Uniswap Wins Full Dismissal Of The Scam Token Class Action Lawsuit

• US judge dismisses Uniswap class action with prejudice, closing the case.
• The court ruled Uniswap is not liable for scam tokens issued by unknown third parties on its protocol.
• Plaintiffs failed to prove actual knowledge of fraud, substantial assistance, or state-law violations.

A US federal judge has fully dismissed the class action lawsuit against Uniswap Labs and its founder Hayden Adams, ending a four-year legal fight over scam tokens traded on the Uniswap protocol.

Judge Katherine Polk Failla of the Southern District of New York ruled that Uniswap cannot be held liable for fraud committed by unknown third-party token issuers.

The second amended complaint was dismissed with prejudice, and the case is now closed at the district court level. According to CoinGecko, UNI climbed 10% following the ruling to reach $3.92, before easing slightly to trade around $3.88.

Court Rejects Liability For Third-Party Fraud

The plaintiffs claimed they lost money in rug pulls and pump-and-dump schemes. They argued that Uniswap facilitated fraud by operating a marketplace that brought buyers and sellers together.

The court rejected the complaint. Failla wrote that simply offering a platform does not equal substantial assistance in fraud. She said the plaintiffs failed to show Uniswap had actual knowledge of specific fraud or that it actively helped carry it out.

The judge added that creating an environment where fraud can occur is not the same as helping execute fraud. She compared it to a bank not being liable for money laundering just because its accounts are used, or a messaging app not being liable because criminals use its service.

She also repeated her earlier view that it makes no sense to hold a developer of open-source smart contract code responsible for how third parties misuse that code.

Four-Year Legal Battle Ends

The lawsuit was first filed in April 2022 by a group led by Nessa Risley. It named Uniswap, Adams, and venture firms Paradigm, Andreessen Horowitz, and Union Square Ventures. The plaintiffs later filed an amended complaint expanding their claims under federal securities laws and state consumer protection statutes.

In August 2023, Judge Failla dismissed the federal securities law claims, a decision that was later affirmed by the Second Circuit Court of Appeals. The remaining state-law consumer protection claims were sent back to the district court.

In May, the plaintiffs filed a second amended complaint focused on state-level violations. On Monday, Failla dismissed those claims with prejudice and ruled that the plaintiffs failed to plausibly allege knowledge of fraud, deceptive conduct under state law, or unjust enrichment.

This was the class group’s second attempt. Both of them have failed.

Precedent For DeFi Developers

Uniswap’s general counsel Brian Nistler called the ruling another precedent-setting decision for decentralized finance. Adams described it as a good and sensible outcome.

The core legal point is that if open-source smart contract code is used by scammers, liability sits with the scammers, not the developers who wrote the code. 

Providing neutral infrastructure does not create automatic liability for user misconduct. For DeFi builders, this reduces direct legal risk tied to third-party token activity.

Related: BlackRock Brings Treasury-Backed BUIDL Fund to Uniswap for DeFi Access