Pump.fun's extreme live streaming content may trigger criminal investigation and civil lawsuits

Author: Yohan Yun, CoinTelegraph; Compiler: Baishui, Golden Finance

Pump.Fun’s live streaming feature appears to have become a platform for developers to broadcast extremely shocking content to promote their tokens — which could lead to civil or criminal prosecution, according to legal experts.

From suicide threats to animal cruelty to pornography, developers who push the boundaries face few consequences other than having their content removed. Meanwhile, industry players urged Pump.Fun to stop live streaming (which it did earlier today) until it can properly moderate the content.

Calling for Pump.fun to shut down its live streaming feature. Source: Beau

Pump.fun was one of this year’s big success stories, offering code-free token issuance services in just a few clicks, and played a major role in Solana’s memecoin superstardom.

Despite the platform being home to multiple scam tokens and scams, it remains unregulated. However, the latest series of provocative behavior in its live broadcasts is prompting market observers to call for regulatory action.

"This is a legitimate reason for a criminal investigation and civil lawsuit," said Yuriy Brisov, partner at Digital and Analogue Partners.

"While we strongly support free speech, we have a responsibility to ensure that users do not see offensive/dangerous content and do not provide a platform for bad actors to do whatever they want," said Alon.

Pump.fun and the responsibility of content platforms

Pump.fun's latest problems with live broadcasts have reignited an ongoing debate over whether channels that distribute user-generated content, such as X or YouTube, should be held responsible for the content shared on their platforms.

On social media, despite advances in content moderation technology, illegal content often slips through the cracks amid the proliferation of user-generated content.

Recently on Pump.fun, a “developer” threatened to hang himself if their token didn’t reach a certain market cap, while another threatened a goldfish on camera.

Source:DBCrypto

Mikko Ohtamaa, co-founder of algorithmic trading firm Trading Strategy, said on X that Pump.fun had two options: either it would be quickly shut down by police after choosing not to moderate, or it would eventually be shut down after regulators took it seriously.

“I’m for free speech, but these livestreams are causing real problems, with people breaking the law on the livestreams. When mainstream media gets wind of this, it’s going to trigger a shutdown,” Ohtamaa said.

Alon acknowledged on X that Pump.fun’s moderation “isn’t perfect,” adding that an NSFW (Not Safe for Work) switch could be turned on to hide extreme videos.

In the U.S., Section 230 of the Communications Decency Act provides some form of immunity for platforms that host user-generated content.

While platforms are generally protected, they must be accountable when they moderate content. Failure to do so, especially if they knowingly allow harmful content, can lead to legal challenges. For example, in Barnes v. Yahoo! In the U.S., courts have held that a platform’s promise to remove harmful content can give rise to liability if it doesn’t follow through.

Alon said Pump.fun has a “large” moderation team “working around the clock,” while inviting community members to flag unmoderated content or tokens to its support channels.

On November 25, some pornographic and racist content was displayed on Pump.Fun’s live broadcast board.

Many examples of animal abuse and violent content can be seen in the four pages of content, which all seem to have been eventually deleted.

Pump.Fun is a haven for Meme coins, but most have been accused of defrauding users.

The platform’s welcome note to visitors claims that it can prevent Rug Pulls and that issuing tokens is not that difficult. In a recent livestream, a teenager created a token and then allegedly tossed it to his investors for $30,000 before giving the audience the finger with two middle fingers during a livestream.

Teens suspected of live Rug Pull. Source: TikTokInvestors

Some pornographic live broadcasts have been accused of playing videos recorded by adult content creators on other platforms, which are used as headlines just to attract investors.

According to Dune Analytics,More than 3.8 million tokens have been issued through Pump.

The success rate for these tokens is low, with an estimated 1.2% of tokens successfully reaching the $69,000 market cap required to be listed on decentralized exchanges such as Raydium.

This can be attributed to several factors, such as oversaturation of tokens and poor marketing, as well as scams and fraud.

“This does not bode well for the industry,” noted Mads Eberhardt, senior crypto analyst at Steno Research. “I believe that the snowball effect of more and more institutional adoption of Bitcoin cannot be stopped, but the Bitcoin industry would be better off if it wasn’t happening at the same time.”

Brisov of Digital and Analog Partners said existing laws cover fraud involving cryptocurrencies. In the case of Pump.fun, the token creators could be held liable for wire fraud, a white-collar crime committed through electronic means, including the internet.

The threat of Pump.fun doesn’t just come from the U.S. Department of Justice

“For reasons that I cannot understand, entrepreneurs dealing with Meme coins think that the law does not apply to them,” Brisov said.

“If you are doing wash trading, if you are cheating on Pump.fun, the same laws will apply to you, the [U.S.] Department of Justice will come after you, you will be prosecuted and go to jail for years,” he warned.

Pump.fun does not prominently display terms and conditions or disclaimers on its website like many other sites do. Their absence could be used against the platform if any formal investigation or lawsuit is launched against it.

Brisov said the DOJ isn’t the only agency that Pump.fun should be worried about.

“The fact that any token has the potential to be considered a security means there is also a high risk of an unregistered securities offering, which is also in violation of the Securities Act and relevant EU regulations,” he said.