Court sides with Uniswap over class action suit

The Court said that concerns around unregistered securities were better addressed to Congress

article-image

chase4concept/Shutterstock modified by Blockworks

share

A class action complaint against Uniswap was tossed on Tuesday, Aug. 29 after the judge found that some of the claims were “devoid of factual support.”

Judge Katherine Polk Failla oversaw the case — she is also overseeing the US Securities and Exchange Commission’s case against Coinbase — and issued the ruling on the dismissal. 

“Due to the Protocol’s decentralized nature, the identities of the Scam Token issuers are basically unknown and unknowable, leaving Plaintiffs with an identifiable injury but no identifiable defendant,” the judge wrote. 

Read more: SEC sues Coinbase for alleged securities violations

She added that the plaintiffs launched the suit “hoping that this Court might overlook the fact that the current state of cryptocurrency regulation leaves them without recourse.” But that does not allow them to blame Uniswap for their injury. 

The original complaint filed last year alleged that Uniswap, founder Hayden Adams, Andreessen Horowitz, and Paradigm were responsible for “rampant fraud” on the exchange, and also pushed for Uniswap to register with the Financial Industry Regulatory Authority. 

Furthermore, plaintiffs also alleged that Uniswap “offered and sold unregistered securities.”

Failla said that due to the regulatory landscape and the unknowns that currently exist — meaning, despite the SEC’s various lawsuits and claims that certain crypto assets are securities — there has yet to be a “definitive determination” on whether certain crypto assets are commodities, securities, etc. 

The Court “concludes that Plaintiffs’ concerns” around federal securities laws “are better addressed to Congress than to this Court.”

Despite claims that Uniswap is “run as a for-profit business,” Failla said that there is no centralized ownership structure.

“The Court finds that the smart contracts here were themselves able to be carried out lawfully, as with the exchange of crypto commodities ETH and Bitcoin,” the ruling said. 

The defendants, in a move to dismiss the suit, compared the plaintiff’s claims to holding a “developer of self-driving cars liable for a third-party’s use of the car to commit a traffic violation or rob a bank.” The Court noted that the argument held merit, saying that the individual who committed the crime was in the wrong, not the car company.

Uniswap’s chief legal officer Marvin Ammori took to X, formerly Twitter, to praise the win, saying that the Court found that the “Uniswap protocol has primarily lawful use & protocol devs aren’t liable when others misuse it. The trend in courts is obvious.”

Loading Tweet..

Failla goes on to compare the suit to one “attempting to hold an application like Venmo or Zelle liable for a drug deal that used the platform to facilitate a fund transfer.” The platform is not at fault, but rather whoever was responsible for the “Scam Token.”

While the SEC is still early in its approach to DeFi, the court notes, the complaints alleged by the plaintiffs are not applicable until there’s a framework for liability. It dismissed not only the federal claims, but the state claims as well.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

MON - WED, MARCH 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience:  Attend expert-led panel discussions and fireside chats  Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts   Grow your network […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Frax report cover.jpg

Research

Frax saw continued development in its frxETH liquid staking derivative and Fraxlend money market throughout 2023. Frax V3 introduces an RWA strategy to drive utility to the protocol's cornerstone product, the FRAX stablecoin.

article-image

Nova Labs will hope to grow Helium’s hotspot network to reduce backup coverage costs paid to T-Mobile

article-image

The LinkedIn posting states that the position would “support the Federal Reserve System’s [CBDC] Research and Development program.”

article-image

Both central banks are exploring the impact a CBDC could have on an economy

article-image

Neutron core contributor Dutheil notes this is “a period of consolidation” in the Cosmos ecosystem

article-image

Safe has teamed up with Web3Auth to create tooling for building Ethereum applications on top of smart accounts

article-image

Wildcat wants to make undercollateralized lending terms completely transparent