The decentralized crypto sphere was thrown for a loop when a dismissal ruling by a New York district court tagged popular cryptocurrencies, ETH and BTC, as commodities. The case involved leading decentralized crypto exchange, Uniswap, as defendant in a proposed class action lawsuit. A group of investors lodged the accusation that Uniswap had contravened U.S. securities laws by operating severed from an official exchange or broker-dealer registration. The investors’ claim sought recompense for losses to “scam tokens” they insist were issued and trade-enabled via the protocol.
Tokens pinned to the suit spotlight ERC-20 tokens EthereumMax (EMAX), Bezoge (BEZOGE) and Alphawolf Finance (AWF). The judge’s ruling to abort the case before it progressed to full trial declared that the issuers of the disputed tokens were the suit’s appropriate defendants rather than Uniswap. This diverged from the stance of SEC Chief Gary Gensler, who has up to now abstained from branding ETH as a security. On the contrary, the presiding judge voiced directly that she regarded ETH as a commodity.
The judge ruled that the decentralized character of the Uniswap Protocol rendered scam token originators, “unknown and unknowable”, negating the existence of an “identifiable defendant”. The plaintiff’s claim likened Uniswap to the manufacturer of a self-driving car behind a system trafficking in scam tokens. Nonetheless, the court’s decision curtailed this viewpoint stating its comparative misalignment. It was noted that the presented analogy echoed more holding an application like Venmo or Zelle responsible for an illegal deal facilitated by the platform’s fund transfer ability.
The court opinion furthers the continuous discourse concerning the potential influence on future lawsuits against decentralized protocols, and potentially those built on allegations of U.S. securities law infringement. The ruling shook the argument that Uniswap created a system that aided scam tokens. Backing regulation’s absence as a relevant factor, the court concluded the investors’ perceptive risks “are better addressed to Congress rather than to this Court”.
The judiciary’s viewpoint on the dismissed class action might ripple through future cases against decentralized protocols, potentially even those pitched against alleged U.S. securities law contra. Whether the current classification of the ETH as a commodity will be sustained, is an element only time can reveal. Similarly, the question of if future lawsuits will echo the same allegations against decentralized protocols, or if they may pivot to target the alleged infringement of securities law, remains to be seen.
Source: Coindesk
