The cryptocurrency world escaped a bullet this week when a New York federal judge dismissed claims that Uniswap should compensate those scammed into buying scam tokens on the decentralized platform. Not only did the judge have the right reasoning, but he delivered a verdict that shows a remarkable level of sophistication when it comes to crypto.
In her 51-page decision, Judge Katherine Polk Failla shows she is fluent in decentralized finance and has a command of writing on smart contracts, liquidity pools, pump-and-dumps, rug pulls, and more — remarkable considering the courts have ruled had trouble explaining what a blockchain was for five years. More importantly, Failla also made the right choice between two competing vehicle metaphors.
The plaintiffs — or more specifically, their class action attorneys — argued that Uniswap was like a manufacturer of driverless cars that built dangerous vehicles that roamed the streets everywhere. Uniswap’s lawyer, meanwhile, said holding the company liable for fraudulent tokens is like blaming the maker of self-driving cars when criminals use their vehicle to rob a bank. Failla agreed with the latter argument.
The judge also acknowledged that there was a policy gap regarding cryptocurrencies, but declined to fill that gap, noting that that task is probably best left to Congress. While there are a number of important nuances in Failla’s judgment that underscore that the crypto industry has barely strayed from regulatory boundaries, when it comes to crypto and open source development, she got the broad lines right.
This result likely has to do with the upstanding nature of Uniswap and its founder, Hayden Adams, who by all indications is one of the good guys in an industry full of bad guys. The situation is very different from the Ethereum “mixer” Tornado Cash that Leo wrote about this week. While this case also involves the right to develop software, there seems to be clear evidence that the men who developed the platform did so to carry out criminal activities. It’s a case that, if decided, risks proving the adage that “bad facts make bad law.”
The story goes on
However, both the Uniswap and Tornado Cash cases will likely prove to be sideshows compared to the main event, which will see a court rule on the SEC’s claim that Coinbase broke the law by allegedly issuing unregistered securities sold on its platform. It is noteworthy that this case is also in the hands of the able judge Failla. It’s something to watch.
Finally, I would like to say that Leo and I will be hosting talks at Mainnet starting September 20th in New York City. Packed with headliners including Coinbase’s Brian Armstrong, the annual event has become the standout crypto conference of the season. (As a media partner, Fortune has put together a discount code for our readers – use Fortune300 when you register here). In the meantime, have a relaxing Labor Day weekend—we’ll be back in your inbox Tuesday morning.
Jeff John Roberts
[email protected]
@jeffjohnroberts
This story was originally published on Fortune.com
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