Jump to
Main Blog Regulation Court dismisses lawsuit against Uniswap

Court dismisses lawsuit against Uniswap

Pic 1

On August 29, the Court for the Southern District of New York dismissed a class-action lawsuit against Uniswap. The lawsuit from six investors concerned the loss of money due to investments in tokens traded on the DEX. Let's get into the details of what happened.

Uniswap, which made its debut back in 2018, is the largest decentralized exchange (DEX) in the market. Initially limited to Ethereum, it has now expanded to six more networks: Polygon, Celo, BNB Chain, Avalanche, Arbitrum, and Optimism. As of today, Uniswap’s total TVL is almost $3,3 billion.

 

What was in the lawsuit against Uniswap

In April 2022, a group of investors filed a lawsuit against Uniswap Labs. They accused the platform of promoting securities without a licence and aiding and abetting fraudsters.

Previously, these investors had purchased tokens through Uniswap, which later turned out to be a scam. The list of mentioned ERC-20 tokens can be seen in the screenshot below.

Pic 2

According to the investors, these tokens qualify as unregistered securities, making Uniswap an illegal provider of securities trading services.Their lawsuit claims that Uniswap Labs has control over the decentralised exchange.
 

Why the judge decided to dismiss the lawsuit

In the court's August 29 ruling, judge Katherine Polk Failla detailed the specifics of Uniswap, explaining why she dismissed the investors' lawsuit and suggesting their next actions. Key points from the text include:

1. The crypto area lacks regulation, so courts are unable to help in such situations

Even though the victims suffered losses on a certain platform while the scam tokens issuers remain unknown, current regulation of cryptocurrencies prevents the court from offering help.

"The current state of cryptocurrency regulation leaves them without recourse, at least as to the specific claims alleged in this suit". 

DeFi is not yet sufficiently regulated as well, and "regulators may someday address this grey area in the securities laws". For the same reason, affected investors are better off going to Congress than to courts.

2. Uniswap's smart contracts themselves are not illegal; thus, the claims against the DEX are misplaced

The judge thoroughly examined the blockchain technology, Ethereum, and how ERC-20 tokens operate. She highlighted that Uniswap is only a platform to interact with pools of liquidity and not a direct executor or beneficiary, despite some fees being involved.

She further distinguished between the smart contracts that make DEX work and the smart contracts for fraudulent tokens: "The contracts relevant to Plaintiffs' claims are not these overarching codes provided by Defendants, but rather the pair or token contracts drafted by the issuers themselves".

3. Accusing Uniswap of fraud is as incorrect as accusing payment giants of being used to exchange money for illegal aims

This interesting analogy in the text is incidentally similar to arguments of those who justify Tornado Cash.

4. The judge mentions Bitcoin and Ethereum as "commodities" in her ruling

It turns out that the question of whether crypto is a security or a commodity is quite important for the regulation of the whole area after all.
 

Reaction to the judgement

Marvin Ammori, Chief Legal Officer of Uniswap Labs, tweeted that this decision was a win for both the crypto community and developers.

A user under the nickname @mikewawszczak noted that the same judge was involved in the SEC vs Coinbase case. He paid special attention to her language when describing how decentralised protocols work and how poorly this part of crypto is currently regulated.

 

🧐 What are your opinions on this case? Share in our socials!

💌  Telegram, Twitter, Instagram, Facebook
 

You might also like:

Crypto: security or commodity?

Tornado Cash founders charged by US federal courts

Coinbase pauses staking in the USA

What is Ethereum

Buy BTC

Buy ETH

Maria Kachura
Maria Kachura

Visit her on Facebook or hit her up via Email.

0
Share this post
Similar articles
Best investment options for 2023
Markets
16 February, 2023
Best investment options for 2023
Let’s explore all the pros and cons of currencies, cryptocurrencies, stocks, real estate, and precious metals.
Cryptocurrency vs. token: what's the difference?
Learn
7 April, 2023
Cryptocurrency vs. token: what's the difference?
Let’s figure out what types of coins are there on the crypto market.
NFT NYC 2022!🌐🦄
Events
20 June, 2022
NFT NYC 2022!🌐🦄
NFT NYC 2022.
AIBC Americas 2022
Events
8 June, 2022
AIBC Americas 2022
AIBC Americas 2022.
ETH NEW YORK 2022 🌐🦄
Events
24 June, 2022
ETH NEW YORK 2022 🌐🦄
ETH NEW YORK 2022.
Blockchain Economy Istabbul Summit 2022
Events
9 June, 2022
Blockchain Economy Istabbul Summit 2022
Blockchain Economy Istanbul Summit.