U.S. Court Rules Uniswap Is Not Liable for Scam Tokens, Setting DeFi Legal Precedent

The Uniswap protocol, developed by Uniswap Labs, uses open-source smart contracts to execute token trades automatically and allows anyone to create a liquidity pool. Investors who lost money in alleged rug pulls involving tokens including EthereumMax and Bezoge Earth filed a class action claiming that the developers and investment firms were liable under U.S. securities laws. The amount of damages sought was not disclosed.

U.S. District Judge Katherine Polk Failla of the Southern District of New York dismissed the case on August 29, 2023. She found that the issuers behind the tokens were unidentified and that Uniswap Labs, the Uniswap Foundation and investors Paradigm, Andreessen Horowitz and Union Square Ventures could not be held liable for fraud committed by third parties. The court likened the protocol to email, describing it as a neutral tool.