DeFi exchange Uniswap has hailed the latest court ruling that dismissed a case that sought to hold it accountable for scam tokens traded on the platform.
In an opinion issued on the 2nd of March, federal Judge Katherine Polk Failla of the Southern District of New York (SDNY) dismissed the complaint with prejudice.
Judge Failla ruled that the petitioners can not hold Uniswap CEO Hayden Adams and Uniswap Labs (defendants) responsible for misconduct carried out by unidentified third-party token issuers.
The petitioners claimed losses from trading tokens on the Uniswap platform. They alleged the tokens were ‘rug pulls’ and ‘pump and dump’ schemes.
According to them, Uniswap facilitated fraud by running a marketplace that allows the selling and buying of these alleged scam tokens.
But the court dismissed this argument, stating that,
“It defies logic that a drafter of computer code underlying a particular software platform could be liable under Section 29(b) for a third-party’s misuse of that platform.”
Uniswap leadership hails the ruling
The case has been running since April 2022. Reacting to the ruling, Uniswap CEO called it a ‘good, sensible outcome’ and a new legal precedent for the sector.
“If you write open source smart contract code, and the code is used by scammers, the scammers are liable, not the open source developers.”
Source: X/Hayden
Stani Kulechov, Founder of Aave, called the update a “great win for DeFi.”
The change gives DeFi players breathing room. Fully decentralized platforms will no longer face legal liability for losses caused by third-party token issuers.
Lawmakers are also pushing for a safe harbor for open-source developers in the crypto market structure bill, the CLARITY Act. Still, the final draft will determine whether those developer protections actually hold.
Uniswap is one of the largest DeFi platforms and has operated for over eight years. Since its inception, the exchange has recorded a cumulative of over $5 billion in fees and recently activated a token accrual program for its governance token UNI.
Following the court update, the Uniswap [UNI] token surged by about 5%, but was still stuck between $3.6 and $4.2 short-term price range.
Source: UNI/USDT, TradingView
Final Summary
- Judge Failla ruled that Uniswap and other DeFi platforms can’t be held responsible for misconduct done by unidentified third-party token issuers.
- The case could set the tone for the protection of open-source DeFi developers, according to policy watchers.