TOKENICATION_ is your reliable source for the latest news and analysis on cryptocurrencies. We provide up-to-date information on Bitcoin, Ethereum, and other digital currencies to keep you informed about the latest trends and help you make informed decisions.
Date: 2025-02-26 19:47:01
On Wednesday, the U.S. Court of Appeals for the Second Circuit handed down a decision that mostly concurred with a lower court's 2023 ruling to dismiss a class action lawsuit against decentralized exchange Uniswap.
In 2022, a group of investors brought a lawsuit against Uniswap Labs, the company responsible for the decentralized protocol with the same name, as well as some of its venture capital investors. The investors claimed that the company had caused harm to investors by permitting fraudulent tokens to be issued on its protocol.
Judge Katherine Polk Failla of the Southern District of New York (SDNY) previously sided with Uniswap in 2023 and discarded the lawsuit before it went to trial. She likened the plaintiffs' arguments to "a suit attempting to hold an application like Venmo or Zelle liable for a drug deal that used the platform to facilitate a fund transfer."
Plaintiffs appealed Failla's decision in September 2023, but the recent ruling from the Second Circuit on Wednesday mostly dismissed their appeal. The Second Circuit judges upheld Failla's decision to dismiss the plaintiffs' claims under both the Securities Act and the Exchange Act, stating:
"In summary, we agree with the district court that it 'defies logic' that a drafter of a smart contract, a computer code, could be held liable under the Exchange Act for a third party user's misuse of the platform," according to the filing.
Read More: "Jupiter Initiates Initial $3.33M Share Repurchase Program"
The only part of Failla's ruling that was vacated and remanded back to a district court was the state law claims. These claims seek to try similar allegations under state law, rather than federal law, in New York, North Carolina, and Idaho. This means that the lower court will hear this portion of the plaintiffs' case again.
The ruling is a victory for Uniswap, coming shortly after Tuesday's announcement that the U.S. Securities and Exchange Commission (SEC) would drop its investigation into the decentralized exchange. Under former SEC Chairman Gary Gensler, Uniswap was being investigated for allegedly operating as an unregistered securities broker and unregistered securities exchange, as well as issuing an unregistered security.
Related: SEC Drops Investigation Into Uniswap, Will Not File Enforcement Action
Read More: "Mavryk Dynamics Obtains $5.2M for Blockchain-Driven Real Asset Possession"