A landmark ruling in the Central District of California has clarified the legal status of celebrity-endorsed meme coins. On April 16, 2026, U.S. District Judge Stanley Blumenfeld Jr. granted the defendants’ motion to dismiss the Second Amended Complaint in Naeem Azad et al. v. Caitlyn Jenner et al. (Case No. 2:24-cv-09768), terminating all federal securities claims with prejudice. The decision marks one of the first major judicial applications of the Howey Test to a meme coin, offering guidance for both the crypto industry and regulatory bodies.
Howey Test and the Common Enterprise Prong
The Howey Test, established by the U.S. Supreme Court in 1946, determines whether a transaction qualifies as an “investment contract” subject to securities laws. It requires: (1) an investment of money, (2) in a common enterprise, (3) with an expectation of profits derived from the efforts of others. Judge Blumenfeld ruled that the plaintiffs failed to plausibly allege the second prong—common enterprise. The complaint did not show that investors pooled resources or shared profits and losses beyond the simple purchase of the token. Arguments about transaction taxes, buybacks, and marketing activities were deemed insufficient to establish a common enterprise. Because this element was not met, the court did not address the third prong regarding profits from others’ efforts.
Case Background and Procedural History
Caitlyn Jenner launched the JENNER token on Solana on May 26, 2024, followed by an Ethereum version. The token was heavily promoted via social media, including AI-generated imagery on X (formerly Twitter) that suggested profit potential. In November 2024, The Rosen Law Firm filed a class action on behalf of token purchasers, alleging securities fraud against Jenner and her then-business manager Sophia Hutchins (who died in July 2025). The court initially dismissed the complaint on May 9, 2025, because the plaintiffs—many foreign investors—failed to allege U.S.-based transactions. An amended complaint added lead plaintiff Lee Greenfield, a UK citizen claiming losses exceeding $40,000. Despite these amendments, the court found the securities allegations still deficient.
Federal securities claims were dismissed with prejudice on the merits as to Greenfield, meaning they cannot be refiled in federal court. California state-law claims, including fraud and quasi-contract, were dismissed without prejudice, allowing plaintiffs to potentially refile in state court. Claims from all other putative class members were also dismissed without prejudice.
Implications for the Crypto Industry
This ruling adds to a growing body of case law distinguishing speculative meme tokens from regulated securities. While not binding on the SEC or other courts, it provides persuasive authority for future litigation involving celebrity-endorsed tokens. Jenner had previously described the lawsuit as meritless and set up a legal defense fund, warning that an adverse outcome could harm the broader digital asset industry. The decision may influence cases involving other public figures, including political personalities, who have launched similar tokens. No immediate appeal has been reported, and the state-law questions remain unresolved pending possible refiling in California state court.