A federal judge has dismissed a lawsuit against decentralized finance (DeFi) startup PoolTogether, ruling that the court system was not the right place to address the plaintiff’s concerns. Judge Frederic Block said in the order, While Kent no doubt has genuine concerns about PoolTogether—including its legality under New York law—a suit in federal court is not an appropriate way to address them.
The lawsuit, filed by former congressional staffer Joe Kent in October 2021, alleged that the DeFi platform violated New York state’s gambling laws. In response, PoolTogether released an NFT collection called Pooly to raise funds to fight the case, raising roughly $135,000 worth of cryptocurrencies within two hours.
The dismissal of this case does not mean the DeFi space is immune to litigation. Last month, investors sued DeFi protocol Bancor for allegedly deceiving investors about its impermanent loss protection mechanism (ILP) and operating as an unregistered security. The DeFi space is also facing increasing scrutiny from regulators as the U.S. cracks down on the crypto industry. In March, the SEC subpoenaed DeFi protocol SushiSwap and its Head Chef Jared Grey.