to pierce that veil. The Infrastructure Precedent: What Solana's Dismissal Teaches The court's analysis of Solana Labs deserves careful attention. The plaintiffs argued that Solana's low fees and high throughput created the conditions for the meme coin boom, and that the network should have done more to protect investors. Judge Liman rejected this theory. The infrastructure layer, he reasoned, does not control the actions of independent application developers or users. The implication extends beyond Solana. Ethereum, Base, Arbitrum, and every other L1/L2 can now cite this ruling as a defense against user losses from applications built on top of them. The gatekeeper theory—that networks must police their ecosystems—has been rejected at the motion to dismiss stage. This is a significant legal development for the entire infrastructure sector. I have argued in past analyses that protocol neutrality is not just a design principle but a legal necessity. This ruling converts that argument into case law. But the protection is not absolute. The ruling leaves open the possibility that infrastructure providers could face liability if they actively participate in application-level conduct. A network team that promotes specific tokens, provides liquidity, or directly manages application operations could still be exposed. The boundary is not between code and commerce. It is between neutrality and participation. The court's language suggests that the passive provision of infrastructure—even infrastructure that is uniquely suited to meme coin trading—does not create liability. Active orchestration of token launches would. The Jito Labs episode is instructive. The plaintiffs tried to add the MEV and staking firm, then withdrew. The attempt suggests plaintiffs' firms will continue to probe which ecosystem participants can be swept into enterprise theories. The court's rejection of that expansion is encouraging for the infrastructure sector, but it is not a permanent shield. Each new case will test a different set of facts. Implementation Risk Scoring: A Framework for Legal Exposure My institutional due diligence work has taught me to quantify implementation risk. Legal rulings like this one require the same treatment. Here is my provisional framework for assessing how this ruling affects different layers of the token stack: Infrastructure layer (Solana, Ethereum, Base): Legal risk reduced. The ruling aligns with the neutral protocol standard. Risk score: 2/10. Launch platforms (Pump Fun and similar bonding curve platforms): Legal risk elevated. RICO discovery creates operational burden. The gambling and money transmission charges threaten the business model directly. Risk score: 8/10. KOL promoters: Legal risk uncertain. The service issue creates an open question. If KOLs can be served and joined, their liability becomes a live issue. Risk score: 6/10. Meme coins with no revenue-sharing or pooled assets: Securities classification risk reduced. The no common enterprise finding provides a workable defense—provided the contract does not change. Risk score: 4/10. Meme coins with staking, revenue-sharing, or team-controlled treasuries: Securities classification risk elevated. The presence of shared pools or profit-distribution mechanisms could flip the Howey analysis. Risk score: 7/10. The distinction between categories four and five is the most important takeaway for token designers. The contract determines the legal outcome. Marketing materials are irrelevant. Code is law, but history is the judge. Let me walk through the fourth category with a concrete example. A meme coin with a fixed supply, no staking mechanism, no team treasury, and a fully burned liquidity pool is structurally similar to a collectible. Buyers acquire it as a speculation on collective enthusiasm, but there is no enterprise generating returns. The coin either appreciates through demand or depreciates through neglect. No one controls the supply. No one shares the platform's fee revenue. Under the court's logic, this coin's holders lack the commonality required for securities classification. The fifth category is different. If the same coin introduces a staking pool where user deposits are aggregated and yield is distributed proportionally, the holders now share in a pooled enterprise. The smart contract created the commonality that the Howey Test requires. A single contract upgrade can change the legal classification of a token. That is the operational reality teams face going forward. What the Ruling Does Not Say The ruling has limitations that will become clear in the coming months. First, it is not a final judgment on liability. It survived the motion to dismiss phase—the lowest procedural bar in federal litigation. The findings could be reversed on appeal, modified by subsequent discovery, or rendered moot by settlement. Second, the SEC is not bound by this ruling. The agency's enforcement framework maintains that most tokens are securities. A federal district court opinion does not compel the SEC to change its position. The ruling creates persuasive authority, not binding precedent across all circuits. The agency could still file its own enforcement action against Pump Fun or similar platforms, arguing that the Howey Test is satisfied under different facts. Third, the common enterprise finding applies to the specific facts of FRED and GRIFFAIN. Another meme coin with a different economic structure could yield a different result. The Howey Test is fact-sensitive by design, and courts distinguish cases based on contract terms, marketing representations, and the actions of promoters. Fourth, the ruling says nothing about state-level regulation. Even if the tokens are not federal securities, they could still be subject to state consumer protection laws, state securities statutes, or gambling regulations. California, New York, and Texas have aggressive enforcement frameworks for digital assets. The absence of federal securities classification is not a license to operate without compliance. Sector Response and Expected Market Dynamics The immediate market reaction is likely to be muted but directional. Solana's legal overhang has been reduced, which supports a modest re-rating of the network's risk premium. Pump Fun faces a more uncertain path. The platform's trading volume may decline as users factor in the possibility of operational disruption. KOLs who previously promoted Pump Fun tokens with impunity may hesitate, particularly if the September 10 service deadline results in the KOLs being formally joined to the lawsuit. The broader meme coin sector enters a period of legal differentiation. Platforms that mirror Pump Fun's architecture—bonding curves, rapid launch mechanics, influencer distribution—now face elevated legal scrutiny. Platforms that adopt more neutral structures, such as fully permissionless token deployment without promotional coordination, may be better positioned. The market will eventually price this distinction. I expect to see a premium emerge for launch platforms with mandatory disclosure mechanisms, transparent fee structures, and documented KOL compliance policies. Takeaway: The Structural Consequences This ruling is the clearest signal yet that U.S. courts are willing to distinguish between layers of the blockchain stack. The infrastructure layer is protected. The application layer is exposed. KOLs are the next frontier. For Solana, the dismissal removes a significant legal overhang. The network can continue to position itself as the home of meme coin innovation without the immediate threat of class action liability. Expect more teams to launch on Solana as a result. The ruling effectively subsidizes the network's meme coin ecosystem by externalizing legal risk to application developers. For Pump Fun, the survival of the RICO claims means the platform's business model is now a subject of public legal scrutiny. The bonding curve mechanism, the fee structure, and the KOL network are all discoverable. The September 10 KOL service deadline is the next checkpoint. If the plaintiffs fail to serve the influencers, the enterprise theory weakens. If they succeed, the case becomes a blueprint for future enforcement. The most durable outcome is conceptual. The Howey Test now has a functional, contract-level definition for meme coins. A token that does not share profits, pool assets, or create joint ownership is more likely to be classified as a standalone asset, not a security. The token contract is now a compliance document. The chain remembers what the ego forgets. This is not liberation for the meme coin sector. It is a narrowing of the road. Issuers who structure their contracts to avoid securities classification also surrender the protections of securities law. Holders who trade independently lose the ability to pursue collective remedies. The ruling does not create a safe harbor. It creates a trade-off. We do not guess the crash; we trace the fault. The fault in this case ran from Pump Fun's bonding curve contracts through the KOL distribution network to the Solana base layer. The court has now drawn the line. Token architects should study it carefully. The next case will be decided on contract parameters, not narratives. Truth is not consensus; it is consensus verified. The deeper lesson extends beyond the meme coin sector. Every protocol that facilitates trading, launches tokens, or coordinates promotional activity now operates in a legal environment where the court reads the code. The question is no longer whether a team's intentions were good. It is whether the smart contract objectively creates a common enterprise, a gambling mechanism, or an unlicensed money transmission service. Those determinations are made from the code itself, not from the white paper. For the infrastructure builders reading this, the message is discipline. Neutrality is a legal defense, but it must be maintained operationally. Do not promote specific assets. Do not coordinate with launch platforms. Do not provide privileged liquidity arrangements. Every departure from neutrality creates a factual basis for the next plaintiff's theory. For the application developers reading this, the message is caution. The bonding curve model works technically but carries legal weight. Consider whether your fee structure creates a gambling dynamic. Consider whether your promotional practices can withstand RICO discovery. Consider whether your token contract could be read as creating a common enterprise. The court has given the industry a preview of how these questions will be answered. The September 10 deadline will be the first test of the KOL dimension. The subsequent discovery schedule will reveal the depth of the enterprise allegations. The trial, if it occurs, will be the first major U.S. jury determination of meme coin platform liability under RICO. History is not written by headlines. It is written by docket entries. The chain remembers what the ego forgets.