Another important cryptocurrency entity has scored a victory in the US legal system, with ethereum-based cryptocurrency exchange Uniswap winning a class action lawsuit. The legal battle is crucial for the platform, as it could set a dangerous precedent for the fledgling industry.
Uniswap triumphs, draws important boundaries for DeFi
Nessa Risley, James Freeland, Robert Scott, and others have filed a class action lawsuit against Uniswap Labs, its founder Hayden Adams, and Paradigm in an attempt to establish a direct link of liability between the defendants and “scam tokens.”
In other words, Uniswap users are trying to hold Adams and the company responsible for the cryptocurrency exchange’s losses. The plaintiffs are therefore seeking monetary damages by arguing that the companies and investors behind Uniswap created a system that “could allow scam tokens” to harm them.
District Judge Katherine Fayla of the Southern District of New York dismissed the case. Legal expert Stephen Palley said the court ruled that software, in this case a cryptocurrency exchange, cannot be held liable. loss of its users or damage caused by third parties.
Parley claimed that this case, and cases like it, will be the focus of legislation for the next decade. The rise of artificial intelligence and decentralized finance (DeFi) is bound to face uncharted territory in the U.S. legal system.
The legal expert noted the potential fallout for cryptocurrency developers and projects like Uniswap:
I predict that most of this will eventually be the subject of legislation, but the common law judgment will lead the way… Also, I don’t think this case means that developers can be protected on a comprehensive basis from third party claims – it does Depends on facts and circumstances.
XRP and Uniswap decisions have significant precedent
Consensys Attorney Bill Hughes believe The decision will have more legal implications than the decision in the XRP case. The lawyer agrees with Palley that the decision states that cryptocurrency exchanges cannot be held liable for losses suffered by users as a result of tokens issued by third parties.
In theory, this decision favors a truly decentralized protocol, but as Parley argues, the legal road ahead is long. Hughes added:
Specifically, the court found that (i) the Uniswap platform was capable, and in many cases was indeed being used legally; (ii) there was no transaction between the plaintiffs and the Uniswap platform/Protocol Labs; (iii) existing securities laws do not appear to address the DEFI protocol own responsibility for using the protocol to defraud others.
Cover image from Unsplash, chart from Tradingview