Memecoin Factory or Digital Casino? Pump.fun story
In less than three years, the British startup Pump.fun transformed the cryptocurrency market into a ruthless, highly profitable speculative mechanism. While almost all of its users lose funds or walk away with negligible profits, the platform itself has generated a massive revenue reaching nearly $1.3 billion. How does this system work, why does it win regardless of the players' outcomes, and what goes on behind the scenes of its US court battle?
Democratization of Speculation: How Does Pump.fun Work?
Memecoins are assets lacking utility value, underlying technology, or backing from real-world businesses. Their value relies entirely on internet trends and speculation. Previously, creating a new token required programming knowledge. Pump.fun (created by UK-registered Baton Corporation Ltd.) reduced this process to a simple online form.
The creation process of a new coin takes very little time: the user enters a name, uploads a graphic, and within moments, the token goes live on the Solana blockchain for free or for a minimal fee. The face of the venture is Alon Cohen-one of three co-founders-who frequently hides his face behind an animated digital overlay during public appearances.
System Mathematics: A Commission on Every Move
The valuation of tokens on the platform relies on a programmed liquidity curve (bonding curve):
- Early Purchase: Low entry price. Every subsequent buy transaction raises the asset's price.
- Buying at the Top: Highest price and the risk of being left holding a token that lacks further buyers.
The core business foundation of Pump.fun is a 1% commission levied on every buy and sell transaction. Buying $100 worth of tokens generates $1 in commission for the service, and their subsequent sale yields another dollar.
[User Buys] ─── 1% commission ───► [ Pump.fun Revenue ]
[User Sells] ─── 1% commission ───► [ Pump.fun Revenue ]
When a token accumulates sufficient liquidity on the curve (reaching a market valuation of around $70,000), it is migrated to a decentralized exchange. As of March 2025, this is the company's own exchange-Pump Swap-allowing transaction fees to remain within the same corporate entity.
Player Statistics: 96% in the Red or Making Small Gains
- Fewer than 1 in 100 wallets achieved a profit exceeding $10,000.
- A study covering nearly 1.5 million wallets showed that half of the investors suffered losses, while the majority of the rest achieved profits under $500.
- In total, 96% of players failed to achieve life-changing or financially significant profits.
Despite this, at the peak of the memecoin bull run (January 2025, during which Donald Trump, among others, issued his own token), the platform generated record transaction fees.
Controversies, Regulation, and Market Competition
- Pathological Livestreams: Introducing livestreaming capabilities for token creators in the autumn of 2024 led to attempts to artificially pump prices through drastic on-camera behavior (including threats and animal abuse), forcing the company to tighten moderation.
- Regulatory Response: In December 2024, the UK's Financial Conduct Authority (FCA) issued a warning regarding the company operating without required permissions, resulting in the service being blocked for users in the United Kingdom.
- Emergence of Competition: The rise of alternative launchpad platforms (such as LetsBonk) in mid-2025 temporarily took away part of Pump.fun's market share. In response, the company introduced a transaction fee-sharing system with token creators, rewarding volume generation.
The $PUMP Token and the Buyback & Burn Mechanism
In July 2025, the platform conducted a public sale of its own token, $PUMP, raising approximately $500 million in 12 minutes.
To stabilize the valuation, the company implemented an ongoing buyback and burn mechanism to purchase tokens from the market and destroy them:
- By April 2026, approximately $370 million USD was allocated to buy back and destroy over one-third of the total token supply.
- The total amount allocated for buybacks and burning surpassed $460 million.
Despite the constant reduction in supply, the market valuation of the $PUMP token fell by more than half from its peak values.
Court Battle in New York (Aguilar v. Baton Corporation Ltd.)
In January 2025, a consolidated class action lawsuit against Baton Corporation Ltd. and its founders was updated in the US District Court for the Southern District of New York. The allegations included violations of the RICO Act (pertaining to racketeering and organized crime), offering unregistered securities, and misleading investors regarding the "fair launch" mechanism.
In late August 2026, the judge issued a ruling on the motion to dismiss:
- Illegal Gambling Charge Dismissed: The court ruled that memecoin transactions under the law constitute market speculation rather than a gambling wager.
- RICO Case Moves Forward: The court allowed claims regarding unfair trading practices and unfair advantages granted to certain market participants to proceed.
- On-chain Evidence and Chats: Attorneys representing the plaintiffs added nearly 5,000 internal corporate chat messages provided by a whistleblower to the evidence files.
In the rationale for the ruling, the court drew attention to the platform's revenue structure, pointing out that Pump.fun collects fees regardless of whether a transaction participant turns a profit or incurs a loss.
Conclusion
Resources:
https://www.wolfpopper.com/news/pumpfun-class-action-lawsuit-expands-with-consolidated-amended-complaint-adding-rico-allegations-and-new-defendants
https://www.dlapiper.com/insights/publications/2025/02/meme-coins-alleged-to-be-securities-in-two-new-class-actions
https://pump.fun/pump-token
https://dune.com/drugo/pumpfun-memecoins
https://decrypt.co/331108/business-memes-inside-solana-meme-coin-pump-fun
https://www.theblock.co/news/ecosystems/2025-08-20-pump-fun-surpasses-800-million-in-lifetime-revenue-as-solana-memecoin-launchpad-competition-heats-up-367585
http://www.youtube.com/watch?v=QCxP9PoCYT8
