US Judge Swats Down Amended Class-Action Lawsuit Against Decentralized Crypto Exchange Uniswap

A federal judge has dismissed with prejudice an amended class-action lawsuit against Decentralized Crypto Exchange Uniswap, marking another legal win for the protocol and its developers.

Uniswap’s head of policy and associate general counsel Brian Nistler says Judge Katherine Polk Failla threw out the Risley class action against Uniswap Labs and founder Hayden Adams after previously dismissing related federal claims.

The ruling addresses plaintiffs’ theory of liability.

“Plaintiffs’ theories of liability are still predicated on Defendants having ‘facilitated’ the scam trades ‘by providing a marketplace and facilities for bringing together buyers and sellers of Tokens[.]’ Though the claims have changed, the result is the same: Plaintiffs cannot hold Defendants liable for the misconduct of the unidentified third-party issuers.”

Failla previously rejected similar arguments.

“It ‘defies logic’ that a drafter of a smart contract, a computer code, could be held liable … for a third party user’s misuse of the platform.”

The lawsuit alleged that Uniswap enabled trading of so-called scam tokens that caused investor losses. In dismissing the complaint, the court cited the protocol’s decentralized structure and the difficulty of identifying the alleged token issuers.

“Due to the Protocol’s decentralized nature, the identities of the Scam Token issuers are basically unknown and unknowable, leaving Plaintiffs with an identifiable injury but no identifiable defendant… As set forth in the remainder of this Opinion, the Court dismisses their complaint in full.”

Adams characterizes the outcome as setting a new legal precedent, arguing that open-source developers are not liable for how third parties use their code.