DEFIREGULATION

US Judge Dismisses Uniswap Lawsuit: Ether is a Commodity, Platform Not Liable for Fraudsters

share
US Judge Dismisses Uniswap Lawsuit: Ether is a Commodity, Platform Not Liable for Fraudsters

U.S. District Judge Katherine Polk Failla yesterday dismissed the class-action lawsuit against Uniswap, stating that the unclear regulatory status of cryptocurrencies deprived the defendants, who are investors, of standing to sue and that the platform is not liable for fraudulent actors. Additionally, she expressed agreement with the view that Ether and Bitcoin are commodities, not securities.

Uniswap is not responsible for third-party users' criminal activities

As the presiding judge in the Uniswap lawsuit, Judge Katherine Polk Failla of the Southern District of New York dismissed the case, stating that investors' losses from investing in fraudulent tokens on the platform should not be attributed to Uniswap.

According to the lawsuit filed in April last year, Uniswap founder Hayden Adams, Andreessen Horowitz, and venture capital firm Paradigm were sued by investors, accusing them of promoting fraud through the exchange, selling unregistered securities, and demanding that Uniswap register with financial regulators.

Failla pointed out in court that while Uniswap operates as a "for-profit enterprise," it does not have a centralized ownership structure, and the smart contracts themselves are legally executable, similar to most current cryptocurrency exchanges.

She illustrated her point with an analogy:

Car manufacturers are not responsible for any traffic violations committed by drivers using their cars, therefore the responsibility lies with those selling fraudulent tokens.

It is worth noting that Failla is also the presiding judge in the SEC v. Coinbase case and the collective lawsuit involving Tether and Bitfinex case.

Judge: Regulatory ambiguity prevents investors from holding platforms accountable for losses

Blockworks reported that Failla expressed that concerns and doubts regarding federal securities laws from the plaintiffs are better suited for legislative bodies than for resolution in court.

She also added:

Despite the U.S. Securities and Exchange Commission (SEC) bringing securities charges against cryptocurrencies, there is still no consistent standard for defining them. Due to the current regulatory landscape, Uniswap's token sales are currently not restricted, and therefore investors do not have recourse against the platform.

Failla also indicated that the SEC's stance on DeFi is still in its early stages, so the complaints brought by the plaintiffs are not applicable until a regulatory framework is established.

Judge considers Ethereum (ETH) a commodity, not a security

A lawyer from ConsenSys tweeted that Failla explicitly mentioned her views on Bitcoin (BTC) and Ethereum (ETH) in court documents.

Ethereum is a commodity, not a security.

The documents did not delve into a discussion or analysis on the issue, but the mere mention is enough to convey Failla's position.

While her comments on cryptocurrencies alone do not represent a definitive classification or judgment under U.S. law, they still serve as an important perspective.

Supporting Decentralization or Centralization?

In Uniswap's Chief Legal Officer Marvin Ammori's celebration, users criticized the platform for previously delisting tokens due to regulatory investigations, which was perceived as too centralized. Users condemned Uniswap for succumbing to regulations as a leading DeFi platform, damaging market development.

I love how you champion decentralization and its victories, then centralize and arbitrarily decide to delist tokens you don't like.