Visa is moving to shut down a checkout loophole that allowed meme coin purchases made with credit cards to be processed under a merchant category code intended for digital media, according to a source familiar with the matter.

The move follows a challenge from Chase, which said one Visa transaction had been misclassified and should not have earned rewards. The New York attorney general's office is also reviewing the matter.

Meme coin purchases are not going away, but they will have to be coded as crypto transactions and become subject to Visa's corresponding rules. Payment processors have been given a grace period to wind down the practice, which is expected to end next week.

The development lands on the heels of a separate legislative fight: banks came away empty-handed in their bid for tighter restrictions on stablecoin rewards after the Clarity Act failed to advance in the Senate this week. But JP Morgan has scored a narrower victory in its fight over credit card rewards on crypto purchases, Crypto In America has learned.

According to the source, Visa is moving to close an apparent loophole in check powered by Crossmint, a crypto payments infrastructure firm. The workaround allowed meme coin purchases made with Visa credit cards to be processed under a merchant code intended for ordinary digital media. Merchant category codes are the standardized labels card networks assign to businesses to identify what is being sold — the mechanism by which issuers decide whether a purchase earns rewards.

The change follows an investigation by The Block that found users of the Robinhood Wallet and Fomo apps could purchase meme coins with credit cards through Apple Pay or Google Pay without completing a separate KYC process, the identity-verification step crypto platforms typically require of their users. The Block's test purchases — powered by Crossmint and made with both Visa and Mastercard credit cards — were coded as “digital goods media,” a category typically used for e-books, movies and music, rather than as crypto transactions. That classification allowed customers to earn ordinary credit card rewards, such as points or cash back, on the meme coin purchases.

Chase told The Block that one Visa transaction had not been flagged as a cryptocurrency purchase, had been assigned the wrong merchant category code and should not have earned rewards. The bank subsequently opened a case with Visa challenging the classification. The New York attorney general's office also told The Block it was aware of and reviewing the matter.

Crossmint defended its approach by pointing to a 2025 SEC staff statement that described certain meme coins as akin to collectibles rather than securities.

On the payment processing side, Visa clearly does not agree. In correspondence reviewed by Crypto In America, the payments giant told at least one industry participant that the merchant code used for digital goods media is not appropriate for meme coin purchases.

Visa has also informed payment processors, including Checkout.com, that the code will no longer be accepted for those transactions, the source said. The processors have been given a grace period to wind down the practice, which is expected to end next week.

Visa did not immediately respond to requests for comment.

In a statement provided after publication, a Crossmint spokesperson said: “Visa has not made a public statement or confirmed any change to how they treat merchant codes. Crossmint maintains good standing with Visa, card networks, and payment partners. Our position and procedures on how we process digital goods through our platform has not changed. As stated previously, if that guidance is updated, our procedures will be updated with it.”

But the correspondence reviewed by Crypto In America indicates that meme coin purchases, while not going away, will no longer qualify for ordinary credit card rewards. Once the grace period ends, the purchases must be processed as crypto transactions and will be subject to Visa's corresponding rules and restrictions. With Visa yet to make any public statement and Crossmint maintaining that its procedures have not changed, how processors actually re-code these checkouts once the grace period ends will show whether the loophole has fully closed.

“The message to the crypto industry is clear: Stop being cute, stay in your lane and use the appropriate codes,” the source said.

The report was first published by Crypto in America, a newsletter written by Eleanor Terrett. This story was updated after publication to include comment from Crossmint.