Court Sides with Uniswap in Class-Action Lawsuit

The Southern District of New York dismissed the class-action lawsuit against Uniswap Labs, its CEO Hayden Adams, the Uniswap Foundation, and the venture investors in the decentralized exchange.

Led by Nessa Risley, a group of users filed a complaint in early 2022. They accused the developer of the popular DEX and other defendants of violating securities laws, resulting in losses.

The plaintiffs alleged that the exchange and other defendants offered and sold unregistered securities in the form of digital assets, including the governance token UNI.

Among other accusations, they alleged the platform operated as a broker-dealer. Investors also claimed that Uniswap Labs failed to take adequate steps to prevent fraudulent practices rug pull and Pump & Dump on a number of coins.

«Because of the decentralised nature of the protocol, the identities of the issuers of scam tokens are largely unknown and indeterminate, leaving the plaintiffs with damages but without an identifiable defendant», said Judge Kathryn Polk Failla.

In her view, the investors filed the suit in the expectation that the court would overlook the fact that the current state of cryptocurrency regulation does not leave them with a path to seek relief. However, that does not give them grounds to blame Uniswap for their losses, she noted.

According to the judge’s ruling, given the current regulatory framework it remains to be final determined whether cryptocurrencies are securities, commodities, or something else. Failla recommended that the plaintiffs direct questions about the applicable federal statutes to the U.S. Congress.

She ruled that, despite Uniswap operating as a commercial business, there is no centralized ownership structure of the platform.

«Uniswap is largely used lawfully, and the protocol developers are not responsible for abuses by other parties», emphasised the judge.

In this regard, the charges against the exchange are comparable to claims against services such as Venmo or Zelle for payments related to drug deals. The fault lies not with the platform but with the party responsible for the scam token, Failla added.

Back in December 2022, a partner at venture firm Cinneamhain Ventures, Adam Cochran, suggested that Uniswap would in the future implement verification for users.