An entity and individual associated with the "Let's Go Brandon" meme token can't beat a lawsuit over a collapse in prices for the coin after a judge said a jury must decide whether people purchased the token because they expected profits or because the coin was pitched as "a meme coin for advocacy of conservative values."

In a Tuesday order, U.S. District Judge Paul G. Byron denied a summary judgment bid by James Koutoulas and LGBcoin Ltd. and partially granted a competing summary judgment request from the proposed class of meme coin purchasers, finding that "neither party is entitled to summary judgment as to whether LGBCoin is a security."

"A genuine dispute of material fact exists as to the third prong of the Howey test," Judge Byron said, referring to the 1946 holding in the case Securities and Exchange Commission v. W.J. Howey Co. that an offering is an investment contract if it involves, first, an investment of money; second, investment in a common enterprise, and third, an expectation of profits that would come solely through the efforts of others.

Judge Byron's finding in favor of the meme coin purchasers included a holding that their payment for LGBcoin represents an investment of money and that they'd invested in a "common enterprise." As such, they'd satisfied the first two prongs of the Howey test, the court said.

But "neither party is entitled to summary judgment as to the third prong," the court said, noting that the parties disagreed about "whether defendants' promotional materials for LGBCoin attracted plaintiffs with an expectation of profits or motivated plaintiffs by a desire to obtain LGBCoin as a meme coin for advocacy of conservative values."

The coin at issue in the case is inspired by the "Let's Go Brandon" meme, in which the phrase serves as a stand-in for a profane statement of distaste for former U.S. President Joe Biden.

The meme originated in October 2021 as a TV news reporter interviewed stock car racer Brandon Brown following a race at the Talladega Superspeedway in Alabama. As the interview took place, the news reporter mistakenly described chanting from the crowd in the background as "Let's go, Brandon," an expression of support for Brown.

In the latest version of their suit, LGBcoin buyers Sandra Bader, Eric De Ford and Shawn R. Key claimed that purchasers of the coin bought it in part because those associated with the coin teased "an upcoming announcement of a NASCAR partnership" with Brown.

LGBcoin did indeed announce in December 2021 that it would be Brown's full-season primary partner for the 2022 NASCAR Xfinity Series season. The announcement allegedly sent prices for LGB coin up by nearly 510% from its opening price two months earlier.

But days later, the investors claimed, NASCAR revoked the sponsorships in an effort to "steer away from political issues," which allegedly precipitated a complete wipeout of prices for LGBcoin.

Earlier versions of the suit included Brown, NASCAR and others as defendants, but Koutoulas and LGBcoin Ltd. are the final remaining defendants. In March, Judge Byron certified a class of buyers solely related to their claims of the sale of unregistered securities.

Judge Byron's Tuesday order also asserted that "In support of their argument that LGBCoin is a 'meme coin' rather than a security, defendants cite to several cases which the court believes are hallucinated from artificial intelligence."

"The court cautions defendants that citing to cases that do not exist is a misrepresentation to the court," Judge Byron said, warning that "if defendants continue to use such unethical practices in later briefings, the court may impose appropriate sanctions against defendants."

The case is currently scheduled for trial in early March.

In a Wednesday email, Koutoulas told Law360 that he would continue to "fight this sham case." He also asserted that plaintiffs' counsel should be sanctioned for what he alleged were "brightline violations" of the Private Securities Litigation Reform Act, without specifying what the alleged violations were.

Counsel for the LGBcoin purchasers declined to comment, and Koutoulas and his counsel did not immediately respond to a follow-up request for comment regarding Judge Byron's comments about the citations.

The buyers are represented by Aaron M. Zigler, Nidya S. Gutierrez, Lawrence V. Ashe and Kevin McCormack of Zigler Law Group LLC and John T. Jasnoch and Sean T. Masson of Scott + Scott Attorneys at Law LLP.

Koutoulas and LGBCoin Ltd. are represented by Nicole Martell of Di Pietro Partners PLLC.

The case is De Ford v. Koutoulas et al., case number 6:22-cv-00652, in the U.S. District Court for the Middle District of Florida.