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District Judge says that due to the protocol's decentralized nature, the identities of the scam token issuers are basically unknown, leaving plaintiffs with no identifiable defendant.
A federal judge in New York has dismissed all remaining claims in a proposed class action against Uniswap Labs, its CEO and venture backers, ruling they cannot be held liable for alleged scam tokens traded on the protocol.Judge Katherine Polk Failla found that, because Uniswap is a decentralized, permissionless protocol run by autonomous smart contracts, developers and investors are not responsible for third parties’ misuse of the platform.Legal experts say the decision is an early, precedent-setting ruling for DeFi that underscores the difficulty of assigning civil liability to protocol creators and may influence how courts approach future crypto and criminal cases.A federal judge has dismissed a proposed class action lawsuit against Uniswap Labs, CEO Hayden Adams and several venture capital backers, ruling they cannot be held liable for alleged “rug pull” tokens traded on the decentralized exchange’s protocol.
In a ruling issued Monday by the U.S. District Court for the Southern District of New York, Judge Katherine Polk Failla threw out the remaining state law claims in Risley v. Universal Navigation Inc., the Brooklyn-based firm that operates Uniswap. after previously dismissing the plaintiffs’ federal securities claims. The decision effectively ends the case at the district court level.
The ruling is one of the first to specifically address whether developers and investors behind a decentralized protocol can be held liable under existing securities and state laws for tokens created and traded by third parties.
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,” Failla wrote.
“Undaunted, they now sue the Uniswap Defendants and the VC Defendants, hoping that this Court might overlook the fact that the current state of cryptocurrency regulation leaves them without recourse, at least as to the specific claims alleged in this suit,” she added.
Irina Heaver, a UAE-based crypto lawyer, told CoinDesk “the dismissal signals that courts are beginning to engage more seriously with the realities of decentralization.”
By recognizing that a permissionless protocol governed by autonomous smart contracts is not the same as a centralized intermediary exercising control, the court drew an important distinction for DeFi, she explained.
“When code executes automatically and there is no discretionary control, liability cannot simply be reassigned to developers because bad actors misuse the infrastructure,” Heaver said. “The real question now is how this reasoning carries into criminal cases such as Tornado Cash. If decentralization is acknowledged as a structural reality, prosecutors will need to prove intent and control, not merely authorship of code.”
Brian Nistler, Uniswap’s head of policy, celebrated the ruling on X, calling it “another precedent-setting ruling for DeFi.” He highlighted what he described as his “favorite quote” from the case: “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 plaintiffs, a group of investors , claimed they lost an undisclosed amount of money after purchasing dozens of tokens on the Uniswap Protocol that they later described as scams. Because the token issuers were unidentified, the investors instead sued Uniswap Labs, the Uniswap Foundation, Adams and venture firms Paradigm, Andreessen Horowitz and Union Square Ventures.
Failla rejected the argument that the defendants could be held responsible simply for providing the infrastructure on which the tokens were issued and traded.
“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,’” Failla wrote, concluding that the claims failed as a matter of law.
In an earlier dismissal of the federal claims, Failla said it “defies logic” to hold the drafter of a