Why Did the Court Reject the Securities Claim?
A US federal judge has ruled that a memecoin linked to media personality and retired Olympian Caitlyn Jenner does not qualify as a security, dismissing key claims in a class action lawsuit brought by investor Lee Greenfield. The plaintiff alleged he lost more than $40,000 after purchasing the $JENNER token on both Solana and Ethereum, arguing that the launch amounted to the sale of unregistered securities. The complaint claimed Jenner used her public profile to promote the token and create expectations of profit among buyers. Greenfield pointed to social media posts, including one featuring an AI-generated image tied to the token’s branding, as part of a broader effort to encourage investment. The lawsuit also named Jenner’s manager, Sophia Hutchins, who died in July 2025, as a defendant. However, the court found that the claims failed to meet the legal threshold required to classify the token as a security under US law.How Did the Howey Test Shape the Ruling?
U.S. District Judge Stanley Blumenfeld, Jr. based the decision on the Howey Test, a long-standing legal standard used to determine whether a transaction qualifies as an investment contract. The test requires three elements: an investment of money, a common enterprise, and an expectation of profits derived from the efforts of others. While the court did not dispute that investors had committed capital, it concluded that the complaint failed to establish the existence of a common enterprise. This element is central to securities classification and often determines whether token sales fall under federal regulation. “Taken together, the allegations in the SAC [second amended complaint] do not plausibly allege that the investors agreed to split profits and losses or that they pooled their resources to create capital for investment in anything other than the coin itself, including through the alleged transaction tax, buybacks, or marketing efforts,” the judge said. “Greenfield therefore has not plausibly alleged a common enterprise based on horizontal commonality.” The court further stated that without establishing either horizontal or vertical commonality, the case could not proceed under the securities framework. “Because Greenfield does not plausibly allege either horizontal or vertical commonality, he has not alleged the existence of a common enterprise,” Judge Blumenfeld added. “The Court therefore need not determine whether he has plausibly alleged the third prong of the Howey test—whether investors expected profits solely from Jenner’s efforts.”Investor Takeaway
Failure to establish a “common enterprise” remains a critical weakness in many token-related lawsuits. Without pooled capital or shared profit structures, courts may continue to reject securities classifications for memecoins.
What Does This Mean for Memecoin Regulation?
The ruling highlights the legal difficulty of applying traditional securities frameworks to memecoins, which often lack formal governance structures or coordinated investment schemes. Unlike token projects tied to revenue generation or protocol development, memecoins frequently operate without clear mechanisms for profit distribution. This case reinforces a pattern seen in recent litigation, where courts scrutinize the structural design of tokens rather than promotional activity alone. Claims based solely on marketing or celebrity endorsement may not be sufficient to meet the legal definition of a security. At the same time, the decision does not eliminate regulatory risk. The judge noted that remaining non-federal claims could still be pursued in state court, leaving open the possibility of further legal challenges under different frameworks.Investor Takeaway
Memecoins continue to sit in a regulatory gray area. Federal securities claims may fail without clear investment structures, but legal exposure can persist through state-level actions and other enforcement paths.
