U.S. Appeals Court Upholds Dismissal Of Uniswap Class Action Lawsuit

According to CoinDesk, the U.S. Court of Appeals for the Second Circuit has upheld a previous decision by a lower court to dismiss a class action lawsuit against Uniswap, a decentralized exchange. The lawsuit, initiated by a group of investors in 2022, accused Uniswap Labs and its venture capital backers of enabling the issuance of scam tokens on its platform, thereby harming investors. In 2023, District Court Judge Katherine Polk Failla of the Southern District of New York ruled in favor of Uniswap, dismissing the lawsuit before it could proceed to trial. Judge Failla compared the plaintiffs' claims to holding applications like Venmo or Zelle accountable for illegal activities facilitated through their platforms. The plaintiffs appealed this decision in September 2023, but the Second Circuit's recent ruling largely supports Failla's judgment, rejecting the claims under both the Securities Act and the Exchange Act. The appellate court stated that it is illogical to hold the creator of a smart contract liable for a third party's misuse of the platform. However, the Second Circuit did vacate and remand a portion of Failla's ruling concerning state law claims. This means that the lower court will revisit these claims, which aim to address similar allegations under state laws in New York, North Carolina, and Idaho. This development represents a significant victory for Uniswap, especially following the U.S. Securities and Exchange Commission's (SEC) decision to cease its investigation into the exchange. The SEC, under former Chairman Gary Gensler, had been investigating Uniswap for potentially operating as an unregistered securities broker and exchange, as well as for issuing an unregistered security.