Federal Judge Katherine Polk Failla dismissed a lawsuit against Uniswap, ruling the decentralized exchange cannot be held liable for scam tokens created by third parties. The case, filed in April 2022, alleged Uniswap facilitated fraud by allowing the trading of ‘rug pull’ and ‘pump and dump’ tokens. Uniswap CEO Hayden Adams hailed the decision as a “good, sensible outcome” setting a new legal precedent for DeFi.
A federal judge has dismissed a class-action lawsuit against decentralized exchange Uniswap, providing a significant legal precedent for the DeFi sector. Judge Katherine Polk Failla of the Southern District of New York ruled that Uniswap and its CEO Hayden Adams cannot be held responsible for misconduct by unidentified third-party token issuers on the platform.
The plaintiffs had claimed losses from trading alleged scam tokens on Uniswap and argued the platform facilitated fraud. In her March 2 opinion, Judge Failla stated 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 celebrated the ruling. CEO Hayden Adams called it a “good, sensible outcome” and a new legal precedent, adding, “If you write open source smart contract code, and the code is used by scammers, the scammers are liable, not the open source developers.” Aave founder Stani Kulechov described the update as a “great win for DeFi.”
The case, active since April 2022, sought to hold Uniswap accountable for investor losses. Following the court’s decision, the price of Uniswap’s governance token, UNI, saw an approximate 5% increase, though it remained within a short-term trading range between $3.6 and $4.2. The ruling could influence ongoing legislative efforts, including the CLARITY Act, which aims to create a safe harbor for open-source developers.
