Key facts
- Visa is closing a loophole that allowed meme coin purchases with credit cards to earn rewards.
- The loophole involved processing meme coin purchases under a merchant code for digital media.
- Chase challenged a Visa transaction for misclassification and improper rewards.
- The New York attorney general's office is reviewing the matter.
- Meme coin purchases will now be coded as crypto transactions, subject to Visa's rules.
- Payment processors have a grace period expected to end next week.
Visa is taking steps to close a loophole that allowed users to earn credit card rewards on meme coin purchases. The workaround, facilitated by Crossmint, a crypto payments infrastructure firm, enabled these purchases to be processed under a merchant code typically used for digital media like e-books, movies, and music, rather than as crypto transactions. This classification allowed customers to accrue ordinary credit card rewards, such as points or cash back.
The issue came to light after an investigation found that users of Robinhood Wallet and Fomo apps could buy meme coins with credit cards via Apple Pay or Google Pay without a full Know Your Customer (KYC) process. These transactions were coded as 'digital goods media.'
Chase flagged one such Visa transaction, stating it was misclassified and should not have qualified for rewards. The bank subsequently initiated a challenge with Visa. The New York attorney general's office has also indicated it is aware of and reviewing the situation.
Crossmint defended its approach by referencing a 2025 SEC staff statement that characterized certain meme coins as akin to collectibles rather than securities. However, Visa appears to disagree with this classification for payment processing purposes. In correspondence reviewed by Crypto In America, Visa informed at least one industry participant that the digital goods media merchant code is inappropriate for meme coin purchases. Visa has also notified payment processors, including Checkout.com, that this code will no longer be accepted for such transactions. Processors have been granted a grace period, expected to conclude next week, to adjust their practices.
While meme coin purchases are expected to continue, the associated credit card rewards are likely to cease. Going forward, these transactions must be processed as crypto transactions, adhering to Visa's established rules and restrictions for such activities.