Visa Closes Meme Coin Rewards Loophole After Block Investigation
In brief
- Visa directed payment processors to stop coding meme coin purchases as digital goods, effective next week.
- The Block found users could earn ordinary credit card rewards by buying meme coins via Robinhood Wallet and Fomo apps.
- Chase opened a case with Visa after discovering one transaction wasn't flagged as crypto.
- The move represents a narrower regulatory win for JP Morgan after banks failed to tighten stablecoin rules in Congress.
The Loophole
The Block published an investigation finding that users of the Robinhood Wallet and Fomo apps could purchase meme coins with credit cards through Apple Pay or Google Pay. The purchases, powered by Crossmint's payments infrastructure, were coded as "digital goods media" rather than crypto transactions. This classification allowed customers to earn standard credit card rewards on what were effectively cryptocurrency purchases.
Chase discovered the issue when one Visa transaction had not been flagged as a cryptocurrency purchase and should not have earned rewards. The bank subsequently opened a case with Visa challenging the merchant category code classification.
Visa's Response
Visa told at least one industry participant that the merchant code for digital goods media is not appropriate for meme coin purchases. The payment giant has also informed payment processors, including Checkout.com, that the code will no longer be accepted for those transactions. Processors have been given a grace period to wind down the practice, expected to end the following week.
Going forward, meme coin purchases must be processed as crypto transactions and will be subject to Visa's corresponding rules and restrictions.
Crossmint defended its original approach by pointing to a 2025 SEC staff statement that described certain meme coins as akin to collectibles rather than securities. That argument, however, didn't persuade Visa or the banks monitoring the loophole.
Regulatory Context
This move comes after banks came away empty-handed in their bid for tighter restrictions on stablecoin rewards after the Clarity Act failed to advance in the Senate. JP Morgan scored a narrower victory in a separate fight over credit card rewards on crypto purchases, with this Visa enforcement representing a tactical win on a more granular level.
The New York attorney general's office also told The Block it was aware of and reviewing the matter. The regulatory scrutiny underscores the broader tension between crypto's growth and traditional finance's compliance obligations.
