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.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

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

Screenshot 2024-05-23 091855.png

Research

Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.

article-image

Sponsored

As part of the #Breakout2024 plans, Radix has introduced Token Trek

article-image

House members ask Gensler to keep a “consistent and equitable approach” with ether ETF proposals after the agency approved spot bitcoin ETFs in January

article-image

Using old-world instruments to address crypto user experience challenges goes against what this industry set out to do

article-image

And, weeks of a potential crypto ETF decision are no stranger to chaos

article-image

The FIT21 Act marks the second crypto-focused piece of legislation to advance in Congress this month

article-image

More than half of Solana transactions fail