A federal judge recently dismissed a class action lawsuit filed against decentralized exchange Uniswap and creator Hayden Adams, citing that the plaintiffs had filed against the wrong defendants and that federal securities laws don’t create a clear avenue for the plaintiffs to sue the real defendants. Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York wrote that 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. This ruling will almost certainly be cited by various parties, particularly entities and individuals facing lawsuits from the U.S. Securities and Exchange Commission.
The judge noted that few token issuers have registered with the SEC as Congress and the courts have yet to make a definitive determination as to whether such tokens constitute securities, commodities, or something else. She also wrote that it defies logic that a drafter of computer code underlying a particular software platform could be liable under Section 29(b) [of the Securities Exchange Act of 1934] for a third-party’s misuse of that platform.
This ruling could have a significant impact on other lawsuits involving securities law and crypto entities. It implies that the SEC may not be the right authority to define token issuers or Uniswap’s role within securities law, and that regulators may someday address this gray area. Whether other judges agree, and whether the facts and circumstances of those cases are similar enough to warrant a similar outcome, remain to be seen.