A federal judge has dismissed a class-action lawsuit against Uniswap Labs, CEO Hayden Adams and several venture capital backers, ruling that they cannot be held liable for so-called “pull” tokens traded on the decentralized exchange protocol.
In a ruling issued Monday by the U.S. District Court for the Southern District of New York, Judge Katherine Polk Failla dismissed the remaining state law claims in Risley v. Universal Navigation Inc., the Brooklyn-based company that operates Uniswap. Plaintiffs’ federal securities claims were previously dismissed. 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 decentralized protocols can be held liable under existing securities and state laws for tokens created and traded by third parties.
“Due to the decentralized nature of the protocol, the identity of the fraudulent token issuers is essentially unknown and unknowable, leaving the plaintiffs with identifiable harm but no identifiable defendants,” Failla wrote.
She added: “Undaunted, they are now suing the Uniswap Defendants and VC Defendants in the hope that the court will ignore the fact that the current state of cryptocurrency regulation leaves them with no recourse, at least with respect to the specific claims alleged in this lawsuit.”
Irina Heaver, a cryptocurrency lawyer in the UAE, told CoinDesk that “the dismissal shows that the courts are starting to take the reality of decentralization more seriously.”
She explained that the court made an important distinction in DeFi by recognizing that permissionless protocols governed by autonomous smart contracts are different from centralized intermediaries that exercise control.
“When code executes automatically and without arbitrary control, responsibility cannot simply be reassigned to developers as bad actors abuse the infrastructure,” Heaver said. “The real question now is how this reasoning applies to criminal cases like Tornado Cash. If decentralization is recognized as a structural reality, prosecutors will need to prove intent and control, not just authorship of the code.”
Uniswap policy director Brian Nistler celebrated the X ruling, calling it “another precedent-setting ruling for DeFi.” He highlighted what he described as his “favorite quote” from the case: “It defies logic that the drafters of smart contracts, computer code, could be held liable for misuse of the platform by third-party users.”
The plaintiffs are a group of investors who claim they lost an undisclosed amount of money after buying dozens of tokens on the Uniswap protocol, which they later called a scam. Due to the unknown identity of the token issuer, investors turned to sue Uniswap Labs, Uniswap Foundation, Adams, and venture capital firms Paradigm, Andreessen Horowitz and Union Square Ventures.
Failla rejected the argument that the defendants could be held liable solely for providing the infrastructure for the issuance and trading of tokens.
“Plaintiffs’ theory of liability remains based on Defendants ‘facilitating’ fraudulent transactions by providing a marketplace and facilities to bring token buyers and sellers together,” Failla wrote, concluding that the claims failed as a matter of law.
In an earlier dismissal of the federal charges, Failla said it would be “illogical” to hold smart contract drafters liable for third-party misuse of the platform – a claim that has been widely cited by decentralized finance advocates.